GERMANY: The long-awaited reform of Germany's byzantine, indebted health system was greeted yesterday morning with a mixture of modest praise and harsh derision.
After months of negotiations, the grand coalition parties of Christian Democrats (CDU) and Social Democrats (SPD) agreed a compromise deal to refinance the health system as well as to cut corporate taxes.
The CDU reform priority was to halve non-wage labour costs: currently German employers match the health insurance contribution of 14 per cent of employee salaries. The SPD was anxious to refinance the system through additional taxes and to place a greater burden on top earners.
In the end, neither side got what it wanted and insurance contributions will now rise by 0.5 per cent next year to cover a looming cost shortfall.
Economist Bert Rürup, a member of the government's independent panel of economic advisers, called the reform an agreement on "the lowest common denominator" and a "rather modest breakthrough for the coalition".
Germany's health system is considered one of the world's best, but also one of the most expensive.
The present, century-old system has struggled to keep up with costs that have risen to €144 billion annually, a 1,005 per cent increase since 1970.
Adding to the problem is the greying German population profile and the departure of younger and wealthier Germans to private health insurers.
Government officials said the reforms will bring greater transparency and competition to the system.
Central to the reform is a new health fund to bankroll the health system, financed from payroll contributions and tax revenues.
In addition, child healthcare coverage will be free of charge under the new plan, at a cost of around €15 billion a year, and doctors will be given a simpler cost structure and pharmacies greater freedom to haggle for better prices from pharmaceutical companies.
Guido Westerwelle, leader of the opposition Free Democrats (FDP) said the government had "in the shadow of the World Cup agreed . . . an orgy of unimaginable tax and contribution hikes".
The grand coalition has raced to pass reforms ahead of next week's parliamentary summer break, agreeing a new wealth tax on top earners and a three-point VAT increase to 19 per cent next year.
An agreement to redistribute competences between federal and state government is set to clear its final parliamentary hurdle on Friday. The coalition has also agreed to reduce the tax burden on German companies from 39 per cent to around 30 per cent and a new flat-rate capital gains tax.