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10/08/2009

So far, the messages have been consistent. With coalition negotiations between Chancellor Angela Merkel's conservatives and Guido Westerwelle's Free Democrats (FDP) entering round two on Thursday, both sides have been eager to emphasize their agreement on most issues rather than their divisions on some.

But news this week that Germany's public health care system will soon be massively overdrawn may provide momentum to Westerwelle's demand that the country's recently created health insurance fund be discarded. And it could drive a wedge between him and Merkel before their partnership is even inked.

The Health Fund, into which employer and employee health care payments are channelled before being paid out to health insurance providers, may be short by €7.4 billion ($10.9 billion) in 2010, the German Health Ministry announced this week. The shortage is the product of an expected rise in unemployment coupled with rising health care costs. Should the state not significantly increase the subsidies it already pays into the Health Fund, an increase in the 14.9 percent scraped off the top of employees' gross incomes may become necessary.

The Health Fund, a pet project of Merkel's, went into effect in January of this year and replaced a system where health insurers set their own rates. Employee contributions were first cut from 15.5 percent to their current level in July.

Not Politically Palatable

Westerwelle, however, has demanded that the new Health Fund be abolished in favor of a greater role for private insurers. This week he blamed the system for the looming shortfall, prompting a sharp retort by Merkel. "The Health Fund does not promote higher expenditures," she said in a curt statement issued by her spokesperson. Some, though, have said that the Health Fund, by mandating the level of contribution, has robbed health insurance providers of the flexibility they need to balance their books.

"I think the health working group has some of the most difficult work," Daniel Bahr, a health care expert with the FDP, told the Dow Jones newswire on Wednesday. "We hope and expect that (Merkel's conservatives) will make a shift away from state-run medicine."

It is unclear what strategy the new government might follow to plug the gap. Berlin currently pumps €11.9 billion into the Fund, with plans to increase that amount to €14 billion by 2012. Calls have mounted this week for the government to bump the total up already next year. Others have said that an increase in employer/employee contributions may be unavoidable. Neither solution is seen as politically palatable.

Still, industry representatives have been slow to blame the Health Fund for the problem. "If a bank account goes deep into the red, it's not the account itself that is to blame," Jürgen Graalmann, deputy head of AOK -- one of Germany's largest health insurance providers -- told the Süddeutsche Zeitung on Wednesday.

Health care in Germany is among the most costly in Europe, representing 10.4 percent of GDP in 2007 according to the Organization for Economic Cooperation and Development (OECD). By that measure, only France's expenditures are higher, reaching 11 percent in 2007. The United States, by contrast, spent 16 percent of its GDP on health care in 2007.