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Attacking the Shortfall: Merkel's Government Agrees to Mini-Health Care Reform

Facing a projected shortfall of 11 billion euros for Germany's health care system in 2011, Chancellor Angela Merkel's government agreed on Tuesday to increase contributions. But the plan is a far cry from radical reform, leading to calls for the country's health minister to resign.

Health care costs in Germany have been skyrocketing in recent years. Zoom

Health care costs in Germany have been skyrocketing in recent years.

Germany's government has been arguing for months about how best to reform the country's chronically indebted health care system. On Tuesday, leaders of Chancellor Angela Merkel's coalition finally reached agreement.

The deal, presented by Health Minister Philipp Rösler -- from Merkel's junior coalition partner, the Free Democrats -- calls for contributions to rise from 14.9 percent of employee income to 15.5 percent. The contributions remain split 50-50 between workers and employers. In addition, additional charges demanded by insurers to eliminate shortfalls will no longer be capped at 1 percent of employee salaries.

"The expected deficit of €11 billion in 2011 will be cancelled out," Rösler told reporters on Tuesday. He said he was optimistic that the new contribution regime would result in lasting stability for Germany's health care finances, but added that the system for how contributions are made must still be reformed.

Rising costs have dogged Germany's health care system for years, and multi-billion euro deficits have become the norm. As recently as 2006, Merkel -- then in coalition with the center-left Social Democrats -- proudly announced what she called "far reaching reform."

Raining on the Parade

Then, as now, however, the reform was a far cry from what was originally promised. In 2006, Merkel's Christian Democrats had sought to radically change the way health care contributions are made -- via joint contributions from employers and employees -- as a way to inject flexibility into the country's labor market.

This time around, it was Rösler's Free Democrats who wanted to shake up the system. Rösler had promised the introduction of a per-capita payment system, which would have seen all Germans pay the same amount into the system, though with government assistance for those who couldn't afford it. In 2006, a similar idea was blocked by the Social Democrats. This year, it was the Christian Social Union -- the Bavarian sister party to Merkel's Christian Democrats -- who rained on the parade. The ensuing debate contributed mightily to the widespread impression that Merkel's coalition prefers infighting to governing.

Health care costs in Germany are rising at roughly 5 percent each year, according to Peter Altmaier, parliamentary floor leader for Merkel's conservatives. He promised that Tuesday's agreement will be the first step towards a "long term solution."

While the plan allows insurers to determine how high the additional charges should be, it calls for assistance for low wage earners. Should the additional charges be higher than 2 percent of their salary, they will receive state help.

The plan is a far cry from the radical reform that Rösler had been championing. On Tuesday, Frank-Walter Steinmeier, SPD floor leader, called for the FDP minister's resignation on the grounds that he was clearly unable to push through his preferred plan. Steinmeier said the plan was unfair and would "hit low and middle income earners the hardest."

cgh -- with wire reports


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The Fractures in Merkel's Coalition
Tax Increases
Chancellor Angela Merkel's cabinet recently put together an austerity program designed to reduce spending by €80 billion ($95 billion) by 2014. It is the largest such package of cuts since World War II, but it has been criticized for not demanding sacrifices from Germany's wealthy and top earners. Several leading members of Merkel's Christian Democrats (CDU) have urged her to consider raising taxes in the highest brackets. Her junior coalition partners from the pro-business Free Democrats (FDP) have protested vehemently against any such increases, with some saying that a tax hike could force the FDP out of the coalition.
Mandatory Conscription
Given Merkel's desire to cut spending, Defense Minister Karl-Theodor zu Guttenberg, a member of the Christian Social Union, the Bavarian sister party to Merkel's CDU, openly speculated that jettisoning mandatory conscription, a feature of the German military since 1957. Despite having signalled her willingness to consider just such a step, Merkel declined to support her defense minister. Rumors circulated over the weekend that Guttenberg was considering handing in his resignation as a result.
Health Care Reform
Since his swearing in last October, Health Minister Philipp Rösler (FDP) has been working on a fundamental change in the way Germany's health care system is funded. His plan has been discussed in detail within the coalition and, after difficult negotiations with the CSU, an agreement appeared to be in the offing. In the end, however, the CSU declined to support Rösler and Merkel stood by as the reform faltered, allowing her health minister's public image to suffer. The FDP was outraged and referred to the CSU as a "wild sow." In response, the CSU called the FDP a "troop of cucumbers," roughly akin to calling the party a gaggle of bumbling idiots.
Whether or not Germany will use federal funds to help out the struggling carmaker Opel has long been a point of dispute in Berlin. Economics Minister Rainer Brüderle (FDP) recently went on record as saying that no federal funds would be made available to Opel. Shortly thereafter, Merkel contradicted her minister by saying that the last word had not been spoken. Many anticipated Brüderle's resignation -- until Merkel aligned her position with that of her minister the next day. It was an about face that angered the FDP yet again and made Merkel look indecisive.
Presidential Candidate
The resignation of President Horst Köhler at the end of May caught nearly everyone by surprised. Merkel sought to find a replacement candidate quickly, and initially supported the candidacy of Labor Minister Ursula von der Leyen (CDU). With some in her party tepid about von der Leyen, however, Merkel quickly backed away and threw her support behind Christian Wulff (CDU), the governor of Lower Saxony. The about-face made von der Leyen look bad.
Nuclear Reactor Life-Spans
One of the central policies of Merkel's new government when it entered office last autumn was its desire to overturn a law requiring all nuclear reactors in the country to go offline by the early 2020s. Following a miserable showing in North Rhine-Westphalia state elections in April, however, her government lost its majority in the Bundesrat, Germany's upper legislative chamber. Merkel's government, already not totally in agreement on nuclear energy policy, mused about the possibility of pushing through the extension without Bundesrat approval, but has since been criticized for considering such a course of action. Merkel remains unsure how to proceed. Part of the austerity package foresees a new tax on radioactive waste, but there has been public disagreement within the CDU as to whether such a tax would be introduced without a lifespan extension. The headlines have added to the impression the coalition has lost its way.

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