4. Paying for services
Adequate funding for health is important to manage the excess demands on the health system. This section considers how countries are PAYING FOR COVID-19 SERVICES. Health financing describes how much is spent on health and the distribution of health spending across different service areas. The section also describes who is covered for COVID-19 testing and treatment, whether there are any notable gaps (in population coverage and service coverage), and how much people pay (if at all) for those services out-of-pocket.
4.1 Health financing
Financing implications of the Third COVID-19 Population Protection Act
In regard to more targeted help for hospitals, the Third COVID-19 Population Protection Act, adopted by parliament on November 18, implements changes in the compensation payments for beds that hospitals reserve for COVID-19 patients. The per diem/daily payments for keeping empty beds available are to be reintroduced, but in a more targeted manner: the intensive care capacities of hospitals have to be scarce and the area’s 7-day incidence of confirmed cases has to be over 70.
Only hospitals with intensive care capacities that postpone or cancel elective treatments to potentially treat COVID-19 patients are eligible to receive compensation payments. These hospitals, whose eligibility is to be determined by the state, can receive compensation payments if they are located in areas where less than 25% of free, operable intensive care beds are available and in which the 7-day cumulative incidence is above 70 cases per 100,000 residents. If the free ICU capacity is less than 15% of all ICU beds in the area, the respective state authorities can determine if hospitals from neighbouring communities with the same preconditions (i.e. postponing interventions to free up ICU capacities) are also eligible for compensation payments. Compensation will be paid to hospitals for the lower number of patients treated in 2020 compared to 2019, as per diem payments are to be distributed based on 90% of the difference in patients that hospitals had between both years. The basis of the per diem payment is the flat-rate fee per unoccupied hospital bed.
In addition, rehabilitation facilities can once again be used as recovery facilities until end of January 2021 to take over discharged COVID-19 patients with mild symptoms or other patients to relieve ICUs. Residential facilities for rehabilitation and prevention are also eligible for financial support for revenue shortfalls for a limited period of two and a half months with half of the revenue loss being covered, based on the average daily flat rates.
Compensation payments for hospitals and residential facilities for rehabilitation and prevention are refinanced through the federal budget.
A new regulation came into effect on December 23 that enables hospitals in COVID-19 hotspots to access special financial support. If a district or independent city registers more than 200 new cases of COVID-19 per 100,000 inhabitants within seven days, hospitals in those areas can receive compensation regardless of their free bed capacities. The Federal Ministry of Health also announced that the regulation would retroactively apply to December 17, 2020.
Hospitals in Germany have received roughly EUR 12.7 billion in COVID-19 aid from the Health Fund between March 2020 and April 2021. This answer came in a response to a parliamentary inquiry from the opposition. Additionally, it was reported that physicians and psychotherapists received payments of EUR 207 million in 2020 and ambulatory and other care facilities have received financial aid of a total of EUR 2.4 billion since the start of the pandemic through February 28, 2021.
Deficits of SHI funds and compensation by federal government in 2020
On December 4, it was reported that Germany’s 105 statutory health insurance funds posted a total deficit of nearly EUR 1.7 billion from the 1st to 3rd quarters of 2020. While the income of the SHI funds increased by 4 %, the expenditures on services and administrative costs increased by 4.2 % They had financial reserves of EUR 17.8 billion as of September 30 (equivalent to 0,81 of monthly expenditures)as the effects of COVID-19 and the Federal Ministry of Health has agreed to provide additional subsidies into 2021. EUR 10.5 billion had been paid out of the liquidity reserve of the Central Reallocation (German Health Fund) until by the end of September to compensate for the availability of hospital beds, the decline in occupancy rates at preventive care and rehabilitation facilities, the expansion of intensive care beds, the loss of income for providers of medical treatment and the subsidies for social service providers. The federal government reimbursed around EUR 8.8 billion to the Health Fund for the 1st to 3rd quarters as compensation for the compensation payments due to declining hospital occupancy rates and from January to September, the Health Fund posted a deficit of EUR 5.1 billion until end of September 2020.
According to preliminary figures of the year 2020, the SHI funds’ deficits increased by about one billion Euros to EUR 2.5 billion in 2020, equal to an increase of almost two thirds. This is the highest deficit for more than a decade. Since 2003, the SHI funds have generated surpluses in 12 out of 16 years. However, not only the pandemic is responsible for this deficit, but also reforms to Germany’s healthcare system are putting pressure on statutory health insurance such as the Long Term Care Strengthening Act.
Paradoxically, during the first half of 2020, the SHI funds had very healthy balance sheets as hospitals postponed expensive surgeries and rehabilitation clinics remained empty. As a result, the system saved on expenses, while the revenues set in the previous year continued to run. In the first half of the year, the SHI funds therefore achieved a surplus of almost EUR 1.3 billion. In the third quarter, however, there was a severe deficit of EUR 3 billion, followed by another drop of almost EUR 900 million in the fourth quarter.
Federal budget of 2021 and health financing
The federal government is planning to take on EUR 96.2 billion on debt in 2021 and hence to loosen its strict rules on public debt (the German debt brake, adopted in 2009 after the financial crash, limits the Federal government's structural net borrowing to 0.35% of GDP). A one-off extra subsidy of EUR 5 billion has been earmarked for the deficits of the SHI funds in 2021.
The Federal Ministry of Health is getting an additional EUR 6 billion from the federal budget to fight COVID-19. More than half of that money will go towards guaranteeing the free rapid tests that have been available since March 8, and EUR 1.5 billion will be available to reimburse GPs who vaccinate in their practices and another EUR 1 billion earmarked to support hospitals.
COVID-19 Hospital Relief Act: financial support for hospitals
On March 25, the parliament approved the COVID-19 Hospital Relief Act which comprises a number of measures to guarantee the funding of hospitals and ensure their liquidity. The additional expenditure for these measures is in particular financed from the liquidity reserve of the Central Reallocation Pool (Gesundheitsfonds; literally, “Health Fund”) which contains SHI contributions but also federal tax money. The measures included in the COVID-19 Hospital Relief Act aim to compensate hospitals for decreased admissions, provide financial aid for increasing treatment capacities as well as to reduce administrative burden.
(1) For non-essential surgery and treatment that has been postponed, hospitals are to receive financial compensation from the liquidity reserve of the health fund which will be subsidized by the national budget (the additional spending is estimated at EUR 2,8 billion in 2020). Until end of September 2020, hospitals will receive a lump sum payment of EUR 560 a day for every bed that is not occupied (calculated by determining the difference between the number of patients currently being treated per day and the average number of patients that were treated per day in the previous year).
(2) For every additional ICU bed with ventilation capabilities that hospitals set up, hospitals will receive a bonus of EUR 50,000 between April 1 and September 30.
(3) Hospitals will also receive an additional payment of EUR 50 per patient to cover the additional costs, especially of personal protective gear. This provision will apply from April 1 until June 30.
(4) Hospital do also receive a higher payment for nurses. The current nationwide nurse fee of EUR 146 per day will be raised by about EUR 38 to EUR 185 a day as of April 1. This provides hospitals financial leeway in scheduling nursing staff and to adapt to the increased need for nursing. Should the provisional nursing fee exceed the actual nursing staff costs of the hospital, the excessive amount will remain with the hospital. On the other hand, if the provisional nursing fee is not sufficient to cover the actual nursing staff costs, the excessive nursing costs will be completely assumed by the social health insurance funds.
Further measures to safeguard hospital’s liquidity include:
- a suspension of the fixed cost degression deduction for the agreement on the 2020 income budget
- reduction of the payment period of the SHI funds for invoices issued by the hospitals to five days
- suspension of several measures of the new SHI Medical Review Board reform act entered into force in January 2020. For example, to protect hospitals from expensive and time-consuming billing audits and the compilation of necessary documents for the SHI Medical Review Board, the Hospital Relief Act simplifies the auditing of the invoices by reducing the audit rate: the maximum permissible review rate of 12.5 % of the invoices (in place since January 2020) received per quarter has been lowered to 5 % (ongoing billing audits that exceed the reduced rate must be cancelled).
According to information from the Federal Office for Social Security (Bundesamt für Soziale Sicherung; BAS), German hospitals have received around EUR 9.4 billion in compensation payments related to COVID-19 until September 2020. Most of this amount (EUR 8.76 billion) was used to compensate hospitals for the loss of revenue caused by cancelled or postponed operations. A further EUR 608 million was paid to equip additional intensive care beds. Further funds have gone to preventative and rehab facilities (EUR 330.6 million), allied health professionals (EUR 813.8 million) as well as to paying for COVID-19 tests (EUR 28.9 million). Part of these grants disbursed by the BAS and financed from the liquidity reserve of the Central Reallocation Pool (“Health Fund” [Gesundheitsfond]). However, the funds provided for hospital revenue shortfalls are borne by the Federal Government.
COVID-19 Hospital Relief Act: financial support for outpatient care
For outpatient care the COVID-19 Hospital Relief Act also contains a number of measures. SHI accredited physicians and psychotherapists working in practices can expect to receive compensatory payments if they suffer loss of earnings as a result of the COVID-19 pandemic. If the total fee of the SHI-authorised service provider decreases by more than 10 % compared with the quarter in the previous year and if the reason for this is a reduction in the number of cases due to a pandemic, epidemic, endemic, natural disaster or another major damage event, the regional Association of SHI Physicians can pay a compensation to physicians. However, such payments are limited to extra-budgetary services and take into account other compensation claims (e.g. under the Infection Protection Act). Compensation payments must be reimbursed by the SHI funds to the Regional Associations of SHI Physicians.
At the same time, additional costs incurred as a result of treating COVID-19 patients are to be offset. Against this background, the financing of extraordinary measures, such as the establishment of special centres to separate patients with respiratory problems or setting up services to render additional visitations,"outpatient clinics for patients with fever" is to be ensured. The SHI funds must reimburse the Regional Associations of SHI Physicians for the additional costs of these extraordinary measures.
COVID-19 Hospital Relief Act: financial support for residential care facilities
The legislation also contains provisions to ensure long-term care and reduce the risk of infection to those in need of care and professionals working in long-term care (suspending or distance long-term care need assessments). Residential facilities for rehabilitation and prevention will also receive compensation for every non- occupied medical rehabilitation bed of the sickness funds The amount of the payment will be calculated by comparing the number of inpatients per day as of 16 March with the average number of inpatients per day in 2019. The difference thus calculated will be offset by a lump sum payment per case, currently up to September 30 at the latest. This amounts to 60% of the average remuneration rates that were agreed upon with the SHI funds. The additional financial costs incurred by the pandemic or any loss of income is to be reimbursed through the long-term nursing care insurance. Bureaucratic requirements such as quality inspections by the SHI Medical Review Board and counselling visits of long-term care beneficiaries cared for by family members will be waived for a time. Assessments of long-term care needs will be based on documentation and interviews. Nursing care insurance schemes will be granted more leeway to help them avoid gaps arising in nursing care coverage for people receiving care at home.
On April 12, the Minister of Health announces to extend compensatory payments to dentists, allied health professionals (physiotherapists, speech therapists, ergo therapists etc.) and rehabilitation facilities for parent-child health retreats. The financial support aims to maintain important structures in health care which currently experience loss of income due to a low number of patients. On May 5, the ‘Ordinance for compensation of dentists, allied health professionals and rehabilitation facilities for parent-child retreats due to COVID-19 related financial strains’ was approved.
Modification of the DRG system
On March 23, the German Institute for Medical Documentation and Information (DIMDI) provided the secondary code for COVID-19 suspicion after consultation with WHO. Prior to this, on February 17, the DIMDI and WHO already provided the code for the new COVID-19 infection (U07.1!) complementing the secondary code B97.2!. As of now, the ICD-10-GM catalogue, which is an adaptation of ICD-10-WHO, provides the following two subcodes for COVID-19:
- U07.1! for COVID-19 confirmed by laboratory testing and
- U07.2! for clinical or epidemiological diagnosis of COVID-19 where laboratory confirmation is inconclusive or not available.
These secondary codes are to be combined with a main code. In the G-DRG system, depending on the main diagnosis, pharyngitis/laryngitis (D63Z), bronchitis (E69C), bronchiolitis (E70Z) or pneumonia (E79C) is achieved. The main codes are important for the billing within the G-DRG remuneration system. Further, length of stay, ventilation, comorbidities and degrees of severity determine the valuation. In the case of at least 10 days of isolation with complex treatment an increase in severity to E79B is possible, but only in the case of pneumonia. With ventilation treatment of at least 25 hours and minimum length of stay of three days the basic DRG E40 is achieved and depending on PCCL, age and intensive complex care the stage s. As a result, the valuation ratios can fluctuate considerably by main diagnosis, severity and length of ventilation, among others.
Financing implications of the Second COVID-19 Population Protection Act
On May 14, the federal parliament passed the ‘Second Act for protecting the Population in the Event of an Epidemic Situation of National Importance’ which includes a bundle of laws which concern testing, reporting obligation of test results, health and long-term care professionals and financing. The law is meant to expand the provisions of the first pandemic law passed at the end of March. The Ministry of Health can compel SHI funds to cover the cost of the COVID-19 tests and antibody tests for recovered patients. Public health offices will be able to invoice costs for COVID-19 tests with the SHI funds. To cover costs for COVID-19 tests of patients treated in hospitals, an additional charge will be introduced.
A further support measure for hospitals is the postponement of the introduction of a quarterly audit rate of 12.5% maximum until 2021. The variable, hospital-specific audit rate will apply from 2022 onwards. This provision supplements the 2020 quarterly audit-rate limit introduced by the COVID-19 Hospital Relief Act of up to 5% of final invoices.
The Act includes an exemption for the treatment of (suspected) COVID-19 cases from Medical Service audits re compliance with the minimum requirements of certain procedure classifications for the second quarter of 2020. The reason for this is that ICU’s have been expanded during the pandemic, both in terms of medical equipment and personnel from other areas and as a result the minimum requirements of the complex intensive care medicine classifications may not be fulfilled in every case. However, this should not cause the repayment of payments to hospitals. The German Institute of Medical Documentation and Information (DMDI) therefore compiles a list of minimum requirements of procedure classifications exempted from audit.
In order to be able to check the effects of the measures under the COVID-19 Hospital Relief Act on the economic situation of the hospitals on a valid data basis, hospitals are required to submit part of the data that is in any case to be supplied to the Institute for the Hospital Remuneration System (InEK) an additional two times a year. This is first and foremost for the purpose of examining whether and to what extent there are backlog effects from postponed operations and how high the proportion of dialysis is for corona patients receiving intensive care. Failure to comply with the obligation to provide data during the year is penalised by a reduction of EUR 10 per case, but at least EUR 20,000 per hospital location. This does not apply in the event that it would cause the hospital undue hardship. The Institute for the Hospital Remuneration System has the task of determining the details of this hardship provision.
GPs and ambulatory physicians will be able to procure more flu vaccines without having to fear claim for compensation by SHI funds. Until now, doctors have only been able to procure a limited amount of flu vaccines every year for their patients, as health insurance companies would only cover the cost for those deemed to have a higher necessity for immunization. Now, health insurers will have to make the vaccines more widely available. This enables physicians to order an additional reserve of 30% of the influenza vaccine, based on the number of influenza vaccinations retrospectively established as having been carried out, for their practice requirements in the 2020/2021 influenza season, without having to fear additional charges from the statutory health insurance funds. The government's goal is to protect the health care system by not overburdening it with flu patients next fall and winter.
Ordinance to adjust hospital compensation payments due to exceptional charges related to COVID-19
On July 3, the federal government passed an ordinance that foresees a differentiation of the lump sum payment for hospitals as compensation for keeping empty beds that was defined as part of the Hospital Relief Act (see above). The expert advisory body that reviewed the Hospital Relief Act as of April 2020 proposed a differentiation by five types of hospitals with the objective to compensate hospitals more adequately, e.g. hospitals with high ICU capacity and higher costs receive for keeping empty beds will receive higher compensation. As of July 13, and until September 30, 2020, hospitals receive a lump sum payment that ranges between EUR 190 and EUR 760 per day for every bed that is not occupied. The lump sum payment varies according to five hospital categories that are defined by case mix index and average length of stay in 2019 and type of hospital (e.g. provision of semi-stationary care and/or hospitals with services not remunerated via G-DRG system). The per diem will be supplemented with an additional EUR 100 if a patient treated in hospital was tested positive for SARS-CoV-2.
Financial support for social security funds
On May 14, the Minister of Health announced the German government will use tax subsidies to support social security funds that are suffering shortfalls due to the pandemic, and hinted that such support could even spillover into 2021. Due to the need to keep the social system stable and affordable and to avoid an increase of social insurance contributions above 40%, the use of tax money by the federal government will be made available.
Due to the additional expenditure during the pandemic, SHI funds are facing deficits after many years of surplus. On October 30, the federal government passed the Act of Improved Care Provision (Versorgungsverbesserungsgesetz). The Act still has to be approved by the federal parliament. Besides measures to improve staffing levels in nursing care, the Act regulates the financing of additional expenses due to COVID-19 crisis. The expected financing gap of EUR 16,6 billion of the SHI funds will be financed from tax revenues (EUR 5 billion), the reserves of the SHI funds (EUR 8 billion) as well as from additional health insurance contributions (EUR 3 billion). The insured therefore have to expect higher supplementary contributions rates in 2021 (Zusatzbeiträge). The average supplementary contribution rate for 2021 is to increase by 0.2 percentage points to 1.3%. The higher contribute rates are specified by each SHI fund and they can therefore deviate from the average. The total contribution includes the general rate of 14.6% and the supplementary contribute rate (which is on average at 1.1% in 2020). The total contribution would thus increase on average from currently 15.7% to 15.9% in 2021.
According to a study carried out by the Central Institute for Statutory Health Care (Zi), medical practices had additional expenses for e.g. PPE supply of on average EUR 1,000. Further, results indicate that the workload for every practice increased by two to three hours on average due to the increased use of video consultation hours and changes in e.g. appointment management.
Financing of COVID-19 tests
From the middle of July to the middle of August the Federal Office for Social Security (BAS) paid EUR 4.2 million to the Regional Associations of SHI Physicians for COVID-19 tests on asymptomatic cases from the Central Reallocation Pool. Different associations received different amounts of funding based on the needs of urgent testing (see also Section 1.5 Transition measures : testing). For example, the Westfalen-Lippe region received a total of EUR 3.17 million which included the resulting testing needs from the outbreak at the plant of the Tönnies meat company. The BAS has already paid EUR 9.23 billion into the health care system during the run of the pandemic. This includes EUR 7.55 billion to cover loss of revenue at hospitals, EUR 550 million for additional intensive care beds, EUR 308.7 million for preventative and rehab facilities, EUR 812 million for treatment providers and EUR 1.6 million for social service providers.
The Hospital Future Law and prolonged financial support for hospitals and nursing homes
On September 2, the Federal Cabinet adopted the draft for the "Hospital Future Law” that intends to to support the digital infrastructure of hospitals in the coming years (see also Section 2.1: Stimulus package's investments in infrastructure and equipment). Hospitals are to receive an investment package of around four billion euros. The Federal Government will provide EUR 3 billion, the Länder are to invest another EUR 1.3 billion. During the corona pandemic it became clear that there were deficits or slow progress in the digitalisation and networking of hospitals which is partly a result of the lack of financing of capital investment through the Länder. Funding will be provided for investments in emergency capacities and digital infrastructure to promote internal, intra-sectoral and cross-sectoral care, in particular to digitalise process organisation, documentation and communication, and to introduce or improve telemedicine, robotics and high-tech medicine. Financial support will also be provided for improved information security and the targeted development and strengthening of regional service structures in order to harmonise supply structures both in normal operation and in times of crisis. Necessary personnel measures and cross-border projects can also be financed by the Hospital Future Fund. In 2021 and 2023 the state of digitalisation will be evaluated. Accordingly, the fund will be established at the Federal Office for Social Security and will be funded by the Federal Government, the Länder and the funding agencies from January 2021. The Länder can submit applications for funding as of now and until the end of 2021.
In addition the financial support for hospitals, the existing hospital structural fund, which was established in 2016 to improve regional inpatient care structures, will be extended by two years until 2024. In case of revenue shortfalls related to COVID-19 hospitals may agree on compensation with the SHI funds on an individual basis. Similarly, to cover additional expenditure related to COVID-19 to-up payments can be agreed. Moreover, financial support for residential care facilities to cover additional expenditure related to COVID-19 and revenue shortfalls will be extended until 31 March 2021. The benefits were initially limited until 30 September. Also the support for informal carers providing care to relatives. They can still take 20 working days off at short notice until the end of December 2020 in case of an acute nursing case due to Covid-19. The care support allowance can still be claimed for 20 working days instead of the previous ten. The Act is expected to be adopted by the Federal Parliament beginning October 2020.