Canada could learn from Germany’s private hospitals

Germany is known for its extensive welfare state and comprehensive public health-care system. But the success of Germany’s health system would not be possible without the strong role of private hospitals.

Only 30 per cent of hospitals in Germany are government-owned. More than two-thirds are either private for-profit or private non-profit facilities, though they serve the whole population within a broader publicly financed health system.

The strong presence of private hospitals in Germany could lead one to assume that the health-care system there is more expensive than Quebec’s, that it requires more private funding, and that it asks its patients for higher copayments. But this is not true at all: Germany’s system is cheaper, more accessible, asks for less in terms of copayment and provides a higher quality of care overall to its population.

In 2011, Germany spent 11.3 per cent of its gross domestic product on health care, which is significantly less than the 12.5 per cent that Quebec spent. Almost 77 per cent of Germany’s spending is funded by the public sector, compared with less than 70 per cent in Quebec.

Although Germany has to cope with an older population and therefore a higher demand for health services — the share of its citizens age 65 and older being about 30 per cent higher than in Quebec — it manages to keep its total health-care spending as a share of GDP below that of Quebec.

Hospital treatment in privately owned hospitals in Germany is cheaper than treatment in publicly owned facilities. About 26 per cent of Germany’s health-care expenditures go to pay for hospital treatments. That’s 10 percentage points less than what Canadian hospitals are costing in proportional terms, and also below the share of Quebec’s mainly public hospital system. While Germany spends 2.9 per cent of annual GDP on hospital care, Quebec spends 3.3 per cent.

The level of out-of-pocket payments by patients in both German and Canadian hospitals is below two per cent of total hospital costs. This means patients pay as little in German private hospitals as Canadian patients pay out of pocket in their government-owned hospitals.

So more competition and more private hospitals do not lead to higher costs or higher out-of-pocket payments for patients; quite the contrary. These very factors are behind the increased level of care observed in Germany in recent decades since hospitals, be they public or private, have to compete on quality to attract patients. German patients are free to choose which hospital they want to go to for treatment.

The German health-care system offers a bigger bang for the buck. For instance, Germany has more than twice as many hospital beds per capita as Quebec does, and 50 per cent more magnetic resource imaging machines.

It is important to understand that the existence of private hospitals within a public and universal health system does not mean that patients have to pay more for health care, or that fewer services are going to be covered by the state.

It also does not mean that the poorest citizens are left out, or that they receive lower-quality services. Private provision of health care and a very comprehensive publicly funded health system can coexist very well.

If Canadian policy-makers want to improve the quality of hospital care and reduce wait times, they should rethink the way that care is provided and who should owns the means of service delivery.

Frederik Cyrus Roeder is a German health economist and an associate researcher at the Montreal Economic Institute. The views reflected in this op-ed are his own.

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