The U.S. and German Health Care Systems after the Health Care Decision: Not Much Closer

Building a Smarter German-American Partnership

On June 28, the Supreme Court announced its decision to uphold all of the Patient Protection and Affordable Care Act (ACA), including the controversial requirement for individuals to purchase health insurance or face a tax, which conservative challengers of the law starkly opposed. Although the fate of the law remains unclear – Mitt Romney has promised to repeal the law if elected – its supporters can breathe a sigh of relief that it has cleared its final legal hurdle. By upholding the individual requirement, the Supreme Court arrived at a decision similar to the Bundesverfassungsgericht’s (the German Federal Constitutional Court) approval of a universal requirement for individuals to hold insurance in 2009. The debate surrounding, and the decision concerning the mandate varies starkly between the two cases. While the Supreme Court’s decision marks the crest of a wave of controversy surrounding the federal government’s authority to require individuals to purchase insurance, the Bundesverfassungsgericht gave the universal individual mandate little thought, reflecting a dramatic difference in the foundations of the U.S. and German health care systems.

In the United States, the individual mandate to buy insurance proved so controversial that the Supreme Court sidestepped the issue, upholding the provision as not a mandate, but as a tax. Rather than upholding Congress’ authority to require individuals to purchase insurance, the court approved Congress’ levying a tax on individuals who did not purchase insurance. In the court’s 193-page opinion on the health care case, the Supreme Court justices present varied and nuanced analyses of the individual mandate – or tax – and what it means for congressional power and the constitutionality of the ACA. The opinion, which is as complicated as it is lengthy, reflects the novelty of a direct relationship between individuals and the federal government in the U.S. health system. As a result, the political and judicial challenges faced by the law should come as no surprise.

In contrast, Germany’s 2009 implementation of a universal individual requirement to purchase health insurance represented a relatively minor change to a system with compulsory requirements stretching back to Bismarck’s 1883 health care law. Previous to enacting the universal requirement, Germans earning under a certain amount were already required to hold Gesetzliche Krankenversicherung, or Statutory Health Insurance (SHI), which covered the majority of the population. Individuals earning salaries above that level were permitted to opt out of the SHI system and purchase private health insurance instead, without a legal requirement to do so. Nevertheless, most individuals eligible to opt out either remained in the system or purchased private insurance, meaning that very few Germans went without insurance.

Thus, the 2009 universal requirement only directly affected the tiny proportion of Germans who earned enough to opt out of SHI and did not hold private insurance. More importantly, the 2009 law built on a legacy of federal requirements already accepted in Germany. Because of the extensive precedent for federal requirements to purchase insurance, the Bundesverfassungsgericht did not have to question the constitutionality of a federally-issued mandate, the central premise of the case before the Supreme Court. Instead, the legal challenge to Germany’s 2009 law came primarily from private health insurers worried that other provisions of the law would pose undue hurdles to their business. In its decision, the Bundesverfassungsgericht addressed these concerns as largely unfounded but barely mentioned the universal individual requirement.

The context surrounding the individual requirement in the two court cases could not be more different. While the individual requirement became the focal point of the Supreme Court’s decision, it was a legal sideshow at the Bundesverfassungsgericht. Although the United States and Germany face similar challenges in their health care systems, the systemic starting points from which policymakers seek to address these issues remain sharply different. To further complicate the relationship between market and federal government, the Supreme Court’s decision only permitted a tax penalizing those who did not purchase insurance rather than a universal individual mandate to purchase insurance, as authorized by the Bundesverfassungsgericht in 2009. By denying the U.S. government the authority to require individuals to buy insurance, the Supreme Court maintained a modified status quo, which denied the government the precedent it wanted for future health care reforms.

Therefore, to argue that the Supreme Court’s decision upholding the ACA makes the U.S. health care system more like its German counterpart would be a dramatic overstatement. While the ACA reforms the U.S. health system, it also maintains its current shape, a pattern reinforced by the Supreme Court’s decision. As reflected by the debate surrounding the individual requirement – or lack thereof, in Germany – policymakers in the United States and Germany will continue to face very different policy contexts in shaping future health care reforms.