Social Service and Health Care Provision

March 9, 2010

On March 9, 2010, the American Institute for Contemporary Studies (AGI) hosted a discussion on “At the Eve of Convergence? Social Service and Health Care Provision in the U.S. and Germany.” Dr. Annette Zimmer, DAAD/AGI fellow, and Dr. Steven Rathgeb Smith from the Georgetown Public Policy Institute presented research on the question of whether there is convergence between the U.S. and Germany in terms of social service provision. While the two countries have somewhat different social welfare policies and histories, today’s challenges confronting both countries–demographic changes and increasing national debts–are similar.

Germany’s social policies trace their origin back to Bismarck, who introduced the concept of social security in the late nineteenth and early twentieth centuries in order to integrate a new class of workers into society and politics. The distinction between social security and welfare, which was made during that time, is still applicable in Germany today. Social security is provided through state programs whereas welfare is provided by churches and non-profit welfare agencies. This distinction and division of labor is similar in the U.S.: There is a differentiation between social security and welfare; care and services are organized at the local level; and nonprofits play an important role. Yet, differences between both nations are also apparent: In Germany, the Basic Law defines and guarantees equality of life; in the U.S., non-profit providers have to rely largely on private funding.

In Germany, the provision of social services is based on a long tradition of close relations between the government and the nonprofit sector. The nonprofit sector is able to profit from laws protecting it from commercial competition and from guaranteed public funding. The principle of subsidiarity serves as ideological underpinning of social policy in Germany. Yet, recent economic changes have impacted the provision of social services in Germany. In times of economic crisis, neo-liberalist ideas have gained traction and ended the postwar consensus of a close linkage between Germany’s economic strength and its strong welfare state. Laws governing social policy were implemented modifying the principle of subsidiarity, capping government subsidies, and increasing the private contributions to care.

In the U.S., recent trends have included shifting away from direct contracts to vouchers, tax-credits, and performance-based contracts. Additionally, Medicaid’s role as a funder of key social services has grown and for-profit firms have entered the market of service providers, which was previously dominated by non-profit service providers. In comparing the U.S. and Germany, a convergence of the welfare mix, financing, and regulation is evident. However, rather than a path-dependent theory it is more path dynamism explaining this convergence.