[Notes on the planned German health fund model]

The aim of this paper is to evaluate the planned German health fund model, a special risk adjustment scheme, in terms of competition policy. Starting from the present model of risk adjustment, we have examined the consequences of introducing the fund model on competition in the health insurance market. On the one hand, the risk adjustment fund will, at best, decrease ineffective competition for "good risks". On the other hand, it will increase the pressure of competition inside the health insurance market by providing new incentives to the unemployed to change their sickness fund. Significant economies, however, can only be realised by increasing the competition for contracts between the health insurance companies and the suppliers of medical services. The new risk adjustment fund then will also offer only a limited potential for competition between individual sickness funds. Besides, it remains to be seen to what extent policy-makers are able to achieve an optimally designed risk adjustment fund and whether the sickness funds themselves do not misinterpret the reform as nationalization in disguise and consequently delegate their management responsibilities back to the policy-makers.