Global budgeting in Germany: lessons for the United States

In 1993 Germany implemented significant health reform legislation that, among other things, strengthened the global budgeting of physicians and instituted global budgeting of pharmaceutical expenditures. German physician expenditures are now capped at the growth in income of members of the sickness funds, in contrast to prior years, in which some growth above a targeted level was allowed. For the first time, dental services also are subject to the budget cap. The new reform legislation also limits growth in pharmaceutical expenditures by increasing the level of copayments and by placing physicians as a group at financial risk for growth over the limit. This paper examines the effect of these reforms during the first year and offers lessons for reform of the U.S. system.