The changing nature of contracts in German health care

The flexibility inherent in the German health care system is fairly limited. The contracting environment itself is characterized by bilateral cartels negotiating the terms covering their respective members. Looking at some recently implemented reforms, namely structural contracts and experimental settings, the paper assesses the potential for sickness funds to take on a more active role. The paper also evaluates the implications for the contracting relationships between the statutory sickness funds and provider associations. Furthermore, the potential effect of selective contracting on the health care system is studied. A look at the reforms recently enacted in other countries illustrates the difficulties contractual reform has to cope with in an environment characterized by strong informational asymmetries. It is postulated that both private and public choices are needed for a successful reform effort.