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Last Updated: Thursday, 5 October 2006, 09:50 GMT 10:50 UK
Germany restructures healthcare
SPD Chairman Kurt Beck, German Chancellor Angela Merkel and Christian Social Union Chairman Edmund Stoiber
The healthcare problem has been a key test for the grand coalition
Germany's grand coalition has reached a deal on funding the country's health service, which has a budget shortfall of $10bn (8bn euros; 5.3bn) a year.

Chancellor Angela Merkel's Christian Democrats (CDU) reached the deal with their Social Democrat (SPD) partners in a seven-hour negotiating session.

Up to now, German healthcare has been funded by compulsory public and private insurance schemes.

A new centralised fund will now receive money from employees and their bosses.

The new system of deducting contributions automatically from the payroll will not be introduced until 2009.

Funding pressure

The deal followed weeks of acrimonious argument in the coalition.

It has been viewed as a test of Ms Merkel's leadership and her government's stability.

Critics say it is a fudge and it still will not be enough to make up the shortfall in health funds.

Correspondents say the funding problem will get worse because Germany's population is ageing. They say it is only recently that the introduction of prescription charges and consultation fees have begun to discourage frivolous visits to the doctor.

Germany has the third most expensive healthcare system in the world, after the United States and Switzerland.

Under the new system, Germany's health insurers will receive a fixed sum out of the centralised fund for each policyholder. They will get an extra amount if they insure a large number of elderly and chronically ill people.

One controversial issue was a cap on additional health insurance premiums. The SPD emerged from the talks claiming victory on this point. In the future, if health insurers want to impose an extra premium on policyholders, it will be capped at 1% of household income.

Country profile: Germany
16 May 06 |  Country profiles

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