Bryan Caplan  

Health Pricing Transparency in Imperial Germany

When to Rely on Coercion... The Company of Strangers...

Last November, Tyler Cowen enumerated fourteen things to do instead of Obamacare.  Number six:

Make an all-out attempt, comparable to the moon landing effort if need be, to introduce price transparency for medical services.  This can be done.
This Singaporean recommendation stuck with me.  Imagine my surprise, then, to see health pricing transparency surface in All Quiet on the Western Front:
The hours are a torture; we do not know what to talk about, so we speak of my mother's illness.  It is now definitely cancer, she is already in the hospital and will be operated on shortly.  The doctors hope she will recover, but we have never heard of cancer being cured.

"Where is she then?" I ask.

"In the Luisa Hospital," says my father.

"In which class?"

"Third.  We must wait till we know what the operation costs.  She wanted to be in the third herself.  She said that then she would have some company.  And besides it is cheaper."

... My mother has always been sickly; and though she has only gone to the hospital when she has been compelled to, it has cost a great deal of money, and my father's life has been practically given up to it.

"If only I knew how much the operation costs," says he.

"Have you not asked?"

"Not directly, I cannot do that - the surgeon might take it amiss and that would not do, he must operate on Mother."

Yes, I think bitterly, that's how it is with us, and with all poor people.  They don't dare to ask the price, but worry themselves dreadfully beforehand about it; but the others, for whom it is not important, they settle the price first as a matter of course.  And the doctors does not take it amiss from them.
Assuming Remarque's narrator has his facts straight, what's going on?  It sounds like a counter-signaling equilibrium: To ask about prices sends a bad signal if you look poor, but a neutral or positive signal if you look rich.  But a bad signal about what?  The most obvious candidate is your probability of paying the bill, but could it just be an issue of status?  (We're talking about the Second Reich, after all). 

In any case, Remarque describes more price transparency than Americans have today.  Did transparency fall over time, has German health pricing always been relatively transparent, or what?

Comments from readers with first-hand knowledge of the German health sector would be especially useful.

P.S. I'll be at FEE's Applying Liberty seminar in Atlanta the rest of the week.  If you're attending, please introduce yourself. :-)

Comments and Sharing

COMMENTS (8 to date)
Hans Huett writes:

Nowadays health pricing in the German market is thoroughly opaque - in the main sector of public option. Patients pay a quarterly fee of 10 Euro for their visits to a doctor.They never see an invoice. This is a reason for health reformers to raise cost awareness by adopting elements of the private sector to enable public option patients to get sort of an idea about the costs of their treatment.
Only the privately insured get detailed invoices reimbursed by their insurances.

Jean writes:

All 16 states control fees, doctors' wages and drug costs. The long waiting times, even with private insurance, were certainly transparent to me, although I don't know if Germans saw it that way.

Richard Davis writes:

The link "Singapore's Health System" failed for me.

david writes:

To the Ed: remove the ' in the Singapore's Health System link.

[The link is fixed now. Thanks for pointing it out.--Econlib Ed.]

kary writes:

German health price transparency depends on the health insurance. Generally, there are three types:

1. Statutory health insurance: The patients don't pay the price. Usually, they don't know the price of an operation. However, they have to pay a fee (e.g. per day in the hospitals) today.

2. Private health insurance: Usually, the patients have to pay first and can recharge the costs at the private health insurance afterwards. Civil servants have private health insurance. The German state also covers a part of the expenses afterwards before the health insurance pays the rest.

3. No health insurance.

Regarding imperial Germany:
1. I would assume that the payment schedule in the private health insurance was the same.

2. Statutory health insurance has been launched in Germany by Bismarck in 1883. Usually, family members had also the health insurance without additional fees in imperial Germany. I don't know how the payment schedule was in imperial Germany. However, the establihment of associations of statutory health insurance physicians in 1931 indicate that the health insurance paid directly before.

3. A major difference was the incompleteness of the statutory health insurance. Only employees (and the family members) got statutory health insurance. The main financial risk to be sick was the loss of the weekly salary in that time, not the expenses for the medical treatment. Especially retired people had no compulsory health insurance in imperial Germany. According to Götz Aly this has been changed in 1941 ("Hitler's gift for the Germans for the victory in France").

Tracy W writes:

Hans Huett - according to some friends who worked in health policy in NZ, in the 1980s in NZ they tried providing doctors and public patients with information about the costs of drugs, figuring that doctors would chose to prescribe the cheaper drug when the two were equally effective. Instead doctors chose to prescribe the more expensive drug, based on the idea that price says something about effectiveness.

Richard Ebeling writes:

For an overview of the Health Care system in Imperial Germany in the late 19th and early 20th centuries, if I may, I would like to recommend a three-part article that I wrote about it in "Freedom Daily" in (January, February, March 1999), published by the Future of Freedom Foundation.

It appears under the title:

"National Health Insurance and the Welfare State."

Part I:

Part II:

Part III:

The article also gives a summary of the political and ideological thinking behind the German welfare state, in general, of which the health care system was one component.

Richard Ebeling

Dave writes:

'but we have never heard of cancer being cured'

Me, I'd take a period of history when cancer can be cured over an era of health care cost transparency any day.

But of course I'm not an economist.

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