On Wednesday, the federal cabinet advanced the first major social reform project of Chancellor Friedrich Merz's (CDU) government. The ministerial council in Berlin approved a draft law to reform the statutory health insurance system (GKV), designed to address the deficits facing health insurers and stabilize contributions for policyholders. The widely criticized reform is expected to have tangible impacts on insured individuals, as well as on doctors, hospitals, and the pharmaceutical industry.
Federal Health Minister Nina Warken (CDU) expects the reform to generate savings of €16.3 billion next year if implemented, sufficient to close the anticipated GKV deficit of €15.3 billion. The plan also aims to address funding gaps in subsequent years. Warken's initial draft had projected nearly €20 billion in savings, but the scope was reduced during final negotiations between the Union and SPD on Tuesday to ease the burden on policyholders.
Despite the adjustments, the reform still includes a series of cutbacks affecting policyholders. Co-payments for medications purchased at pharmacies will increase, free family coverage will be restricted, and higher earners will be required to pay health insurance contributions on a larger portion of their income. Sick pay, however, will remain at full value, contrary to Warken's original proposals, a demand the SPD insisted upon.
The reform will eliminate free health insurance coverage for spouses and domestic partners. Beginning in 2028, policyholders will pay 2.5 percent of their taxable income to cover uninsured partners, down from the initially proposed 3.5 percent. Exemptions remain in place for parents with children under seven, parents of children with disabilities, family caregivers, and retirees. This measure is projected to save €1.6 billion per year.
The government will raise the income cap (Beitragsbemessungsgrenze) by €300 from €5,812.50 to €6,112.50 per month, meaning people earning above €5,812.50 will pay contributions on an extra €300 of income. This is expected to bring in €2.4 billion extra per year.
Warken's draft stipulates that compensation for doctors, hospitals, and pharmaceutical manufacturers may only grow at the same rate as insurers' revenues. In recent years, growth in these areas has typically been significantly higher. Medical associations have criticized this provision, warning it could lead to reductions in patient care quality.
A particularly contentious aspect of the reform is that statutory health insurers will continue to bear a substantial portion of the costs for insuring recipients of basic social security benefits. Minister Warken herself believes that funding through tax revenues would be more equitable.
However, the federal government is facing budgetary constraints and plans to increase its subsidies by only €250 million next year, according to the draft legislation, with incremental increases in following years.
At the same time, the government is cutting its contribution to the GKV health fund by €2 billion. Insurers have expressed frustration and are demanding changes, threatening premium increases starting in 2029.
Until Tuesday, the Union and SPD had been negotiating to reach a compromise on the complex health reform in order to enable the cabinet decision on Wednesday and a swift vote in the Bundestag. For Chancellor Merz's cabinet, which is currently struggling in opinion polls, the matter also concerns demonstrating its ability to govern after weeks of public disputes.
According to the Chancellor's vision, the GKV reform is intended to mark the beginning of further major initiatives, including pension insurance reform.
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