Abstract
Abstract The German health care sector provides a good example for the negative effects of a substitution of potential market failure by real state failure. Generally, buyers and sellers should be allowed to determine the appropriate level and mix of resources that will be channeled into the health sector. The only way to assure that the system provides an efficient allocation is to have well-designed, structural incentives for each party involved in the health care sector. From this perspective, the article identifies the incentives for patients, the providers of medical treatment and for the financing insurance plans as the mere source for inefficiencies. These incentives result from a lack of equivalence and a lack of competition within the German health care sector. They can therefore be related to inadequately designed framework legislation. The article outlines proposals for an improved design of the economic incentives for patients, providers, and insurers in Germany.
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