Risk Adjustment Reform in German Health Insurance: Lessons for the US System?

If you're navigating the complexities of US private health insurance or Medicare/Medicaid, understanding how other countries manage risk and prevent fraud can be enlightening. Germany's healthcare system, with its dual structure of public (GKV) and private (PKV) insurance, recently underwent a major reform of its financial equalization mechanism, the Morbidity-Oriented Risk Structure Adjustment (Morbi-RSA). This system, which allocates funds from a central health fund to insurers based on the health risk of their members, was plagued by fraud. Doctors' offices were systematically upcoding diagnoses to receive higher payments. Sound familiar? Issues of coding accuracy and risk adjustment fraud are also critical concerns in the US Medicare Advantage and ACA marketplace plans.

In 2017 and 2019, Germany's largest public insurer, Techniker Krankenkasse (TK), exposed this widespread manipulation. A reform led by Health Minister Jens Spahn aimed to fix the system. But did it work? We spoke with Dr. Barbara Bertele, TK's expert on the Morbi-RSA, to get the inside story and extract insights relevant for American insurance consumers and policy experts.

Uncovering Systemic Fraud: The Catalyst for Change

Question: In 2017, TK published a study exposing billing fraud and illegal coding consultations. What were the main reasons for conducting this investigation?

Dr. Barbara Bertele: The study investigated whether medical practices had experienced attempts by health insurers to influence diagnosis coding. The results showed that coding consultations were happening through various channels. A follow-up study in 2019, after the law to strengthen healthcare supply (HHVG) introduced stricter rules for such consultations, found that practices still reported various forms of coding advice. We wanted to highlight that existing legal regulations were insufficient and that the Morbi-RSA, the central distribution tool for allocations from the health fund, needed to be more resistant to manipulation. This mirrors concerns in the US about upcoding in Medicare Advantage to inflate risk scores and receive higher capitated payments.

The 2020 Reform: Goals and Implementation

Question: The reform of the Risk Adjustment System (RSA) came into force in April 2020, about three years after your first study. Have you noticed any changes since then – such as a decrease in coding manipulations?

The reform had two central goals. First, to make the distribution of funds from the health fund more precise and fairer. A regional component was introduced for higher accuracy, ensuring that structural cost differences between regions—which insurers cannot influence—no longer lead to competitive disadvantages.

The second crucial goal was greater manipulation resistance. A so-called "manipulation brake" was introduced, along with stricter rules for contracts. These innovations are being evaluated step by step; this process is not yet complete, partly due to shifts caused by the COVID-19 pandemic. In the US context, the Centers for Medicare & Medicaid Services (CMS) also continuously refines its risk adjustment model and audits to ensure payment integrity.

Persistent Challenges: Oversight Fragmentation

Question: Do you still see risks that may not have been fully addressed by the reform?

We still have two parallel oversight logics. Regionally operating insurers are supervised by state ministries, while nationwide insurers are overseen by the Federal Office for Social Security. To prevent differences in supervisory practices, a unified oversight authority would be necessary. This was originally part of the draft law but ultimately failed due to resistance from the states. This fragmentation is akin to the division of oversight for US health insurance between state insurance departments and federal agencies like CMS, which can lead to inconsistencies in enforcement.

TK's Recommendations for Future Reforms

Question: What recommendations would TK give to lawmakers for future RSA reforms?

The issue of manipulation resistance must not fall out of focus. There are already initial voices calling for the abolition of the manipulation brake, and an initiative from Baden-Württemberg seeks to audit past RSA manipulations by some insurers less thoroughly. This would effectively waive penalty payments for past manipulations. Policymakers must not give in to this.

Another danger is looking too minutely at individual situations and then making things worse by tinkering with many small details. A success factor of the reform law was that it was a cohesive, comprehensive overhaul. For US health insurance reform, this underscores the need for holistic approaches rather than piecemeal fixes.

US vs. Germany: A Comparative Look at Risk Adjustment

To help you understand the parallels, here's a comparison of how risk adjustment works in both systems:

Conclusion: A More Sustainable and Fairer System?

Question: Finally, from the perspective of Techniker Krankenkasse, has the 2020 reform led to a more sustainable and fairer system?

The law has significantly improved the framework for fairer distribution of allocations and higher manipulation resistance. The times when the Morbi-RSA repeatedly made negative headlines are over. The system has consolidated. Coverage level differences between types of insurers, which were still extreme a few years ago, have now become significantly smaller, though they are not completely leveled out.

For you as someone interested in health insurance policy, the German experience shows that combating coding fraud requires robust, system-wide mechanisms, consistent oversight, and political will to resist diluting anti-fraud measures. Whether you're covered by a US private insurance plan, Medicare, or Medicaid, the integrity of risk adjustment is fundamental to a fair, efficient, and sustainable healthcare system for everyone.