The healthcare is the responsibility of federal states(L?nder) but the federal central government has the authority to set legal guidelines for health care. The fast majority of population is covered under the Mandatory Social Health Insurance Programme (88%) but, at present, more than 7 million people are privately insured. There exist about 500 health insurance funds, whose legal status is private non-profit entity (public law corporation). They are organised on the basis of occupation, region or employer.

The actual provision of care is carried out by facilities owned by the local authorities or by independent private non-profit (charity) or for profit organisations. Each state may establish their own health financing laws. The financing of the recurrent costs is carried out by the independent health insurance funds, which account about 60% of all health financing. (The states tax financing accounts 21%). The health insurance scheme is divided into two categories. Employees with a monthly income must be insured under one of the statutory health insurance schemes which are financed by equal (50:50) contributions from insured employees and employers (about 14 % of gross wages and salaries). Anyone whose earnings are above the ceiling can opt for exemption from his insurance liability and join one of the 17 private schemes.

For patient the primary care is totally free of charges. For specialised institutional care the patients has to pay a flat co-payment up to 14 days per year. Thereafter there is no out-of-pocket liability. Pharmaceuticals on the positive list have co-payments according to the reference prices. There is no coverage for drugs on the negative list.

Outpatient care is provided in doctors offices based on fee-for-service payments from insurance funds. The private outpatient physicians may even compete on patients with hospitals. Hospitals are funded by a combination of government subsidy for investments (7%) and statutory and private health insurance sources (93%) based on flexible budgeting. Traditional per diem payment system has been changed towards the performance related one and all hospitals have to start to use DRG s in 2007. Today more than 50% of hospitals are already doing so.

The responsibility for planning and financing the major investments lays on public authority who at sate level approves major investments projects according to the plan. The university teaching hospitals gets and extra 20% from the state budget to cover the higher costs because of teaching and research activities.