Surveying the welfare state: challenges, policy development and causes of resilience



29

ience. Such analyses find that path-dependency can be linked to the existence of corporatist
actors in the governance of social policy, which is denoted by self-governance and the so-
cial partners (DohlerZManow 1995, p.140, in: SchreyoggZFarhauer 2004: 249). The exis-
tence of self-governance structures often pre-empts state action in the sphere of interest
groups. In addition, the social partners, employers associations and trade unions, whose
right to conclude collective agreements is guaranteed by the constitution, tend to guard it
carefully and thus play a central role in this policy area. Path-dependency manifests itself as
follows: reform plans presented for labour market policy tend to be regarded as suspicious
by the social partner ,as they guard their autonomy and sources and mechanisms of influ-
ence in political decision-making processes. Institutionalised practices make it more diffi-
cult to break from the existing path, as social partners exert influence on the labour market’s
performance via their collective agreement and income policies. In addition, they influence
political processes indirectly through lobbying activities, which can lead to mutual blocking
of reform initiatives (Schreyogg/Farhauer 2004: 251)31

4.2.3 Statutory Health Care Insurance

The German health care system is dominated by the statutory health care insurance (SHI),
which covers about 90 per cent of the population, while the remainder is covered by private
insurance companies. The SHI is financed by payroll contributions, which are paid in equal
parts by employers and employees up to a certain wage ceiling; those who earn more take
out private insurance. Contributions are administered by a wide choice of sickness funds,
which in the past have insured the population according to individuals’ professional affilia-
tion, but, since the mid-1990s, are practically obliged to insure anyone. Sickness funds con-
clude collective agreements with associations of care providers, the
Kassenarztliche Vere-
inigungen
(KVs), whose members, individual physicians, offer health care services in kind
to the insured and receive payment from the funds in return. The provision of health care
services mostly takes place in the ambulant (general practitioners and specialists) and the
hospital sector (see for a more general introduction Giaimo 2002; Rosenbrock/Gerlinger
2004).

In the area of health care, the PAYGO financing base of the SHI has been identified as an
important source of resilience (Schreyogg/Farhauer 2004: 249).32 The introduction of the

31 Under these circumstances, where exactly does path dependency come in? The crucial point is that the
social partners tend to disagree about the direction of reform. Trade unions tend to protect dismissal pro-
tection, increase wages or decrease working hours, while employers tend to prefer the opposite: longer
working hours, decreasing wages and loosening of dismissal regulations. Being aware of the crisis on the
labour market they both try to enter a new path, but direct their energies in diametrically opposite ways.
As a consequence, their efforts block each other, making it impossible to change the lock-in and reinforc-
ing the status quo. According to Schreyogg and Farhauer, ‘a common strategy of the social partners, and
thus a pooling of reform potential cannot be seen in Germany; rather, they concentrate on traditional
concepts of the enemy’ (2004: 251).

32 Similarly as with statutory pension insurance, the basic choice when creating a health care system
from scratch would be between a capital-funded and a PAYGO variant. PAYGO financing assumes that
one generation finances the benefits (or, in this case, health care services) of an older generation. The



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