Are crutches getting cheaper?

Europe’s population is not only getting older, people are also staying active in sports for longer and longer. To make this possible, but also to deal with injuries resulting from sporting activities and other physical handicaps (which also affect people even younger than me), there are numerous medical aids – which some might perceive as surprisingly expensive not entirely cheap. For those, there is hope: The German Bundeskartellamt is here to help as recent proceedings against the associations of medical aids providers show.

What the Bundeskartellamt says

Last week, the Bundeskartellamt confirmed that it has sent a statement of objections to a working group of associations of medical aid providers (referred to as ARGE). The ARGE represents a large portion of the medical aid providers in the rehabilitation and care sector. The Bundeskartellamt alleges that the ARGE coordinated price increases to the detriment of health insurance companies.  

According to the regulator, the associations organised in the ARGE “had demanded coordinated price increases from health insurance companies for their products and services under existing supply contracts at least as of September 2021, and in many cases they were able to achieve them”. The ARGE participants argued that the coordinated price increases were required due to the cost-related effects of the Covid-19 pandemic, inter alia increased freight, supply and raw material costs.

Stop – aren’t medical aid providers allowed to negotiate collectively with the health insurance companies?

I am sorry, especially for our foreign readers, but now we have to take a (more or less) short detour into the depths of German health insurance law. The relationship between health insurance companies and health care providers (including providers of medical aids) and their associations is governed by the Fifth Book of the German Social Code (Sozialgesetzbuch, SGB V).

According to this SGB V, it exhaustively regulates the relationship between health insurance companies and healthcare providers. One could therefore take the position that antitrust law does not apply at all (I know, a wild notion). The Bundeskartellamt acknowledges this point and argues that the SGB V “pertains exclusively to the legal relationship between health insurance companies and medical aids suppliers and not to agreements reached among medical aids suppliers prior to these negotiations”.

Apparently, the lawyers of the medical aid providers pulled out all the stops and argued that the alleged conduct was in any case permitted under another provision (Section 127 SGB V), which stipulates that health insurance companies shall negotiate contracts with medical service providers and their associations and also compensate for the costs of increased hygiene measures as a result of the COVID 19 pandemic.

According to the Bundeskartellamt, however, the provision does not apply in all cases and to all associations and in particular not to the ARGE, who represents a large share of the market participants. As the President of the Bundeskartellamt, Andreas Mundt, puts it: “This does not legitimise supplier syndicates of any possible size and monopoly-like market coverage, such as in the case of ARGE”.

The Bundeskartellamt is apparently not quite sure of this line of reasoning; it emphasizes that it is also entitled to enforce European antitrust law which it argues is violated in the case at hand (this would require that the trade between Member States is affected), and that (at least) European antitrust law cannot be superseded by German health insurance law.

Who should be happy – consumers or health insurance companies?

The relationship between health insurance companies, providers of medical aid and the insured individuals is very complex, some say unregulatable. There are many voices which think that cost control should not be a major focus when it comes to health related spendings. In this respect, there are two key takeaways for me:

  • The Bundeskartellamt keeps an eye on cost increases which one side of the market collectively agrees to pass on. Interestingly, the regulator also seems to have investigated (extensively) whether the cost increases were in fact justified – a question the Bundeskartellamt answered in the negative. It therefore remains open whether the behaviour of the ARGE would have been warranted in the case of justified cost increases, which might be a surprising result under antitrust law.
  • Even if there are industry-specific regulations that (supposedly) govern the relationship between market participants, these can be outweighed by antitrust law – or should at least be interpreted in the light of antitrust law (please note that the question whether antitrust law applies to the German health insurance companies has repeatedly changed and been discussed over time).

In any case, due to the very complex German health insurance system, it might take a long time for any potential cost savings to reach consumers (if at all).

Picture by Lance Grandahl on Unsplash