Hospital and Drug Costs Outpace Contributions in Germany, Raising Pressure on Pharma Pricing
- Badari Andukuri
- Jun 27
- 4 min read
In the first quarter of 2026, statutory health insurance funds collected about €94.4 billion in revenues and spent roughly €93.1 billion on benefits and administration. Expenditure rose by around 7.7 percent compared with the same period a year earlier, while contribution income excluding supplementary charges increased by about 4.1 percent.
Across the 93 statutory health insurers, the system showed a surplus of €1.3 billion in the quarter, but this surplus largely reflects contribution rate increases introduced at the start of the year and is being used to rebuild depleted reserves. By the end of March, funds held approximately €6.18 billion in financial reserves, equivalent to about 0.2 months of spending and only just meeting the legally required minimum level on average.
The average supplementary contribution charged by health insurers stood at 3.13 percent at the end of March, above the 2.9 percent rate previously calculated as sufficient to cover 2026 expenditure. Many funds continue to set higher rates than strictly necessary for current costs in order to restore reserves that were eroded by unexpectedly strong spending growth in 2024 and 2025.
Health Fund shows seasonal deficit
Germany’s central Health Fund, which collects contributions and distributes funds to individual insurers, started 2026 with a liquidity reserve of about €7.1 billion. Over the first quarter it recorded a deficit of roughly €3.0 billion, mainly due to seasonal patterns.
Allocations from the Health Fund to insurers are paid as fixed monthly amounts, while incoming contributions fluctuate across the year and typically peak in the fourth quarter when annual bonuses and other special payments are included. Despite the first‑quarter deficit, contribution revenues excluding supplementary charges still grew by just over 4 percent compared with the previous year.
Spending trends: benefits vs administration
Benefit spending and administrative costs together increased by 7.7 percent in the first three months of 2026, even though the number of insured persons remained essentially unchanged. Benefit expenditures alone rose by 8.0 percent, broadly in line with the high growth seen in the prior year and well above the long‑term average, while administrative costs were flat. In absolute terms, benefits increased by about €6.6 billion, whereas administrative spending fell slightly by around €1 million.
Hospital treatment costs were the main driver of this surge. Expenditure on hospital care climbed by 9.3 percent, or roughly €2.5 billion, more than twice the average annual hospital spending increase observed between 2013 and 2024 and slightly above the growth rate in 2025.
Even after adjusting for the surcharge, hospital spending rose by about 6.4 percent compared with the first quarter of 2025, which remains well above the long‑term trend and ahead of contribution‑based revenue growth. While spending increased by an average of roughly 3.5 percent per year between 2013 and 2022, annual growth accelerated to about 8.2 percent in the subsequent years, indicating a structurally higher spending trajectory.
Pharmaceuticals and outpatient care
Pharmaceutical spending increased by 6.4 percent, or around €0.9 billion, in the first quarter, slightly faster than the full‑year growth rate recorded in 2025 and above both contribution growth and the long‑term average from 2013 to 2024. Within this area, drug spending linked to outpatient specialist care rose particularly sharply, by nearly 30 percent, adding about €242 million.
Outpatient medical treatment costs also showed strong momentum. Spending on outpatient physician services grew by about 7.3 percent, or €1.0 billion, outpacing long‑term trends. This rise reflects several factors, including an increase in the nationwide point value used for fee calculation, specific reimbursements and surcharges for certain referral constellations, and special payments such as those tied to the rollout of the electronic patient record.
Within outpatient care, spending on specialist treatment, specialized palliative services and primary care physician‑centered models rose well above average, with increases of roughly 18, 17 and 16 percent respectively. Interpreting these figures requires caution because first‑quarter medical spending is partly based on estimates, as detailed billing data are often not yet fully available.
Long‑running high growth in care, therapies and prevention
Medical treatment care, a labor‑intensive segment of the system, once again recorded above‑average growth, with spending up about 11.2 percent or €0.3 billion. Since 2013, this area has consistently grown faster each year than both total statutory health insurance expenditure and contribution‑based income.
Therapeutic services also continued to expand quickly, with costs rising by around 10.2 percent, or €357 million, in the first quarter. Expenditures for occupational and physiotherapy services under “blank prescription” models, which give providers expanded responsibility, increased significantly by about €256 million, reflecting both genuine growth and a shift from traditional therapy models to these new forms of care.
Spending on preventive and rehabilitative services remained on a steep trajectory. After growing by roughly 10.4 percent per year following pandemic‑related declines in 2020, this segment expanded by another 9.0 percent, or €111 million, in the first quarter of 2026, roughly three times the average annual growth seen between 2013 and 2019.
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