DAK Proposes Tax Increase on Tobacco and Alcohol to Fund Lower Medicine VAT

DAK-Gesundheit, a major German statutory health insurance provider, has put forward a plan to address anticipated financial shortfalls in the public health insurance system. The proposal suggests increasing taxes on tobacco and alcoholic beverages to offset a reduction in the value-added tax (VAT) applied to medications and medical aids.

According to DAK-Gesundheit, the VAT on pharmaceutical products and related medical aids should be lowered from the current 19 percent to 7 percent. The health insurer recommends that this reduction be financed through higher taxes levied on tobacco and alcohol, aiming to maintain the financial stability of the statutory health insurance system without increasing contributions for policyholders.

The concern over rising costs in the statutory health insurance sector is growing, with projections indicating significant budgetary gaps in the coming years. Federal Health Minister Nina Warken has publicly acknowledged the likelihood of a deficit reaching several billion euros by 2027. In response, the government has convened an expert commission tasked with developing measures to ensure the long-term stability of public health insurance finances. Recommendations from this commission are expected to be delivered by March, with more comprehensive reform proposals anticipated by the end of the year.

DAK-Gesundheit's plan includes a stepwise approach to reform, with a particular emphasis on aligning expenditure growth with actual revenues. The insurer advocates for a binding rule that would prevent outlays from exceeding income, at least through the end of the current legislative period in 2029. This fiscal discipline, DAK argues, is essential for maintaining access to healthcare and relieving financial pressure on both the system and its contributors.

Economic research supports the urgency of such reforms. A recent analysis conducted by the Berlin-based Iges Institute, commissioned by DAK-Gesundheit, estimates that statutory health insurance funds will face additional costs of approximately 6.8 billion euros in 2027, primarily due to ongoing increases in healthcare expenditures. The projected rise in spending underscores the need for sustainable financing solutions that do not disproportionately impact insured individuals.

Healthcare sector representatives and policymakers are closely monitoring these developments. Many see the expert commission's efforts and DAK-Gesundheit's proposals as an opportunity to reshape health policy and foster consensus on lasting reforms. The suggested tax increases on products with known health risks, such as tobacco and alcohol, are also seen as aligning with public health objectives, potentially discouraging consumption while providing additional fiscal resources.

As the discussion continues, stakeholders await the commission's recommendations and the subsequent political debate. The ultimate goal remains to ensure the long-term viability of statutory health insurance, safeguard access to essential medicines, and distribute financial responsibilities in a balanced manner across society.