Public vs. private: Inequality in health care benefits under Germany's dual system

Health care services are Germany's largest in-kind transfer, yet their distributional effects remain underexplored. Using a microsimulation model, we integrate detailed survey data on health care utilisation from the German Health Update Study (GEDA) with administrative expenditure records from the German Health Reporting system. In contrast to previous studies that allocate benefits using demographic proxies, we apply an actual-use, cost-based approach to assign thirteen categories of health care services to individuals based on reported utilisation. These services are monetised and added to equivalised household income to assess their redistributive effect. We find that total benefits are overall progressive: publicly insured individuals average about €3,759 in benefits, while civil-servant-subsidised private insurance averages €4,050, with public insurance raising household income substantially more due to its wider coverage and targeting of need. A KOB-decomposition at the 60% median-income threshold shows that the poor receive €1,432 more in total benefits than the non-poor, with most of the explained gap driven by worse health status and activity limitations and further widened by employment composition. A lower prevalence of private insurance among the poor narrows the gap. Distribution-wide RIF results reveal that the explained component is sizable at P75 (+€1356) and very large at the 90th percentile (+€5480), reflecting steep need gradients at the top of the benefit distribution. By service type, hospital and GP benefits remain progressive, while specialist care shows no significant mean gap. However, composition effects still indicate that private insurance pushes specialist benefits toward the better-off.