Although it is generally accepted in Germany that decentralizing towards home care settings can improve the efficiency and effectiveness of health care, a coherent policy toward decentralization has not been developed yet. A variety of elements of the traditional German health care system have limited the opportunities for decentralizing. Separation between health care and social services, separation between acute care and medical rehabilitation and separation between ambulatory care and hospital care were rather strict, prohibiting development of a comprehensive infrastructure of professional support for home care as well as the hospital financing scheme. Recent reform measures in Germany in the field of health care policy and social policy partly have tackled these problems. The introduction of long-term care insurance might provide the chance for a better infrastructure and more comprehensive usage of professional support for home care, although it is not without risks, and integration of long-term care insurance in the health policy sector lacks coherence. While reforms of the hospital financing scheme and an entitlement of hospitals to provide one-day-surgery and post-discharge treatment will decrease the likelihood that hospitals keep patients in order to fill their beds, the extent to which hospitals will make use of these new instruments remains doubtful at present. Increased competition between sickness funds could open opportunities for prudent 'managed care' as part of 'managed competition', and strengthening of home care might be part of managed care programs. At present it is not clear, however, whether sickness funds will be entitled to compete through usage of managed care mechanisms. Other elements of recent health care reforms were counterproductive as far as decentralizing towards home care is concerned. Especially global budgets on honorariums for office-based doctors and on volumes of prescribed drugs might create incentives for inefficient and ineffective referrals to hospitals.