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In Germany, health care is provided via the (publicly regulated) interplay of a multitude of non profit sickness funds and a pluralistic set of providers with which these funds maintain contractual relations. With its Bismarckian tradition, the system relies on pay-as-you-go contributions shared by employers and employees – an institutional design that has recently been challenged, though. Moreover, a particular (novel) characteristic of the German health care system is competitive governance in its administrative setting(s). This article explores both the evolution of the funding regime and developments in the governance structures of the system. It argues that there have been incremental changes in the former and more radical shifts concerning the latter. The current debate on health care reform tends to confirm this configuration; in spite of far-reaching proposals to modify medical financing, the old funding regime basically tends to persist while the governance structures present an in-built tendency towards ever more inter-agency competition. The result is a contradictory evolution exhibiting both institutional stability and path-breaking liberalisation – with a creeping differentiation of medical service provision and (some) more social inequality as a likely outcome.