In 2001 Germany introduced disease management programmes (DMPs) in order to give sick funds an incentive to improve the treatment of the chronically ill. By 1 March 2005, a total of 3275 programmes had been approved, 2760 for diabetes, 390 for breast cancer and 125 for corony heart disease, covering roughly 1 million patients. German DMPs show a major fault regarding financial incentives. Sick funds increase their transfers from the risk adjustment scheme when their clients enroll in DMPs. Since this money is a lump sum, sick funds do not necessarily foster treatment of the chronically ill. Similarly, reimbursement of physicians is also not well targeted to the needs of DMPs. Preliminary evidence points to poor performance of DMPs.