Summary on the Countries

For the past couple of weeks, we have described the Healthcare situation in various European Countries based on the critique from the CATO Institute.

I think anyone with an open mind can readily see that no country has a perfect solution to Healthcare and each has their own unique problems.

What can be taken from the review is that no country has yet figured out how to cover 100% of their population. Some come close, but all are with problems.

The things that are most apparent in the review are:
1. Countries with the lowest healthcare costs typically are those where patients have a direct financial role in the decision process.
2. The seemingly more successful systems are employing more free market competitive mechanisms
3. Most are offering secondary private policies for better access, care, and flexibility
4. More government involvement has historically made things worse in most of the systems.
5. out of pocket expenditures range from 8.5% of wages to nearly 31.5% in Switzerland and with co-pays in most of the countries ranging from 10-40%
6. Many of the countries whether they admit it or not, are transitioning to a system that is looking more American.

With this is mind, we need to ask why the Democrats are attempting to radically change our current system when most other countries and working towards a system closer to ours?

I’ve said before that we do have things that can be improved and there are solutions that both parties already agree on to help. So why not make some incremental changes now and quit trying to overhaul a system that works for about 87% of the population.

Germany's Healthcare System

The last country we will examine is Germany. The article is from the CATO institute; The Grass Is Not Always Greener: A Look at National Health Care Systems Around the World Michael D. Tanner Cato Institute: Policy Analysis

Germany

Germany ranked 25th in the WHO ratings. (287) Despite that low ranking, however, the country is worth examining because it is frequently cited as a model by advocates of national health care.

National health insurance in Germany is part of a social insurance system that dates back to Bismarck. All German citizens with incomes under €€ 46,300 (roughly $60,000) are required to enroll in one of approximately 250 statutory “sickness funds.” Those with higher incomes may enroll in the funds if they wish, or may opt out of the government system and purchase private insurance.(288) About three quarters of workers with incomes above the statutory limit choose to remain in the sickness funds, which currently cover approximately 90 percent of the population. Overall, insurance coverage is nearly universal. However, the number of uninsured has been rising, roughly tripling in the last 10 years to 300,000 people. (289) About 9 percent of the population purchases supplemental insurance to cover items that are not included in the standard benefits package. (290)

Sickness funds are financed through a payroll tax split equally between the employer and employee. The size of the tax varies depending on which fund the worker has chosen, but averages around 15 percent of wages.(291) Sickness funds are supposed to be solvent and self-supporting, but in reality the system ran a €€ 7 billion deficit in 2006.(292) The German government has proposed a 1 percent increase in the payroll tax, split evenly between employer and employee, starting next year.(293) In addition, general tax revenues finance capital costs for acute care hospitals and many rehabilitative services, especially for retirees.

Benefits are extensive, covering physicians, hospital and chronic care, diagnostic tests, preventive care, prescription drugs, and part of dental care. In addition to the medical benefits, sickness funds provide sick pay to those who cannot work due to illness, ranging from 70 to 90 percent of the patient’s last gross salary, for up to 78 weeks. (294)

The central government and state governments split the regulation of the health care system. The central government establishes the national global budget for health care spending, defines any new medical procedures to be included in benefit packages, and sets reimbursement rates for physicians. Some of this is accomplished through legislation, while the rest is handled through negotiations between the National Association of Sickness Funds and the National Association of Physicians. At the state level, state associations of sickness funds and physicians negotiate overall health budgets, reimbursement contracts for physicians, procedures for monitoring physicians, and reference standards for prescription drugs.(295) The bargaining power in these negotiations clearly lies with the sickness funds backed by the government, allowing them to effectively impose fee schedules and other restrictions on providers. The purchasing power of a German physician’s wages is now about 20 percent that of a U.S. physician. (296) This has led to physician strikes as recently as 2005. (297)

Although Germany spends less on health care than the United States, both as a percentage of GDP and per capita, expenditures have been rising at an alarming rate in recent years. Friedrich Breyer, an economist from Konstanz University, estimates that health care spending could reach 30 percent of GDP by 2020 unless significant changes are made. (298)

The German government has responded by beginning to cut back on benefits. In 2004, sickness funds stopped covering eyeglasses, lifestyle medications, and all over-the-counter drugs. Co-payments were imposed for the first time, such that Germans now pay €€ 10 per quarter to see a general practitioner, €€ 10 per day of hospital stay, €€10 per prescription, and for certain specialty services.(299) The highest co-payments are 10 percent for prescription drugs. Overall, Germans pay out of pocket for about 13 percent of total health care spending; only slightly less than Americans. (300) Preliminary evidence suggests that the introduction of cost sharing has slightly reduced utilization and spending. (301)

In 2006, Chancellor Angela Merkel proposed a sweeping set of health care reforms that included creating a centralized health fund, shifting financing in part from payroll taxes to general revenues, trimming benefits, imposing greater cost sharing, and making the system more transparent. She was forced to abandon the package in the face of public and political opposition. (302)

The degree of health care rationing in Germany is the subject of considerable debate. Unlike many OECD countries, the German government does not compile data on waiting lists.(303) One frequently cited study suggests that Germans are no more likely than Americans to wait more than four weeks to see a specialist. (304) The WHO says, “Waiting lists and explicit rationing decisions are virtually unknown.”(305)

However, at least one study concludes that rationing is occurring for the elderly and those with terminal illness, and concludes that “the question remains as to whether lives at advanced ages could be saved if age rationing were discontinued and maximum medical treatment were to be applied to everyone, irrespective of their age.”(306) In addition, a survey of German hospitals reported that “waiting times were prolonged” due to both a lack of capacity and hospital target budgets that make the treatment of sickness fund patients with serious conditions financially unattractive.(307)

Also, Germans have less access to modern medical technology than Americans. The United States has four times as many MRI units per million people and twice as many CT scanners. (308) The situation would undoubtedly be worse without the existence of the small private insurance sector. Although small as a proportion of total health spending, private insurance puts competitive pressure on sickness funds, pushing them to expand their quality and services. At one time, CT scanners were even rarer in the public system, available only under exceptional circumstances and after long waits, yet relatively common in the private sector. Competition forced the public sector to add more CT scanners. (309)

Some analysts blame price restrictions and reimbursement rates for increasing bureaucratic interference in how German physicians practice medicine. Physicians trying to work within the maze of reimbursement caps and budget restrictions have no financial incentive to provide more than the minimally necessary care. That has led to questions of quality assurance, and the government has responded with ever greater micromanagement of practice standards. The result has been a huge increase in red tape for physicians and a general loss of innovation. (310)

Germans seem aware of the need to reform their health care system. In a 2004 poll, 76 percent of Germans thought health care reform was “urgent,” while an additional 14 percent thought it was “desirable.” However, Germans are split nearly down the middle about what that reform should be. Roughly 47 percent would like to see an increase in private health care spending, whereas 49 percent would not. Similarly, 45 percent of Germans believe that more patient choice would improve health care quality, whereas 50 percent do not. The reluctance to fully embrace market reforms undoubtedly stems from a long-standing German belief in social solidarity. By a margin of 81 to 18 percent, Germans believe that equal access to the same quality of care for everyone is more important than their own access to the best possible care.(311)

Costs and demographics will eventually force changes in the German system. However, given the failure of Chancellor Merkel’s reforms, change is unlikely in the near future.

The Swiss Healthcare System

Today it is the Swiss healthcare system that is being critiqued.

The article is from the CATO institute; The Grass Is Not Always Greener: A Look at National Health Care Systems Around the World Michael D. Tanner Cato Institute: Policy Analysis


Switzerland

Of all the countries with universal health care, Switzerland has one of the most market- oriented systems. Indeed, the Swiss government actually pays for a smaller amount of total health care expenditures than the U.S. government, 24.9 percent versus 44.7 percent. (250) (See Figure 3.)

The Swiss system is based on the idea of managed competition, the same concept that underlay the 1993 Clinton health care plan and Mitt Romney’s reforms in Massachusetts. (251) Managed competition leaves the provision of health care and health insurance in private hands but creates a highly regulated artificial marketplace as a framework within which the health care industry operates.(252)

Swiss law requires all citizens to purchase a basic package of health insurance, an individual mandate. Coverage is close to universal, estimated at 99.5 percent.(253) This level of compliance is due in part to the Swiss national character and may not be replicable in the United States where the record of complying with mandates is much more mixed (even if such a mandate were desirable). (254) For example, nearly 100 percent of Swiss drivers comply with their country’s mandate for automobile insurance, compared with only 83 percent of U.S. drivers. (255)

The term “basic benefits package” is somewhat misleading since the required benefits are quite extensive, including inpatient and outpatient care, care for the elderly and the physically and mentally handicapped, long-term nursing home care, diagnostic tests, prescription drugs, and even complementary and alternative therapies.(256)

Insurance is generally purchased on an individual basis. Few employers contribute to the purchase or provide insurance. (257) The policies are provided by private insurers. Currently, some 93 insurers operate in Switzerland, although not every insurer operates in every canton, or region.(258) Originally, insurers were required to be nonprofit entities, but that restriction was eliminated in 2002.

Insurers cannot reject an applicant on the basis of health status, and all policies are community rated within a geographic area, meaning that the healthier pay higher premiums to subsidize the less healthy. One exception to community rating is for nonsmokers, who can receive premiums as much as 20 percent lower than smokers. A formula adjusts premiums based on sex and age. (259) The geographic variation can be significant, with premiums differing as much as 50 percent between cantons. (260)

Unable to compete on the basis of managing and pricing risk, and required to offer nearly identical basic benefits packages, insurers compete primarily on price. Since they cannot reduce costs by risk management or benefit design, they generally manage prices by varying the level of deductibles and co-payments. Individuals can purchase expensive policies with very low deductibles and co-payments, or far less expensive policies with high deductibles or extensive co-payments. Thus, premiums vary according to their cost-sharing attributes and plan type, running from $1,428 per year for a plan with a deductible of approximately $2,000 to $2,388 for a plan with a $250 deductible. (261)

Because employers do not pay for workers’ health insurance, the Swiss are exposed to the full cost of their insurance purchases. As a result, many Swiss have opted for high-deductible insurance. Thus, with high deductibles and extensive co-payments, the Swiss pay out of pocket for 31.5 percent of health care, twice as much as in the United States.(262) (See Figure 4.)

Recently, there has also been a growing market in managed care plans that, like those in the United States, offer lower premiums in exchange for limitations on access to specialists and other services. Premiums for such plans run around $1,900 per year. (263)

The Swiss government offers subsidies to low-income citizens to help them purchase a policy. Subsidies are based on both income and assets, and the maximum available subsidy covers the cost of an average premium in the individual’s canton. These subsidies are designed to prevent any individual from having to pay more than 10 percent of income on insurance. They do not, however, pay the entire cost of insurance because the Swiss do not want to create an incentive for subsidized individuals to choose the most expensive plan with the lowest deductibles and co-payments. (264) Roughly one-third of Swiss citizens receive some form of subsidy, and approximately 19 percent of all health insurance premiums are paid with government funds. (265)

Swiss insurers operate as cartels to negotiate provider reimbursements on a cantonal basis. Providers must accept the negotiated payment, and balance-billing is prohibited. If insurers and providers are unable to reach agreement on a fee schedule, canton governments are empowered to step in and impose an agreement. There are no restrictions on where physicians may set up practice, so to some degree providers can vote with their feet, moving to cantons that offer higher reimbursements, a practice that has led to physician shortages in some areas. (267)

The system includes both public and private hospitals. (268) Private hospitals negotiate reimbursement with insurance cartels and physicians in the same manner. Public hospitals are operated by cantons, which negotiate reimbursement rates with insurers and provide subsidies to the hospitals. In some cantons, individuals with only the basic insurance plan must use public hospitals; supplementary insurance (see below) is required for admission to private hospitals.

Recently some providers have begun operating outside the negotiated fee schedules. A separate supplemental insurance market is starting to develop to cover the cost of these providers, which are presumed to offer higher quality or more advanced services. Supplementary insurance also allows access to private hospitals in those cantons that do not permit access under the basic insurance plan. Even within public hospitals, supplementary insurance can be used to pay for services such as private rooms that are not covered under the basic plan. By some estimates as many as 40 percent of Swiss citizens have purchased supplemental insurance. (269)

The Swiss do not impose a global budget on their health care system and have therefore avoided the waiting lists common in other systems. In addition, the Swiss have a high degree of access to modern medical technology, but it has come at a cost. The Swiss spend 11.5 percent of GDP on health care, second only to the United States. (270)

Since Swiss health care consumers are exposed to the cost consequences of their health care decisions, this trade-off between access and cost can be presumed to reflect the desires of Swiss patients. They have chosen high quality care even though it costs them more. Given that economists consider health care to be a “normal good”—that is, consumption rises along with income—and Switzerland is a wealthy nation, such a decision seems entirely reasonable.(271)

At the same time, it is notable that Swiss health care spending remains below that of the United States for nearly comparable care. Strong evidence suggests that the exposure of Swiss consumers to the cost consequences of their health care decisions has made them more conscious consumers and helped limit overall health care costs. As Regina Herzlinger and Ramin Parsa-Parsi of Harvard have concluded, “Cost control may be attributed to the Swiss consumer’s significant role in health care payments and the resulting cost transparency.”(272)

The transparency of the system also makes it responsive to consumer preferences. The WHO survey ranked Switzerland second only to the United States in terms of responsiveness to patients’ needs for choice of provider, dignity, autonomy, timely care, and confidentiality. (273)

The Swiss generally seem pleased with their system. Earlier this year, Swiss voters overwhelmingly rejected a proposal to replace the current system with a single-payer plan; more than 71 percent of Swiss voters turned down the proposal in a nationwide referendum. (274)

Nonetheless, the Swiss system has its own problems, most of them predictable outgrowths of the individual mandate and the regulation inherent in managed competition. In most markets, consumers impose a certain discipline on prices because they can refuse to buy a product if it costs too much. The individual mandate removes this power since consumers must purchase the product (in this case, insurance) even if they believe the cost outweighs the value. Moreover, the establishment of a government defined benefits package is an open-ended invitation to special interests representing various health care providers and disease constituencies, who can certainly be expected to lobby for the inclusion of additional services or coverage. (275)

Public choice dynamics are such that providers (who would make money from the increased demand for their services) and disease constituencies (whose members naturally have an urgent desire for coverage of their illness or condition) will always have a strong incentive to lobby legislators for inclusion under any minimum benefits package. The public at large will likely be unaware of the debate or see resisting the small premium increase caused by any particular additional benefit as unworthy of a similar effort—a simple case of concentrated benefits and diffused costs.(276)

That is exactly what has happened in Switzerland, leading to a growing expansion of the basic benefits package. In particular, a powerful hospital and physician lobbying coalition known as the “Blue Front” was able to demand a significant expansion in covered benefits in exchange for a relaxation of “any willing provider” laws so as to permit managed- care contracts. (277)

The expansion of benefits has driven up the cost of insurance, a cost only partially offset by larger deductibles. Although the proportion of health expenditures paid out of pocket remains high, it has decreased by roughly 10 percent in the past decade. (278)

Moreover, the growth in covered benefits has helped drive up costs for the system as a whole, as the Swiss become more insulated from the costs of their health care purchasing decisions. If that trend continues, it could undermine the cost transparency that is at the heart of the Swiss system.” As Uwe Reinhardt has noted, “Over time, the growth in compulsory benefits has absorbed an increasing fraction of the consumers’ payment, thus compromising the consumer-driven aspects of the Swiss system.”(279)

Evidence shows that the community rating requirements are creating distortions within the Swiss market, leading to the over provision of care to the healthy and the under provision of care to the sick. (280) In addition, the prohibition on risk management discourages the development of new and innovative products. Peter Zweifel of the University of Zurich, a member of the Swiss Competitive Committee which oversees insurance regulation, believes that a return to some degree of risk-rating is essential to the long-term success of the Swiss system. (281) As Zweifel puts it, “Let competition work its magic. Let those who are bad risks get the message that they need to become better risks, if possible. If not possible, [they would] still get a subsidy which [keeps their costs] down to little more than 8–10 percent of taxable income.”(282)

Third, the cartel structure for negotiating reimbursement schedules can create a number of distortions. Effectively monopsony purchasers, the cartels have enormous leverage when it comes to negotiations. Not surprisingly, physicians have tended to set up practice in cantons with the highest levels of reimbursement, leading to shortages in other areas. Reimbursement rates have reportedly created wasteful incentives—for example, hospitals shifting patients from outpatient to inpatient care. (283) And the combination of increased demand and low reimbursement has led to the first signs of queues for the most complex surgeries. (284)

In addition, the negotiations freeze in place a pricing structure that inhibits the development of innovative approaches that do not tie payments to specific benefits. This includes both managed care approaches and health services integration. (285)

Finally, Switzerland has some of Europe’s strongest regulation of nonphysician health care professionals. (286) As a result, patients are often forced to use more expensive providers where a less expensive professional would do.

All of the above combine to undermine the consumer-driven nature of Switzerland’s health system. Despite these problems, the Swiss system provides a useful lesson for the United States about the value of consumer directed health care. In particular, we can see that when the cost of insurance becomes more transparent, consumers shift their purchasing preferences toward true insurance (spreading catastrophic risk), rather than purchasing prepayment for routine, low-cost services. That gives consumers an overall incentive to make cost-versus-value decisions when purchasing health care, resulting in reduced costs while maintaining individual choice and quality care.

The Obama Saga

And it came to pass in the Age of Insanity that the people of the land called America, having lost their morals, their initiative, and their will to defend their liberties, chose as their Supreme Leader that person known as "The One."

He emerged from the vapors with a message that had no meaning; but He hypnotized the people telling them, "I am sent to save you." My lack of experience, my questionable ethics, my monstrous ego, and my association with evil doers are of no consequence. I shall save you with hope and Change. Go, therefore, and proclaim throughout the land that he who preceded me is evil, that he has defiled the nation, and that all he has built must be destroyed. And the people rejoiced, for even though they knew not what "The One" would do, he had promised that it was good; and they believed. And "The One" said " We live in the greatest country in the world. Help me change everything about it!" And the people said, "Hallelujah! Change is good!"

Then He said, "We are going to tax the rich fat-cats." And the people said "Sock it to them!" "And redistribute their wealth." And the people said, "Show us the money!" And the he said, “redistribution of wealth is good for everybody."

And Joe the plumber asked, “Are you kidding me? You're going to steal my money and give it to the deadbeats??" And "The One" ridiculed and taunted him, and Joe's personal records were hacked and publicized. One lone reporter asked, "Isn't that Marxist policy?" And she was banished from the kingdom!

Then a citizen asked, "With no foreign relations experience and having zero military experience or knowledge, how will deal with radical terrorists?" And "The One" said, "Simple. I shall sit with them and talk with them and show them how nice we really are; and they will forget that they ever wanted to kill us all!" And the people said, "Hallelujah!! We are safe at last, and we can beat our weapons into free cars for the people!"

Then "The One" said "I shall give 95% of you lower taxes." And one, lone voice said, "But 40% of us don't pay ANY taxes." So "The One" said, "Then I shall give you some of the taxes the fat-cats pay!" And the people said, "Hallelujah! Show us the money!" Then "The One" said, "I shall tax your Capital Gains when you sell your homes!" And the people yawned and the slumping housing market collapsed. And He said... "I shall mandate employer-funded health care for every worker and raise the minimum wage. And I shall give every person unlimited healthcare and medicine and transportation to the clinics." And the people said, "Give me some of that!" Then he said, "I shall penalize employers who ship jobs overseas." And the people said, "Where's my rebate check?"

Then "The One" said, "I shall bankrupt the coal industry and electricity rates will skyrocket!" And the people said, "Coal is dirty, coal is evil, no more coal! But we don't care for that part about higher electric rates." So "The One" said, Not to worry. If your rebate isn't enough to cover your expenses, we shall bail you out. Just sign up with the ACORN and you troubles are over!"

Then He said, "Illegal immigrants feel scorned and slighted. Let's grant them amnesty, Social Security, free education, free lunches, free medical care, bilingual signs and guaranteed housing..." And the people said, "Hallelujah!" and they made him king!

And so it came to pass that employers, facing spiraling costs and ever-higher taxes, raised their prices and laid off workers. Others simply gave up and went out of business and the economy sank like unto a rock dropped from a cliff. The banking industry was destroyed. Manufacturing slowed to a crawl. And more of the people were without a means of support.

Then "The One" said, "I am the "the One"- The Messiah - and I'm here to save you! We shall just print more money so everyone will have enough!" But our foreign trading partners said unto Him. "Wait a minute. Your dollar is not worth a pile of camel dung! You will have to pay more... And "The One" said, "Wait a minute. That is unfair!!" And the world said, "Neither are these other idiotic programs you have embraced. Lo, you have become a Socialist state and a second-rate power. Now you shall play by our rules!"

And the people cried out, "Alas, alas!! What have we done?" But yea verily, it was too late. The people set upon The One and spat upon him and stoned him, and his name was dung. And the once mighty nation was no more; and the once proud people were without sustenance or shelter or hope. And the Change "The One" had given them was as like unto a poison that had destroyed then and like a whirlwind that consumed all that they had built.

And the people beat their chests in despair and cried out in anguish, "give us back our nation and our pride and our hope!!" But it was too late, and their homeland was no more.

So ask yourself; Is this really happening or is it a very bad dream?

How many of our liberties and freedoms can Obama and the Democrats destroy in 4 years?

**original source of satire not found

The Netherland System

Next we go to the Netherlands which is also one of the countries touted by many as an example of what we should model ourselves after. Again, the report is from the CATO institute report. The Grass Is Not Always Greener: A Look at National Health Care Systems Around the World Michael D. Tanner Cato Institute: Policy Analysis

Netherlands

Aside from Switzerland, the Netherlands has perhaps the most market-oriented national health care system in Europe. That was the case even before 2006, when a series of reforms introduced even more market mechanisms.

The old pre-2006 Dutch system resembled Germany’s. Dutch workers with incomes below €€ 32,600 were required to enroll in one of 30 government-controlled “sickness funds.” Those with higher incomes had the option of enrolling in the funds if they wished, or opting out of the government system and purchasing private insurance. Sickness funds were financed through a payroll tax and a flat-rate, per-capita premium. (208)

The funds provided a uniform package of benefits including physician and hospital care, specialist care, diagnostic tests, prescription drugs, and dental care for children. (209) While consumers could switch funds annually, there was little competition between funds and few consumers actually switched.

The new Dutch system operates on the theory of managed competition like Switzerland (see below). Both the social health insurance program and the alternative private health insurance option were replaced by a requirement that all Dutch citizens purchase a basic health insurance plan from one of 41 private insurance companies. Although a fine may be imposed for failure to comply, there is no comprehensive system for identifying citizens who do not meet the mandate. An estimated 1.5 to 2 percent of the population is currently uninsured. (210)

The required plan, which covers minimum benefits set by the government, includes general practitioner and specialist care, hospital stays, some dental care, prenatal care, some medicines, and travel expenses. In one interesting innovation, most of the required benefits are specified in terms of “functions of care” rather than by provider category. Thus, “rehabilitation care” is required, but no particular type of rehabilitation provider is mandated. (211) This may mean that the benefits package will be less susceptible to manipulation by provider interest groups, but it is much too early to tell.

The Health Ministry sets premiums, which average around €€ 100 per month for an individual. Insurance companies can offer varying deductibles, ranging from €€ 150 to €€1,000 per year, allowing for a small level of price competition. Policies can also offer rebates of up to €€225 if a policyholder uses no health services in a given year beyond seeing a primary care physician. (212) About 90 percent of the population also buys supplemental insurance covering services over and above the required standard benefits package. (213)

Employers generally pay half of insurance premiums, with individual workers picking up the other half.(214) Individual premiums are tax deductible.(215) Subsidies, or care allowances, that help low- and middle-income income workers purchase the basic insurance plan are extensive and reach well into the middle class. Currently, 5 million Dutch citizens qualify for some level of subsidy on a sliding scale based on income. (216) Those subsidies are financed through a tax on salaried workers. Because of the high levels of subsidy, the Dutch government remains a large source of health spending, one area of significant difference with the Swiss system. (217)

Insurers negotiate quality, quantity, and price of services with providers. Notably, many insurers require providers to document the quality of the care they provide, frequently relying on evidence-based guidelines and performance metrics. (218)

Some insurers provide care directly, using their own staffs and their own facilities, such as primary care centers and pharmacies. Other insurers contract with a network of providers similar to U.S. preferred provider organizations (PPOs). Patients can go out of network but will receive only partial reimbursement. Most insurers require a referral from a primary care provider before a patient can see a specialist. (219) Pharmaceutical prices are capped nationwide at the average price of medicines in a therapeutic class. Individuals may choose more expensive drugs but must pay the difference out of pocket. (220)

The new system has been in place for only two years, which is not enough time to permit a thorough evaluation. However, preliminary indications suggest that it is an improvement over the pre-2006 system. (221)

Dutch consumers appear to have embraced the reforms. Consumer organizations are participating in negotiations with providers, insurers, and lawmakers. The system is becoming more transparent, with far greater information available regarding both price and quality.

Consumers seem willing to make decisions and change insurers on the basis of price and quality. Price competition under the new system has increased significantly and at least 20 percent of Dutch consumers have switched insurers. (222) When the system was initiated, the Dutch government predicted premiums would cost €€1,106 on average. However, competition has forced the average premium down to €€1,028, 097.6 percent below the prediction.(223) Overall, the new system is estimated to have increased the purchasing power of Dutch households by as much as 1.5 percent.(224) However, not everyone has been a winner. The community rating requirement has resulted in steep increases in premiums for younger workers who were more heavily subsidized under the old system. (225)

Under the old system, waiting lists were widespread—for example, more than three months for a hip replacement and two months for a prostatectomy or hysterectomy. (226) One study estimated that at least 100 heart patients died each year while on waiting lists.(227) Early evidence suggests that some improvement has come as a result of the 2006 reforms.(228)

Hospitals are beginning to compete by expanding services such as neurosurgery and radiation therapy.(229) Although some experts have expressed concern that smaller hospitals offering these services may not have sufficient utilization rates to ensure quality and efficacy, the expanded availability of services will likely increase access to care and reduce queues.(230)

The new system may even be having a positive impact on health care costs. Since the new system took effect, health care costs have been growing at an annual rate of just 3 percent, compared to more than 4.5 percent in the year before the reforms. (231)

The jury is still out, and the Dutch system still falls well short of a true free market, but the Netherlands appears to have taken a big step in the right direction.

The Greek Healthcare System

Today we look at Greece as referred to in the CATO institute report. The Grass Is Not Always Greener: A Look at National Health Care Systems Around the World Michael D. Tanner Cato Institute: Policy Analysis

Greece

Although ostensibly an employer-based system, the Greek system operates more like a single- payer system in that it is highly centralized and regulated. Virtually every aspect of health care financing and provision is strictly controlled by the Ministry of Social Health and Cohesion.(189) Some attempts have been made to decentralize decision making, with 17 regional organizations having some responsibility for implementing policy and managing the delivery of health care, but most power remains with the central government.

Greek employers must enroll their workers in one of 35 “social insurance funds,” funded in part through a payroll tax and in part through general tax revenues. Unlike Germany, where employers have a choice among competing sickness funds, Greek social insurance funds are specific to industry sectors. The range of benefits offered by each fund, the contribution rates, and the types of providers that the insured can access are all determined by the Ministry of Social Health and Cohesion. (190)

Certain funds known as “noble funds,” primarily used by government workers, the banking sector, and public utility workers, offer more extensive benefits and require smaller worker contributions. The powerful unions representing workers from these sectors have consistently blocked attempts to merge these funds with other social insurance funds or to allow buy-ins from other industry sectors. (191)

Social insurance funds reimburse doctors in two ways. Some providers are employed directly by the funds at fund-operated clinics and are effectively salaried employees. Others practice privately but contract with funds to provide care. Contract physicians are reimbursed on a fee-for-service basis, but reimbursement rates are extremely low. Balance-billing is prohibited.

In theory, funds provide first-dollar coverage, with no deductibles and low co-payments for only a few services. However, as discussed below, most physicians demand “informal” payments in exchange for treatment.

In addition to the social insurance funds, the National Health Service employs physicians and operates hospitals. The NHS operates parallel to the social insurance funds, acting essentially as a back-up mechanism, although it may be the principal provider of health services in some rural areas. It also provides health care for the uninsured and the elderly.

In addition to NHS hospitals, other public hospitals contract with the social insurance funds. In both cases, the Ministry of Social Health and Cohesion determines not only the hospital’s budget, but the number of personnel, the specialties of the personnel, salary levels, number of beds, and the purchase of technology. Budgets are rigidly monitored and hospital administrators have little leeway. (192) Hospitals are reimbursed on a per diem payment system, a type of a fixed charge. (193)

NHS hospitals in particular are considered substandard. Most suffer from severe staffing shortages caused by low pay and poor living conditions in rural areas. It has been estimated that less than half of authorized medical positions are actually filled. (194) Low salaries have also led to personnel shortages in public hospitals associated with social insurance funds. (195)

A series of reforms implemented in 2005 imposed a referral requirement for hospital admissions. Patients seeking free treatment in a public NHS hospital must have a referral from a general practitioner, who acts as a gatekeeper. Private practice physicians may not make referrals to public or NHS hospitals. (196) Unfortunately, general practitioners are in severely short supply. Greece needs an estimated 5,000 general practitioners to meet demand. In actuality it has only around 600. (197)

Despite overlapping health plans, the Greek system falls short of universal coverage. About 83 percent of the population is covered for primary care (on par with the United States), and about 97 percent for hospital care. (198) In theory, the uninsured can always receive treatment by walking into an NHS clinic or hospital. Only about 8 percent of Greeks have private supplemental health insurance, although this percentage has risen substantially in the past few years and further growth is predicted. (199)

Accurate information on waiting lists is difficult to come by. According to the WHO, “although ‘patient registries’ at the hospital level do exist, there is no systematic data processing available at any level of care,” to provide adequate analysis.(200) However, most observers agree that waiting lists are a severe problem at almost every level of care, and particularly bad at both NHS and public hospitals. An examination of waiting lists at Athens hospitals by the Ta Nea newspaper found the wait for surgery was as long as six months; for an outpatient appointment with either the hypertension or neurology departments, 150 days. Even simple blood tests required a month-long wait. (201)

The Greek system has developed a level of endemic corruption as patients have sought ways around the system’s rationing, bureaucracy, and inefficiencies. For example, Greeks routinely provide physicians with “informal” payments for seeing a patient from a sickness fund that has not contracted with the doctor, for moving a patient up in the queue, or for providing treatment outside government guidelines. In addition, physicians actively attempt to persuade patients to move from a doctor’s sickness fund contract to the doctor’s private practice. Patients who switch pay out of pocket but receive faster and better care. Even NHS physicians see private patients on the side. (This practice was illegal until 2002 but went on despite the prohibition). (202) Physicians also receive payments for referrals to private hospitals or diagnostic centers. Such informal out of- pocket payments made up 42 percent of total health expenditures in 2002, fully 4.5 percent of GDP.(203) Essentially, the Greek health care system is funded through payroll taxes, general tax revenue, and bribery.

In addition, the health care bureaucracy has become highly politicized. Every staff appointment in the public health sector must be approved at the ministry level. All hospital administrators and other health officials are appointed on the basis of political affiliation with the governing party, often with little regard for relevant training or other qualifications. (204)
Not surprisingly, Greece has far less modern health care technology than the United States. The United States has more than twice as many MRI units per million people and 20 percent more CT scanners. (205) Much of the state-of-the-art equipment that does exist is clustered in the country’s small number of private clinics and hospitals. Indeed, the vast majority of high technology biomedical tests are performed by the private sector. (206)

One study summed up the problems with the Greek health care system this way:

The Greek health system does not yet offer universal coverage and has fragmented funding and delivery. Funding is regressive, with a reliance on informal payments, and there are inequities in access, supply and quality of services. Inefficiencies arise from an over reliance on relatively expensive inputs, as evidenced by the oversupply of specialists and undersupply of nurses. Resource allocation mechanisms are historical and political with no relation to performance or output; therefore providers have little incentive to improve productivity. (207)

That would appear to be a fairly accurate summary.

The Portugal System

Today we lay out the case for the Portugal Healthcare system referred to in the CATO institute report. The Grass Is Not Always Greener: A Look at National Health Care Systems Around the World Michael D. Tanner Cato Institute: Policy Analysis

Portugal

The Portuguese health care system is a classic, universal, centrally run National Health System, a single-payer system funded through taxes with comprehensive benefits provided free or with little cost at the point of service.(171) Also, a number of occupation-related health insurance schemes—originally intended to be integrated into the NHS—now coexist with it.

The primary source of care is the NHS, which is funded primarily through general tax revenues, accounting for approximately 13 percent of all government expenditures.(172) In theory, the NHS operates within an annual global budget for health care spending. In reality, it regularly exceeds this budget by a wide margin, necessitating supplemental funding. Portugal is one of the few OECD countries where public health care spending has been rising as a proportion of total health spending, up more than four percentage points since 1997.(173)

Theoretically, benefits under the NHS include all necessary inpatient and outpatient health care services including specialists, diagnostic tests, mother and child care, and prescription drugs. On paper, no health-related expense is specifically excluded from coverage by the NHS, though in reality services such as dental care and rehabilitation therapy are seldom provided.(174) Copayments are required for diagnostic tests, hospital admissions, consultations with specialists, and prescription drugs, where copayments can run to 40 percent or higher.(175)

Primary care physicians and hospitalbased physicians are public employees, paid directly by the NHS. However, NHS doctors are permitted to practice privately as well, and roughly half do so.(176) Specialists are often in private practice and are reimbursed by the NHS on a contractual basis.

About 25 percent of the population, mostly government workers, military, telecommunication workers, and their families, remain under a series of industry or occupation-based insurance schemes, known collectively as “subsystems,” which are a legacy of the country’s pre-NHS health care system.(177) These plans were originally intended to be incorporated into the NHS, but their powerful constituencies have prevented that from occurring. Participants in the subsystems pay a premium equal to approximately 1 percent of their salary. Benefits are generally superior to those offered through the NHS.(178) Not surprisingly, premiums fall far short of what is needed to finance benefits. The resulting shortfall is shifted to the NHS.

In addition, approximately 10 percent of the population has private insurance, usually through their employer.(179) Private insurance generally pays for hospital and specialty care but not for primary care physicians. Policies are medically underwritten and have no requirement for renewability, meaning insurers can raise premiums or drop customers with extremely high claims.(180)

Choice of provider is heavily constrained under the NHS. Every citizen must choose a primary care physician from a list of those available within a specified geographic area. This area is usually based on the person’s area of residence but may be based on the area of employment. The average general practitioner serves as many as 1,500 people, though some may have more than 2,000 patients, leading to long waits and difficulties in getting appointments. People may change GPs only by applying in writing to the NHS and explaining their reasons.(181)

Access to specialists or hospital care, except in emergencies, requires referral from the patient’s GP. Since this is often difficult to secure in a timely manner, patients often seek care through hospital emergency rooms. By some estimates, at least 25 percent of emergency room patients do not need immediate treatment.(182)

Despite guarantees of “universal coverage,” access to care remains a serious problem. Waiting lists are so long and so prevalent that the European Observatory on Health Systems says that they veer toward “de facto rationing.”(183) Currently, more than 150,000 Portuguese are on waiting lists for surgery, out of a population of just 10.6 million.(184) However, that may understate the problem in poorer and rural areas, which have fewer health resources and less access to care.(185) Modern health technology is far less available than in the United States. The United States has almost seven times more MRI units per million people, and 20 percent more CT scanners.(186)

To avoid waiting lists, Portuguese patients frequently pay out of pocket to see physicians in private practice. In some cases, Portuguese patients have crossed the border to receive treatment in Spain.(187)

While there appears to be a consensus in Portugal that the system needs some kind of reform, weak governments and strong structural interest groups have combined to prevent the development of any consensus over the direction reform should take.(188) For the moment, Portugal drifts.

The Norwegian System

Today we lay out the case for the Norwegian Healthcare system and again taken from the CATO institute. The Grass Is Not Always Greener: A Look at National Health Care Systems Around the World Michael D. Tanner Cato Institute: Policy Analysis

Norway

Norway has a universal, tax-funded, single payer, national health system. All Norwegian citizens, as well as anyone living or working in Norway, are covered under the National Insurance Scheme. Norwegians can, however, opt out of the government system by paying out of pocket. In addition, many Norwegians go abroad for treatment to avoid the waiting lists endemic under the government program. (151)

The system is financed through general tax revenues, with no earmarked or dedicated tax for health care. (152) Thus, health care becomes one large contributor to a tax burden that consumes 45 percent of GDP. Among industrialized countries, only Sweden has a higher tax burden. (154)

Benefits are extensive and include inpatient and outpatient care, diagnostic services, specialist care, maternity services, preventive medicine, palliative care, and prescription drugs. At public hospitals, there are no charges for stays or treatment, including drugs. However, small co-payments may be charged for outpatient treatment and for treatment by a general practitioner, psychologist, or psychiatrist. The program also provides “sick pay” and disability benefits. (155) As Michael Moore has noted, the Norwegian system will even pay for “spa treatments” in some cases. (156)

Although the central government retains overall responsibility for and authority over the system, some management and funding responsibilities have devolved to regional and municipal governments. In general, municipal governments are responsible for primary health care, while four regional health authorities are responsible for specialist care. (157) Prior to 2002, public hospitals were run by local or county governments. In the face of chronic problems, notably long waiting lists and rising costs, the central government took direct control of all public hospitals in January 2002.(158) A small number of private hospitals do exist outside the public system.

The government sets a global budget limiting overall health expenditures, and setting capital investment expenditures for hospitals. Most general practitioners and physician specialists outside hospitals receive a fixed salary, although some specialists working on a contract basis receive both an annual grant and fee-for-service payments. Reimbursement rates are set by the government and balance-billing is prohibited. Most other health care personnel are salaried government employees. (159)

Patient choice of physician is constrained. All Norwegian citizens must choose a general practitioner from a government list. The GP acts as a gatekeeper for other services and providers. Patients may switch GPs, but no more than twice per year and only if there is no waiting list for the requested GP. (160) Specialists may only be seen with a referral from the GP.

The Norwegian health care system has experienced serious problems with long and growing waiting lists.(161) Approximately 280,000 Norwegians are estimated to be waiting for care on any given day (out of a population of just 4.6 million).(162) The average wait for hip replacement surgery is more than four months; for a prostatectomy, close to three months; and for a hysterectomy, more than two months.(163) Approximately 23 percent of all patients referred for hospital admission have to wait longer than three months for admission.(164)

The Norwegian government has responded by repeatedly and unsuccessfully attempting to legislate waiting lists out of existence. For example, under the 1990 Patients’ Rights Act, patients with a condition that would lead to “catastrophic or very serious consequences” have a right to treatment within six months, if the treatment is available.(165) In 2001, after several government reports had documented repeated violations of this policy, the government passed a new mandate requiring that a patient’s medical condition be at least “assessed” within 30 days.(166) Despite these paper guarantees, waiting lists have not been substantially reduced.(167)

Moreover, such delays may represent only the tip of the iceberg when it comes to rationing care in Norway. In some cases, care may be denied altogether if it is judged not to be cost-effective. As Knut Erik Tranoy, Professor Emeritus at the Centre for Medical Ethics of the University of Oslo and an original member of the government’s Health Care Priorities Commission, explains:

It is important to see (a) that, in a public health service of the Nordic type, any given amount of resources always has alternative uses. And (b) it is neither medically nor morally defensible to put scarce resources to uses which will foreseeably yield less favorable outcomes than other uses—save fewer lives, cure fewer patients.(168)

Tranoy differentiates between Norwegian style systems of national health care and “a health care system where patients buy services in a market, and where justice means equality of opportunity to buy what you need. Decisions about alternative use are then (largely) patients’ decisions.”(169)

While Norwegians generally report that they are “fairly satisfied” with the way their health care system is run, there has been growing discontent over such issues as the ability to choose a health care provider, involvement in decisions regarding care or treatment, and waiting times—which has been an ongoing issue in Norwegian politics. (170) However, at this time there doesn’t appear to be any widespread movement for larger reform.

Pondering the Question

Clunkers...

I guess I must be on the wrong page…

A vehicle at 15 mpg and 12,000 miles per year uses 800 gallons a year of gasoline.

A vehicle at 25 mpg and 12,000 miles per year uses 480 gallons a year.

So, the average clunker transaction will reduce US gasoline consumption by 320 gallons per year.

They claim 700,000 vehicles – so that’s 224 million gallons / year.

That equates to a bit over 5 million barrels of oil.

5 million barrels of oil is about ¼ of one day’s US consumption.

And, 5 million barrels of oil costs about $350 million dollars at $75/bbl.

So, we all contributed to spending $3 billion to save $350 million..

How good a deal was that???

LEMON PICKER

The woman applying for a job in a Florida lemon grove seemed to be far too qualified for the job.

The foreman frowned and said, "I have to ask you this; have you had any actual experience in picking lemons?"

"Well, as a matter of fact, I have!" she replied.

"I've been divorced three times and I voted for Obama."

The Spanish System

Today we lay out the case for the Spanish Healthcare system and again taken from the CATO institute. The Grass Is Not Always Greener: A Look at National Health Care Systems Around the World Michael D. Tanner Cato Institute: Policy Analysis

Spain

Spain’s national health care system operates on a highly decentralized basis, giving primary responsibility to the country’s 17 regions. The Spanish Constitution guarantees all citizens the “right” to health care, including equal access to preventive, curative, and rehabilitative services; but responsibility for implementing the country’s universal system is being devolved to regional governments. The degree and speed of devolution is uneven, however, with some regions only recently achieving maximum autonomy.(111)

Coverage under the Spanish system is nearly universal, estimated at 98.7 percent of the population. The system provides primary health care, including general health and pediatric care, outpatient and inpatient surgery, emergency and acute care, long-term disease management, and prescription drugs (although some drugs may require a co-payment). Many mental health services, particularly outpatient services, are excluded, as is cosmetic surgery.(112)

The federal government provides each region with a block grant. The money is not earmarked: the region decides how to use it. The block grant itself is based primarily on a region’s population with some consideration given to other factors such as the population’s demographics. Regions may use their own funds to supplement federal monies.

Not surprisingly, health care spending varies widely from region to region. The differences in expenditures, as well as in spending priorities, lead to considerable variance in the availability of health resources. For example, Catalonia has more than 4.5 hospital beds per 1,000 residents, while Valencia has just 2.8.(113)

Spanish patients cannot choose their physicians, either primary care or specialists. Rather, they are assigned a primary care doctor from a list of physicians in their local community. If more specialized care is needed, the primary care physician refers patients to a network of specialists. Unlike U.S. managed care, it is not possible to go “out of network” unless the patient has private health insurance (see below). This has sparked an interesting phenomenon whereby sick Spaniards move in order to change physicians or find networks with shorter waiting lists.

Waiting lists vary from region to region but are a significant problem everywhere. On average, Spaniards wait 65 days to see a specialist, and in some regions the wait can be much longer. For instance, the wait for a specialist in the Canary Islands is 140 days. Even on the mainland, in Galacia, the wait can be as long as 81 days. For some specialties the problem is far worse, with a national average of 71 days for a gynecologist and 81 days for a neurologist.(114) Waits for specific procedures are also lengthy. The mean waiting time for a prostatectomy is 62 days; for hip replacement surgery, 123 days.(115)

Some health services that U.S. citizens take for granted are almost totally unavailable. For example, rehabilitation, convalescence, and care for those with terminal illness are usually left to the patient’s relatives. There are very few public nursing and retirement homes, and few hospices and convalescence homes.(116)

As with most other national health care systems, the waiting lists and quality problems have led to the development of a growing private insurance alternative. About 12 percent of the population currently has private health insurance. (This amounts to double coverage since opting out of the government system is not allowed.(117)) In larger cities such as Madrid and Barcelona, the number of privately insured reaches as high as 25 percent. Overall, private insurance payments account for 21 percent of total health care exenditures.(118) More commonly, Spaniards pay for care outside of the national health care system out of pocket. In fact, nearly 24 percent of health care spending in Spain is out of pocket, more than any European country except Greece and Switzerland, and even more than the United States.(119)

Here again, a two-tier system has developed, with the wealthy able to buy their way around the defects of the national health care system, and the poor consigned to substandard services.(120)

There are also shortages of modern medical technologies. Spain has one-third as many MRI units per million people as the United States, just over one-third as many CT units, and fewer lithotripters.(121) Again, there is wide variation by region. For example, two regions, Ceuta and Melilla, do not have a single MRI unit.(122) The regional variation is important because Spaniards face bureaucratic barriers in trying to go to another region for treatment.

All hospital-based physicians and approximately 75 percent of all other physicians are considered quasi–civil servants and are paid a salary rather than receiving payment based on services provided. Compensation is based on years of practice or the attainment of certain professional credentials, with across-the board annual increases unrelated to merit, performance, or patient satisfaction.(123)

As a result, Spain has fewer physicians and fewer nurses per capita than most European countries and the United States. The lack of primary care physicians is particularly acute.(124)

Even so, Spaniards are generally happy with their system. Nearly 60 percent describe their system as good, the second highest favorability rating in Europe. (France was first.)(125) Accordingly, health care reform does not rank high on the average Spaniard’s political agenda. One observer described health care as “conspicuous by its absence as a major issue” in recent elections.(126) Only about 46 percent of Spaniards describe the need for reform as “urgent,” while 35 percent see reform as “desirable.” And Spaniards are less inclined toward market-based reforms than most other European countries. Only 42 percent of Spaniards believe that it should be easier for patients to spend their own money on health care, and only 58 percent believe that giving patients more control over spending will improve quality. However, Spaniards do want more choice of doctors and hospitals, and they want the government to do a better job of dealing with waiting lists.(127)

The Japanese System

Today we lay out the case for the Japanese Healthcare system and again taken from the CATO institute. The Grass Is Not Always Greener: A Look at National Health Care Systems Around the World Michael D. Tanner Cato Institute: Policy Analysis

Japan

Japan has a universal health insurance system centered primarily around mandatory, employment-based insurance. On the surface, Japan’s national health insurance program defies easy description, comprising some 2,000 private insurers and more than 3,000 government units. However, in a broader sense, the system encompasses four principal insurance schemes.

The Employee Health Insurance Program requires companies with 700 or more employees to provide workers with health insurance from among some 1,800 “society managed insurance” plans. Nearly 85 percent of these plans cover a single company and can be thought of as similar to the self-insurance plans operated by many large U.S companies. Most of the rest are industry-based. About 26 percent of the population participates in these plans. (128)

Such plans are financed through mandatory employer and employee contributions, effectively a payroll tax. The total contribution averages around 8.5 percent of wages. It is generally split evenly between employer and employee, although some companies assume slightly more than half the contribution. As a result, workers contribute about 45 percent of payments overall. (129) It should be noted that studies have found that the majority of the burden of the employer’s contribution to health insurance is borne by the employees in the form of reduced wages. (130)

These contributions are frequently insufficient to operate the insurance plans. In 2003, more than half lost money. (131) A number of companies have responded by dissolving their individual plans and entering larger industry-based plans. However, growing costs continue to pressure many businesses.

Workers in businesses with fewer than 700 workers must enroll in the government run, small-business national health insurance program. This plan covers about 30 percent of the population and is funded primarily through mandatory contributions, around 8.2 percent of wages, and supplemented by government funds. (132)

The self-employed and retirees are covered under the Citizens Insurance Program administered by municipal governments. Funding comes primarily from a self-employment tax, but additional revenues come from an assessment on the society-managed insurance programs discussed above and the small business program. General revenue contributions from the national government are used to plug shortfalls.

Finally, the elderly are covered through a fund financed by contributions from the other three schemes, as well as contributions from the central government. The elderly do not pay directly into this plan, known as the Roken, but contribute to the plan they were enrolled in while employed. The Roken is simply a cost sharing mechanism. (134)

A number of small programs exist to handle special populations such as farmers, fishermen, and government workers. The unemployed remain under their former employers’ plan, although they are not required to continue contributing. Private supplemental insurance exists, but very few Japanese carry it. Private health insurance pays for less than 1 percent of total Japanese health care spending.

Benefits under all four schemes are extremely generous, including hospital and physician care, as well as dental care, maternity care, prescription drugs, and even some transportation costs. There are no restrictions on hospital or physician choice and generally no preauthorization or gatekeeper requirements. Significant co-payments accompany most services, ranging from 10 percent to, more commonly, 30 percent (capped at $677 per month for a middle-income family). As a result, the average Japanese household pays about $2,300 per year out of pocket.(135) Overall out-of-pocket expenditures amount to roughly 17 percent of total health care spending.

The vast majority of hospitals and clinics in Japan are privately owned, but because the government sets all fee schedules, the distinction between privately and publicly owned is irrelevant for patients. Reimbursement for both hospitals and clinics is on a fee-for-service basis, with the government setting fees and prescription prices.

The fee schedule is identical for inpatient and outpatient treatment. Because hospitals must absorb both physician and capital costs from the same level of reimbursement, the tendency has been to shift patients to outpatient services. (136) Recently, some attempts have been made to introduce alternate reimbursement mechanisms for hospitals, including DRGs and Diagnosis and Procedure Combinations— classification systems that tie reimbursements more closely to the resources that a particular patient consumes. But the medical establishment has resisted, and only about 80 hospitals participate in the experiment. (137)

Hospital physicians are salaried employees. Nonhospital physicians work in the private sector and the government sets their reimbursement schedules. Generally, reimbursement is on a fee-for-service basis, although recently some chronic conditions have been “price bundled” into a single fee. Reimbursement schedules are set within the context of an overall global budget on health spending, but the division of resources is the subject of extensive negotiation with providers.

The fee schedule reflects both the Japanese style of medicine and attempts to contain costs. For example, because of a strong cultural bias against invasive procedures, surgery tends to be reimbursed at a much lower rate than nonsurgical procedures. (138)

The fee-setting system has had serious corruption problems. Because the fees for each of more than 3,000 procedures or services are set individually and adjusted every two years on an individual basis, it is possible to manipulate particular fees without attracting much attention. (139) In 2004, a group of dentists was indicted for bribing the fee-setting board. (140)

In addition, the reimbursement schedule for physicians creates an incentive for them to see as many patients as possible. The result is assembly line medicine. Two-thirds of patients spend less than 10 minutes with their doctor; 18 percent spend less than 3 minutes. (141)

On the other hand, the Japanese, like Americans, practice a very technology-intensive style of medicine. Capital investment in technology has been given high priority, and the Japanese have at least as much access to technology such as MRI units, CT scanners, and lithotripters as patients in the United States.(142) Because the government imposes uniform fee schedules on hospitals, there is no price competition. Instead, hospitals attempt to lure patients by having the best technology. While this can benefit patients, it has also led to queues at the best hospitals and a black market with “under the table” payments for faster access. (143)

Some restrictions have been added in the last few years, capping the number of diagnostic imaging procedures that a hospital can perform in a calendar month, as well as reducing the fees for those services.(144) These changes have not led to visible rationing yet but could in the future.

To date, Japan has done a fairly good job of controlling costs without resorting to the rationing common in many universal care systems. This is due in part to factors outside the health care system, such as generally healthy lifestyles, low vehicle accident rates, low crime rates, low rates of drug abuse, and other cultural factors.(145) One study estimated that 25 percent of the difference in health care spending between the United States and Japan is attributable to a lower incidence of disease and 15 percent to less aggressive practice styles.(146) But rationing has also been avoided through the management of the health care system and the imposition of significant consumer cost sharing.

Nonetheless, spending is beginning to escalate, especially in government-managed programs such as the Roken, where there has been less of an attempt at cost sharing and cost containment. As one observer explained:

We Japanese have a tendency to go to the hospital even when we have only minor ailments such as the flu, headaches, or stomach aches. If medical expenses are not high and we do not feel well, then why not go see a doctor and get some medication. . . . The result, of course, is that waiting rooms of clinics and hospitals are full of people. Everyone is welcome and there are, in fact, regular customers. Sometimes elderly people come to see a friend and the hospital waiting room becomes a sort of salon. (147)

This problem is aggravated by the demographics of a rapidly aging society. By some estimates, the elderly are responsible for 90 percent of the aggregate increase in Japan’s health care costs. (148) If current trends continue, Japan will almost triple its government spending on health care in the next 20 years.(149) And the situation will only grow less stable with time. Japan is expected to lose 35 million workers by 2050, with 35 percent of its population in retirement. (150) This raises questions of how a system that relies on payroll taxes for funding can continue to fund rising costs even as its payroll base shrinks.

The Italian System

Today we look at Italy and once again, the information is from the same source. The Grass Is Not Always Greener: A Look at National Health Care Systems Around the World Michael D. Tanner Cato Institute: Policy Analysis

Italy

Italy’s national health care system is rated second in the world by the WHO.(89) Yet a closer examination shows the system to be deeply troubled, plagued with crippling bureaucracy, mismanagement and general disorganization, spiraling costs, and long waiting lists.

Generally, the Italian system is similar to the British National Health Service but enjoys more decentralization. The central government sets goals on how money should be spent, monitors the overall health status of the nation, and negotiates the labor contracts of medical staff. The Italian Constitution was changed in 2001 such that the national government now sets the “essential levels of care” regions must meet, but regional governments still control their own autonomous budgets and distribute resources to the local level.

In theory, under the “fiscal federalist” provisions of this reform, discretionary central transfers should have dropped sharply, local tax bases and tax sharing should have increased, and “equalizing” transfers should have been standardized and linked to objectives for controlling costs and increasing quality. However, poorer regions and powerful special interests have strongly resisted these changes. Reform therefore remains incomplete, and financial transfers from the central government are still based on historical spending patterns. (90)

Thus, while the national Ministry of Health continues to outline funding needs based on weighted capitation and past spending, recent reforms have shifted more and more power and responsibility to regional governments who set their own budgets. The regions establish one or more Local Health Authorities, which are responsible for the provision of care either through government-run hospitals and clinics or by contracting with private providers. (91) It should be noted that governance in Italy is often as much art as science, and regions frequently fail to implement rules, guidelines, reimbursement schedules, and budgets set by the central government.(92)

Financing comes from both payroll taxes and general revenues. Payroll taxes have a regressive structure, starting at 10.6 percent of the first €€ 20,660 of gross income and decreasing to 4.6 percent of income between €€20,661 and €€ 77,480. The remainder of funding comes from both federal and regional general taxation, including income and value-added taxes. (93) The central government redistributes resources to compensate to some degree for inequalities among regions. Even so, most regional health authorities run significant deficits. Overall, regional deficits top 1.8 percent of GDP. (94)

Inpatient care and primary care are free at the point of treatment. However, co-payments are required for diagnostic procedures, specialists, and prescription drugs.(95) The size of such co-payments has crept steadily upward over the past decade and now runs as high as 30 percent for some services.(96) Several attempts have been made to impose co-payments for a broad range of services, including primary care, but have collapsed in the face of public protests.(97) In addition, nearly 40 percent of the population (the elderly, pregnant women, and children) are exempt from co-payments.(98)

Italians have limited choice of physician. They must register with a general practitioner within their LHA. They may choose any GP in the LHA but may not go outside it. Except for emergency care, a referral from a GP is required for diagnostic services, hospitalization, and treatment by a specialist. Despite these limits, Italians enjoy more choice of physician than do the British or Spanish.

Most physicians are reimbursed on a capitated basis (i.e., according to the number of patients served over a given time period rather than the services actually provided), although some hospital physicians receive a monthly salary. Hospitals are generally reimbursed according to DRGs, with rates set by the central government—though regions sometimes disregard those rates and set their own.

Private health insurance is available in Italy but is not widespread. Where offered, it is usually provided by employers. About 10 percent of Italians have private health insurance, below the percentage in most OECD countries. According to the insurance industry, this is partly because it is not possible to opt out of the National Health System and because health insurance premiums are not tax deductible.(99) Private health insurance allows free choice of doctors, including specialists, and treatment in private hospitals. Even without private insurance, however, many Italians use private health resources (and presumably pay out of pocket). Estimates suggest that as much as 35 percent of the population uses at least some private health services. (100)

Although Italy spends a relatively low percentage of GDP on health care, expenditures have been rising rapidly in recent years and have consistently exceeded government forecasts. (101) Between 1995 and 2003, total health care spending rose by 68 percent.(102) The Italian government has taken various steps to try to control costs, such as reducing reimbursement rates, increasing co-payments, reducing capital expenditures, contracting with private providers, and limiting prescription drugs. All of these measures have met with protests, including physician strikes, and many have been repealed after only a short time. (103)

The Italian government does not provide official information on waiting lists, but numerous studies have shown them to be widespread and growing, particularly for diagnostic tests. For example, the average wait for a mammogram is 70 days; for endoscopy, 74 days; for a sonogram, 23 days. (104) Undoubtedly, this is due in part to a shortage of modern medical technology. The United States has twice as many MRI units per million people and 25 percent more CT scanners. (105) Ironically, the best-equipped hospitals in northern Italy have even longer waiting lists since they draw patients from the poorer southern regions as well.(106)

If delays become excessive, patients may seek permission from the regional government to obtain treatment from private doctors or hospitals at NHS expense. A recent court decision allows patients whose life would be endangered by delays under the NHS to seek treatment in private hospitals even without prior permission from the regional government.

Italy has imposed a relatively strict drug formulary as well as price controls, and has thereby succeeded in reducing pharmaceutical spending, long considered a problem for the Italian health care system. In 2006, Italian drug prices fell (or were pushed) 5 percent, even as drug prices rose in the United States and much of the rest of the world. However, the savings came at a cost: the introduction of many of the newest and most innovative drugs was blocked. (107)

Conditions in public hospitals are considered substandard, particularly in the south. They lack not just modern technology, but basic goods and services; and overcrowding is widespread. Conditions are frequently unsanitary. For example, one of the largest public hospitals in Rome was recently found to have garbage piled in the hallways, unguarded radioactive materials, abandoned medical records, and staff smoking next to patients. (108) Private hospitals are considered much better and some regions have contracted with private hospitals to treat NHS patients.

Dissatisfaction with the Italian health care system is extremely high, by some measures the highest in Europe. (109) In polls, Italians say that their health care system is much worse than that of other countries and give it poor marks for meeting their needs. Roughly 60 percent of Italians believe that health care reform is “urgent,” and another 24 percent believe it is “desirable.” In general, Italians believe that such reform should incorporate market-based solutions. More than two-thirds (69 percent) believe that giving patients more control over health care spending will improve the system’s quality. And 55 percent believe that it should be easier for patients to spend their own money on health care. (110)

However, given the general dysfunction of the Italian political system, and the entrenched opposition of special interest groups, substantial reform is not likely anytime soon.

The French System

Today we’ll show the French System.

As stated before, these assessments are taken from the CATO institute report. The Grass Is Not Always Greener: A Look at National Health Care Systems Around the World Michael D. Tanner Cato Institute: Policy Analysis

France

Some of the most thoughtful proponents of national health care look to France as a model of how such a program could work. Jonathan Cohn of theNew Republic has written that “the best showcase for what universal health care can achieve may be France.”(44) Ezra Klein of the American Prospect calls France “the closest thing to a model structure out there.”(45) The French system ranks at or near the top of most cross-country comparisons and is ranked number one by the WHO.(46)

Although the French system is facing looming budgetary pressures, it does provide at least some level of universal coverage and manages to avoid many of the problems that afflict other national health care systems. However, it does so in large part by adopting market-oriented approaches, including consumer cost sharing. Other aspects of the system appear to reflect French customs and political attitudes in such a way that would make it difficult to import the system to the United States.

France provides a basic level of universal health insurance through a series of mandatory, largely occupation-based, health insurance funds. These funds are ostensibly private entities but are heavily regulated and supervised by the French government. Premiums (funded primarily through payroll taxes), benefits, and provider reimbursement rates are all set by the government. In these ways the funds are similar to public utilities in the United States. The largest fund, the General National Health Insurance Scheme, covers most nonagricultural workers and their dependents, about 83 percent of French residents. Separate insurance plans cover agricultural workers, the self-employed, and certain special occupations like miners, transportation workers, artists, clergy, and notaries public. Another fund covers the unemployed. These larger insurance schemes are broken down into smaller pools based on geographic region. Overall, about 99 percent of French citizens are covered by national health insurance.

The French health care system is the world’s third most expensive, costing roughly 11 percent of GDP, behind only the United States (17 percent) and Switzerland (11.5 percent). Payroll taxes provide the largest source of funding. Employers must pay 12.8 percent of wages for every employee, while employees contribute an additional 0.75 percent of wages, for a total payroll tax of 13.55 percent. In addition, there is a 5.25 general social contribution tax on income (reduced to 3.95 percent on pension income and unemployment benefits). Thus, most French workers are effectively paying 18.8 percent of their income for health insurance. Finally, dedicated taxes are assessed on tobacco, alcohol, and pharmaceutical company revenues.(47)

In theory, the system should be supported by these dedicated revenues. In reality, they have not been sufficient to keep the program’s finances balanced. The National Health Authority sets a global budget for national health care spending, but actual spending has consistently exceeded those targets.(48)

In 2006, the health care system ran a €€10.3 billion deficit. This actually shows improvement over 2005, when the system ran an €€11.6 billion deficit.(49) The health care system is the largest single factor driving France’s overall budget deficit, which has grown to €€ 49.6 billion, or 2.5 percent of GDP, threatening France’s ability to meet the Maastricht criteria for participation in the Eurozone.(50) This may be just the tip of the iceberg. Some government projections suggest the deficit in the health care system alone could top €€29 billion by 2010 and €€ 66 billion by 2020.(51)

In general, the funds provide coverage for inpatient and outpatient care, physician and specialist services, diagnostic testing, prescription drugs, and home care services. In most cases, the services covered are explicitly specified in regulation. However, some “implicit” benefit guarantees occasionally result in conflicts over what benefits are and are not fully covered.(52)

Most services require substantial copayments, ranging from 10 to 40 percent of the cost. As a result, French consumers pay for roughly 13 percent of health care out of pocket, roughly the same percentage as U.S. consumers. (53) Moreover, because many health care services are not covered, and because many of the best providers refuse to accept the fee schedules imposed by the insurance funds, more than 92 percent of French residents purchase complementary private insurance.(54) In fact, private insurance now makes up roughly 12.7 percent of all health care spending in France, a percentage exceeded only by the Netherlands (15.2 percent) and the United States (35 percent) among industrialized countries.(55)

The combination of out-of-pocket and insurance payments means that nongovernment sources account for roughly 20 percent of all health care spending, less than half the amount spent in the United States but still more than most countries with national health care systems.(56)

The private insurance market in France is in many ways less regulated than the U.S. market. For example, while 20 U.S. states require some form of community rating or put limits on health insurance premiums, private health insurance in France is largely experience rated. No regulations specify what benefits must be included in coverage or mandate “guaranteed issue”; and pre-existing conditions may be excluded. The only significant restriction requires “guaranteed renewability” after two years of coverage.(57) More than 118 carriers currently offer some form of private health insurance coverage.(58)

In general, French patients pay up front for treatment and are then reimbursed by their government health insurance fund and/or private insurance. The amount of reimbursement, minus the copayment, is based on a fee schedule negotiated between health care providers and the national health insurance funds. These fee schedules operate similarly to the diagnostic-related groups (DRGs) under the U.S. system.

Although reimbursement levels are set by the government, the amount physicians charge is not. The French system permits providers to charge more than the reimbursement schedule, and approximately one-third of French physicians do so.(59) In some areas, such as Paris, the percentage of physicians who bill above reimbursement schedules runs as high as 80 percent.(60) In general, however, competition prevents most physicians from billing too far outside negotiated rates; and physicians employed by hospitals, as opposed to those in private practice, do not have the same ability to charge more than the negotiated rate.

The government also sets reimbursement rates for both public and private hospitals, which are generally not allowed to bill beyond the negotiated fee schedules. While fees are restricted, private hospitals (called cliniques), which account for 37 percent of all short-stay hospital beds and half of all surgical beds, control their own budgets, whereas public hospitals operate under global annual budgets imposed by the Ministry of Health.

Health care technology that the National Health Authority has categorized as “insufficient medical service rendered” cannot be purchased by public hospitals, and its use at cliniques is not reimbursable through national insurance schemes.(61) Yet in denying reimbursement for such technology, the French government admits that when a product with an insufficient medical service rendered is de-listed from reimbursement, this does not imply that it is not efficient for a given pathology, but simply that the government prefers to commit its resources to other reimbursements which it deems more useful from a collective point of view.”(62)

In general, the quality of French health care is high, but there are problem areas. Until very recently, the French have generally had quick access to their primary care physician of choice. Now, a growing problem, nomadisme medical, wherein patients go from one doctor to another until they find one whose diagnosis they prefer, is driving up costs to the system. (63) The government has responded by increasing copayments and attempting to limit physician reimbursements.

Much of the burden for cost containment in the French system appears to have fallen on physicians. The average French doctor earns just €€ 40,000 per year ($55,000), compared to $146,000 for primary care physicians and $271,000 for specialists in the United States. This is not necessarily bad (there is no “right” income for physicians) and is partially offset by two benefits: 1) tuition at French medical schools is paid by the government, meaning French doctors do not graduate with the debt burden carried by U.S. physicians, and 2) the French legal system is tort-averse, significantly reducing the cost of malpractice insurance.(64) The French government also attempts to limit the total number of practicing physicians, imposing stringent limits on the number of students admitted to the second year of medical school.(65)

However, French physicians have shown growing resistance to efforts at limiting physician reimbursement with several recent strikes and protests.(66) In the face of growing budgetary problems, future conflict may well be brewing.

More significantly, the government has recently begun imposing restrictions on access to physicians. A 2004 study by the High Council on the Future of Health Insurance raised questions about “the legitimacy of the complete freedom enjoyed by health professionals in setting up their private practice.”(67) And in 2005, the government adopted a system of “coordinated care pathways.” Under the new system, which operates very much like managed care in the United States, patients are encouraged to choose a “preferred doctor” and to follow the “pathway” suggested by that doctor. The effect is both to lock patients into a choice of primary care physician and to establish a “gatekeeper” who limits access to specialists, tests, and some advanced treatment options.(68)

So far, the new system has been more of a gentle push than a mandate. If the new system is not used, copayments may be slightly higher or reimbursements slightly lower, much like going “out of network” in the United States. But if costs continue to rise, the new system may be extended and made more rigorous.

Of more immediate concern, global budgets and fee restrictions for hospitals have led to a recurring lack of capital investment, resulting in a shortage of medical technology and lack of access to the most advanced care. For example, the United States has eight times as many MRI units per million people and four times as many CT scanners as France.(69) This partially reflects the more technology-reliant way of practicing medicine in the United States, but it has also meant delays in treatment for some French patients. Also, strong disparities are evident in the geographic distribution of health care resources, making access to care easier in some regions than others.(70) Thus, while the French system has generally avoided the waiting lists associated with other national health care systems, limited queues do exist for some specialized treatments and technologies. In some cases, hospitals in danger of exceeding their budgets have pushed patients to other facilities to save money.(71)

Finally, the government has tried to curtail the use of prescription drugs. The French have long had an extremely high level of drug consumption. French general practitioners (GPs) prescribe on average €€ 260,000 worth of drugs a year.(72)However, the National Health Authority has begun de-listing drugs from its reimbursement formulary.(73) Many French patients have responded by switching to similar, reimbursable drugs, but some patients may not be getting the medicine they need. For example, one study found that nearly 90 percent of French asthma patients are not receiving drugs that might improve their condition.(74)

Government regulation and bureaucracy have also been blamed for rigidity in the French system, preventing it from reacting quickly to changing circumstances. For example, mismanagement and the inability of the system to cope with emergencies were blamed in part for the deaths of 15,000 elderly individuals in the summer of 2003 during the European heat wave; and a shortage of hospital beds occurred in 2004 when a nationwide flu and bronchitis epidemic broke out.(75)

Although the changes made so far do not amount to rationing, 62 percent of French citizens report that they “have felt the effects” of the new restrictions.(76) Slightly less than half consider the waiting time between diagnosis and treatment to be acceptable.(77)

Valentin Petkantchin, a scholar with the Institut Economique Molinari, warns that France is in danger “of joining the group of countries [such as] the UK and Canada, where the existence of rationing of health care and waiting lists raises serious questions of access to treatments by those who need them.”(78) And some French health professionals have suggested that waiting times for care have begun to lengthen.(79)

The impact of all these cost containment measures is alleviated to some degree by the ability of French patients to privately contract for care outside the public system. If a drug is removed from the national formulary, patients may still purchase it if they are willing to pay for it themselves. The same is true for technology. Likewise, patients may ignore the “coordinated care pathway” and accept higher prices, paying more for immediate access.

In addition, the added resources from payments by private insurance have increased the supply of health care technology and services. By increasing the overall amount of capital available for investment above and beyond the restrictions imposed by the government system, private insurance payments increase the number of hospital beds and the amount of technology available within the system. The capital infused through private insurance may also increase the number and training of physicians.(80)

In essence, the French system avoids widespread rationing because, unlike true singlepayer systems, it employs market forces. Even the OECD says that the “proportion of the population with private health insurance” and the degree of cost sharing are key determinants of how severe waiting lists will be:

• Waiting lists for elective surgery generally tend to be found in countries which combine public health insurance (with zero or low patient cost sharing) and constraints on surgical capacity. Public health insurance removes from patients the financial barriers to access leading to high potential demand. Constraints on capacity . . . prevent supply from matching this demand. Under such circumstances, non-price rationing, in the form of waiting lists, takes over from price rationing as a means of equilibrating supply and demand.(81)
• And Ezra Klein praises the French because [France’s ability to hold down health care costs] is abetted by the French system’s innovative response to one of the trickier problems bedeviling health-policy experts: an economic concept called “moral hazard.” Moral hazard describes people’s tendency to overuse goods or services that offer more marginal benefit without a proportionate marginal cost. Translated into English, you eat more at a buffet because the refills are free, and you use more health care because insurers generally make you pay up front in premiums, rather than at the point of care. The obvious solution is to shift more of the cost away from premiums and into co-pays or deductibles, thus increasing the sensitivity of consumers to the real cost of each unit of care they purchase.(82)

However, the benefits of private insurance are not equally distributed. The wealthy are more likely to be able to pay privately to escape the government system, creating in essence a two-tier system. That has resulted in a disparity in health outcomes based on income.(84) While this is certainly the case in the United States and elsewhere—and there is nothing wrong with the wealthy being able to pay more to receive better care—it demonstrates that the professed goal of entirely equal access is largely unattainable even under this government-run health system.

A 2004 poll showed that the French had the highest level of satisfaction with their health care system among all European countries. This is partly because their hybrid system has avoided many of the biggest problems of other national health care systems. Yet it also stems from French social character. For example, by a three-to-one margin, the French believe the quality of care they receive is less important than everyone having equal access to that care.(85) This means the French experience may not be easily transferable to the United States, which has a far less egalitarian ethic.

While satisfied with their care today, the French do express concern about the future. In particular, they acknowledge the need for greater cost control. This leads to the standard contradiction inherent in government services: most people are opposed to paying more (either through higher taxes or out of pocket), yet they worry that cost-control measures will lead to a deterioration of care in the future. There is no consensus on what French health care reform would look like. Still, some 65 percent of French adults believe that reform is “urgent,” and another 20 percent believe reform is “desirable.”(86)

Moreover there is growing dissatisfaction with the French welfare state—of which the health care system is a significant part—and the level of taxes necessary to support it. The recent election of French president Nicolas Sarkozy is widely regarded as a reflection of this new attitude.(87) Indeed, the new French government has made a crackdown on health care spending one of its top priorities..(88)

To sum up: the French health care system clearly works better than most national health care systems. Despite some problems, France has generally avoided the rationing inherent in other systems. However, the program is threatened by increasing costs and may be forced to resort to rationing in the future.

The French system works in part because it has incorporated many of the characteristics that Michael Moore and other supporters of national health care dislike most about the U.S. system. France imposes substantial cost sharing on patients in order to discourage over-utilization, relies heavily on a relatively unregulated private insurance market to fill gaps in coverage, and allows consumers to pay extra for better or additional care, creating a two-tier system.

This is clearly not the commonly portrayed style of national health care.