truenorthnewsandcommentary.com

During the healthcare reform debate (which is really an insurance reform debate) we’ve heard a lot about the British National Health System (almost totally socialized and roundly criticized) and a little about the French system (less socialized, less criticized).   I recently heard a suggestion that the Swiss system might be a model that would work in the USA.  Here’s a summary and analysis of how that little alpine country approaches health insurance:

1.  There is an insurance mandate for all individuals.

Meaning:  Everyone is required by law to have health insurance, and it is not provided through employers.  This is a compromise between two warring positions:  Libertarians hate the “individual mandate,” and so do most conservatives.  But liberals hate the idea of ending employer-based health insurance.  That would be a huge and controversial change in the U.S.

I think such a compromise might be the price we must pay for a system that is both politically feasible and that actually works.  Regina Herzlinger,  a Harvard Business School professor, has studied and written about the U.S. health care system and other countries’ systems for some time:

To revamp the US system, Herzlinger argues that Americans should be required to buy their own insurance, as in Switzerland, instead of having employers purchase it for them.

“When people buy their own health insurance with their own money they think about value,” Herzlinger said. “I don’t want someone else to buy my car, my house, my food or my clothes, so why do I let them buy my health insurance?”

What about people who can’t pay for their own insurance?  (Yes, they have poor people in Switzerland too.)

In Switzerland, about one-third of the Swiss population cannot afford insurance. The Swiss government provides help on a sliding scale with about SFr4 billion a year.

“I don’t think people really understand just how profound that is,” Herzlinger said. “Poor people become dignified consumers. This is what makes Switzerland so unique.”

2.  The government defines a what the insurance benefit will be for all standard health insurers.

Another intervention in the market that is hard for conservatives to swallow.  Essentially, the government establishes a “floor” or minimum benefit.

3.  Insurance companies are not allowed to deny coverage to any individual.

In other words, no “pre-existing conditions.”

4.  Health insurance and medical procedure prices are made publicly available.

Now we’re talking more free enterprise.  Do you have any idea how to find out what medical procedures cost in the U.S.?  If not, you have lots of company.

5.  In exchange for providing health insurance to consumers, insurance companies receive premiums from consumers and risk-adjustment payments from the government in order that insurance companies are not punished if they decide to insure a sicker population.

This is how the Swiss compensate for making insurance companies take everyone, regardless of pre-existing condition:

[A]n insurance company could go broke if it had too many chronically ill clients and no healthy ones.

For Swiss companies, it makes little difference if you’re a beacon of fitness or in need a heart transplant. A joint foundation overseen by government regulators redistributes high profits earned off healthy clients and divides them among companies with expensive, unhealthy ones.

That’s a lot of regulation for the insurance companies.  Maybe we can do better.

6.  Premiums are community rated, meaning that sick and healthy individuals pay the same price within each age group (the age groupings are 0-18, 19-25, >25 years old).

More intervention in the market, but if you have elements 1-3 above you really have to do this too.

7.   Individuals are allowed to purchase supplemental insurance as well (there is no regulated benefit for supplemental insurance).

This is how they keep the offerings from being “one size fits all.”  I like this provision a lot, and it really saves the entire system, in my view.

I’m no expert on the Swiss sytem, but it seems that individuals choosing their own insurance is the key to its success.   The Swiss are not limited to plans their employers make available to them.  In that way their system is a lot like the Federal Employees Health Benefits Program.  Federal employees get a payroll deduction for a certain amount each year, and they can direct the money to any one of a variety of insurance plans during “open season” every December.   If they wish, they can supplement the amount in the payroll deduction and direct their funds to a more expensive plan.   In other words, the employer doesn’t choose the insurance, the employee does.  I’ve always found it interesting that members of Congress get that kind of freedom but can’t seem to bring themselves to offer it to the rest of the country.

8.  There is significant cost sharing in all insurance plans (i.e.: deductibles, 10% coinsurance rates up to an annual ceiling).

This is the individual responsibility piece that is missing from most current American proposals.

9.  Open enrollment occurs twice per year (June and December).

This means twice a year you can switch insurance plans, and it means the insurance companies are competing actively all the time.

How do the Swiss people use this system?

In 2003, 49.7% of Swiss individuals choose ordinary deductible health insurance, 42.0% choose higher deductible health insurance, and 8.2% chose insurance with limited choice of provider networks (HMO-style contracts). Since only 8% of individuals are in managed care insurance firms, quality is fairly homogeneous across insurance companies.

And does the system produce competition for the consumer’s business?  This is where the Swiss system gets really interesting:

[H]igh consumer demand has created 87 private Swiss health insurance companies that offer an enormous menu of services. In Massachusetts, a state about the same size as Switzerland, there are five such companies.

A Swiss model for the USA might even be great for us.  No, it doesn’t follow free market principles strictly, but that’s not possible with healthcare — or, at least, in the USA we’ve made a decision as a society that we will not let the market alone decide whether people get medical care.  I think that’s proper and humane, but regardless of how one feels about it, that’s the decision we’ve made.   Switzerland has made the same decision, but has insisted on competiton among insurance companies, individual involvement in choosing insurance, and transparency of cost — all core free-market principles.

Here’s a little more about the Swiss system.  And more here.

I’d like to see more thinking along these lines instead of the clunky socialized medicine ideas the Democrats are coming up with.  They seem to be asking, “How can we copy the British National Health Service without going all the way to a single-payer system?”  Not a very creative approach.

UPDATE: Meanwhile, Senator Max Baucus claims it’s “too difficult” to put his proposed healthcare bill online so citizens can review it:

A proposal by Sen. Jim Bunning, R-Ky., that would have required the Senate Finance Committee to post the final language of the $900 billion health care reform bill, as well as a Congressional Budget Office cost analysis, on the committee’s website for 72 hours prior to a vote was rejected 12-11.

Too difficult. Yeah, right.

Posted in Health Care Reform, Lowell, TN Blog | 2 Comments » | |

Recently:

• Nancy Pelosi: Fraying Around The Edges
• Democrats Flying Blind
• The Health Care Summit: Rep. Paul Ryan on Obamacare
• Be Careful At The Gas Pump!
• Toyota’s Mistake Wasn’t…..Human