US healthcare reform looks to the Swiss

Keystone

As Americans prepare for major surgery on an ailing health-care establishment, lawmakers and pundits say elements of the Swiss system could provide the tools.

With the world’s only democratic, consumer-driven market and the right to choose from a vast array of providers, Switzerland’s healthcare system strikes chords that are pleasing in the United States.

“The mix that Switzerland represents between private enterprise and general state regulations that make health care accessible to everyone is really an interesting example for the US,” said Felix Gutzwiller, a Radical Party senator and head of Zurich University’s department of public health.

Americans currently spend more than any other country on health care, about 16 per cent of gross domestic product – the same as the economic output of France. Switzerland spends 11 per cent of its GDP on health care, second only to the US.

But whereas nearly 50 million people in the US have no health insurance at all, the Swiss have quality, universal coverage, while spending 40 per cent less than Americans, a savings of $1 trillion (SFr1.06 trillion) a year.

20-80 rule

The question of how best to overhaul the US system is largely one of economics.

Although Switzerland struggles with bloated hospital subsidies and few incentives for doctors, Regina Herzlinger, a Harvard Business School professor, studied the Swiss system for her book, Who Killed Health Care. She says the Swiss health system is an excellent model for the US.

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?”

In developed countries, 20 per cent of the population generates roughly 80 per cent of the health care costs. Mandatory coverage is key. When everyone pays, the healthy can subsidise the chronically ill. When they don’t, the system collapses. Consumers still have the right to buy coverage that is best for them.

Subsidies

To make insurance affordable, Herzlinger says US employers should not deduct healthcare premiums from salaries but give that money to workers tax free to buy private coverage. Subsidies are still necessary.

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.”

Of course, to make a good decision, consumers need information about quality and prices of healthcare providers and insurers. In Switzerland, groups like Comparis.ch give consumers easy access to comparative data. That is not always the case in the US.

“I have very little information about the people who give me health care,” Herzlinger said. “I know more about the tea I’m drinking than I would about a surgeon.”

Competitive health

Health insurance companies also need dusting off. In Switzerland, administrative costs consume on average five per cent of health insurance revenue. In the US it’s closer to 20 per cent.

More importantly, high 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.

To ensure equal access, the government must step into an otherwise free-market scenario. In Switzerland, federal regulators determine what services a health insurance company must cover. Premiums are based on a person’s age and residence. No one can be turned away or suffer high rates because of illness.

But an 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.

“Switzerland is right in the middle between what the US has now and more state-driven systems like in Britain,” Gutzwiller said.

“We might not be as efficient as we could be but the basic lesson here is that you develop a system with regulatory framework and not just based on employment status.”

Tim Neville, swissinfo.ch

In brief

The average American supermarket has 42,000 different products, but most Americans have one health insurance company to choose from – the one their employer picks.

The average American family spends $17,000 a year on health insurance. Most families in the US have a yearly income of less than $73,000.

One of the most rapidly expanding groups of uninsured Americas makes more than $75,000 a year.

US Health Care Reform

United States President Barack Obama has instructed Congress to come up with proposals on how to overhaul the struggling system in the US, where premiums have grown three times as fast as wages since 2000.

Medical costs are the number one reason for personal bankruptcy in the US. Benefits have decreased for many as costs have climbed. Since 2000 premiums have almost doubled.

At the current rate, health care costs will consume more than 20 per cent of the US gross domestic product by 2018. That is more than the entire economic output of France.

US officials have been interested in visiting Switzerland to study its health care system for many years now.

“Foreign delegations are interested above all in questions about cost control,” said Sabina Helfer, a spokeswoman from the Federal Health Office in Bern.

Swiss Health Care Reform

According to the European Observatory on Health Care Systems, formalised health insurance began in Switzerland as early as 1899, but the system, based on Germany’s, was rejected at the poll.

A new proposal passed by referendum in 1911. To qualify for federal money, “health funds” had to provide a set list of benefits and allow consumers to change plans. Cantons could decide whether to make insurance compulsory. Many funds collapsed after miscalculating demand.

Partial reforms came in 1958, followed in 1964 with measures that bolstered federal subsidies. Rates continued to increase and in 1987 legislators introduced reforms to control costs. The measure failed.

On March 18, 1994, the Swiss voted in favour of more reforms that contained costs. Another round of reforms will go into effect in 2012 that are designed to make hospitals more dynamic by restructuring subsidies and requiring providers to publish quality indicators.