Lessons from Abroad: The Dutch Health Care System, Part 1

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In a new series on The Commonwealth Fund Blog, Jonathan Cohn, senior editor at the New Republic and the author of Sick: The Untold Story of America's Health Care Crisis—and the People Who Pay the Price, will explore the health care systems of four countries: the Netherlands, France, the United Kingdom, and Germany. With Commonwealth Fund support, Cohn traveled to these nations to explore how their health care systems manage to achieve universal coverage at a fraction of what the United States spends, as well as high quality of care, and higher rates of public support. Below is the first installment of a two-part blog post on health care in the Netherlands.

More than a year after enactment of the Patient Protection and Affordable Care Act (Affordable Care Act), polls suggest the average American remains confused about what the law will do. And judging by the tenor of political debate, even experts still disagree over exactly how it will reshape U.S. health care. One place to look for guidance is overseas, starting with the Netherlands.

Of all the countries in Europe and, perhaps, the world, the Dutch health care system most closely resembles what architects of the Affordable Care Act hope to create for the U.S. The primary source of coverage for individuals in the Netherlands is private insurance, made available to all people, regardless of preexisting medical condition, through a highly regulated marketplace. In order to avoid adverse selection and promote universal coverage, the Netherlands has an individual mandate—a requirement that each person obtain insurance. In order to make that mandate work, and prevent hardship on people of lesser economic means, the Dutch government makes available subsidies on a sliding economic scale.

Like the Americans, the Dutch reorganized their health care system relatively recently—in 2006, when the government abandoned a prior system that combined a mandatory, government-run insurance program for lower income groups (about two-thirds of the population) with private insurance for everybody else. And, as in the U.S., a major goal of the restructuring was to create a market in which consumer pressure forced insurers to compete for business, promoting better quality at lower costs. These similarities are not entirely coincidental. American public officials, health industry leaders, and scholars made frequent visits to the Netherlands in the run-up to the debate over U.S. health care reform, borrowing ideas and, on occasion, citing the Dutch system as a model for what the U.S. might achieve.

The Dutch system is worthy of such attention: It provides virtually everybody with high-quality and convenient medical care, and at a much cheaper price than the U.S. system—per capita health spending in the Netherlands in 2009 was only $4,914, compared with $7,960 in the U.S. As Americans move from debating health care reform to implementing it, they would be wise to keep studying the Dutch system. But Americans should pay close attention to what the Dutch have done—and, more important, what they haven't done. Although the 2006 reforms expanded the role of market forces in health care, at least by European standards, it's not as if the Dutch have abandoned the basic principles of social insurance or been content to let the free market run amok. On the contrary, government in the Netherlands continues to play a central role in health care, both as financier and regulator. Recreating something that achieves the strong record of Dutch health care in the U.S. would likely require expanding government's reach into health care, even beyond the expansion under way as part of the Affordable Care Act.

In the Dutch system, buying insurance is similar to the experience of getting coverage through a large employer in the U.S. Every January, residents of the Netherlands get to choose from a menu of private insurance options. But the Dutch government regulates what those insurance options look like, much as the U.S. government will be doing once the Affordable Care Act is fully in place. All insurance policies include a package of basic benefits that includes most medically necessary services. They are available to all people, regardless of preexisting medical condition, and the premiums for each plan cannot vary from person to person. In order to promote more cost-consciousness by individuals, the Dutch system requires that all insurers impose at least some out-of-pocket expenses. But the maximum cost sharing is just $250 a year in U.S. dollars.

Premiums for insurance plans actually have two components. There is, first, a flat-rate or "nominal" premium. The government requires that everybody pay this, in part to enforce a sense of shared responsibility. In 2007, the annual premium was, on average, around 1,000 euros (US$1,400) per person. But the government also provides tax credits, on a sliding scale pegged to income, offsetting part or (in some cases) all of the premiums for people who would struggle to pay the bills on their own. The latest government data suggest that around 60 percent of the population receives at least some financial assistance with their premiums.

Those nominal premiums cover only half the cost of coverage. Government provides the rest through what's known as "risk-adjusted premiums," which are funded—in turn—by payroll taxes that vary by income. (That's true on the individual level, as well; the typical Dutch resident pays as much in payroll taxes for health care as he or she does in nominal premiums, thanks to the subsidies.) But the government varies these payments to insurers slightly, in order to adjust for the fact that certain insurers may attract beneficiaries of unequal medical need.

This "risk-adjustment" system works as follows: Insurers that end up enrolling more patients with severe medical needs will get more money to cover the additional services they require, while insurers that end up enrolling more patients in relatively good health will get less. This effort not only stabilizes the income of insurers, it also deters insurers from "cherry-picking" the healthiest, and thus cheapest to insure, beneficiaries, which has been a major problem in the relatively unregulated insurance market of the U.S. Segregation of beneficiaries by risk level has also been a problem in Switzerland, which—like the Netherlands—operates a system of competing private insurers but does not have aggressive risk adjustment mechanisms. Experts routinely cite the Dutch risk-adjustment system as among the most effective of its kind, anywhere, although the Dutch officials are constantly fine-tuning it.

Insurers are free to offer additional benefits, in the form of supplemental coverage. Typically these benefits include extra coverage for services like routine vision care, which basic insurance covers only partly. The government does not regulate supplemental benefits with the same vigor. Insurers can vary rates and offerings based on medical conditions, within certain limits. This has raised some equity concerns, but the annual health insurance market reviews since 2006 didn't show any serious problems.

The government still handles long-term care—including home care, long-term rehabilitation, and care for the disabled—through a distinct public insurance program. The government finances this insurance through a separate stream of tax revenues, imposing an additional tax roughly on a par with the nominal premiums. In 2007, median individual contributions toward long-term insurance were just a shade under 1,000 euros (US$1,400).

So what are the results? Health insurance in the Netherlands is nearly universal: Just 1.5 percent of people are uninsured, all of them eligible for coverage the moment they step into a physician practice or hospital. And, no less important, health care in the Netherlands remains affordable. Even today, the Dutch have some of the lowest out-of-pocket payments of people anywhere in the world. In a 2008 Commonwealth Fund survey of people with chronic illness, just 8 percent of Dutch respondents reported out-of-pocket expenses greater than $1,000 and only 5 percent said there was a time in the previous 12 months when they could afford health care "only with great difficulty or not at all." The contrast to the U.S. is striking: 41 percent of American respondents reported out-of-pocket expenses of more than $1,000 and 19 percent reported trouble getting care. In addition to being more affordable, Dutch adults in 2009 reported fewer hassles with their insurance—8 percent said in the past year they spent a lot of time on paperwork and 15 percent said their insurance did not pay as much as they expected, compared with 17 percent and 25 percent in the U.S., respectively.

At the same time, statistics suggest that health care in the Netherlands is generally convenient, timely, and of high quality. Relative to their American counterparts, the Dutch have an easier time getting both primary care and urgent care: In the Commonwealth Fund's 2008 survey, 60 percent of Dutch respondents were able to get same-day appointments—highest among the nations surveyed—compared with just 30 percent of Americans. And while nearly two-thirds of Americans had difficulty getting after-hours care outside of emergency rooms, only half as many Dutch had similar troubles—a rate that was, once again, best for the countries surveyed.

The Dutch have also paid specific attention to improving access to urgent care, a problem that has plagued most developed countries (including the U.S.). The result, developed by the government in partnership with medical societies, is a nearly seamless web of urgent care centers. These centers, staffed by physicians and nurse practitioners, provide both telephone consultations and walk-in care to people who need medical attention outside of regular office hours but don't need the intensive treatment of an emergency room. Most of the centers have drivers, so that physicians can make house calls to patients unable to travel. The establishment of these centers is, most likely, one reason why chronically ill patients in the Netherlands report easier access to after-hours care than counterparts in other countries.

The Dutch, like many Europeans, tend to wait longer for specialist care than Americans: A quarter of Dutch respondents to the survey of patients with chronic illness had to wait more than two months for an appointment, while only 10 percent of Americans said the same. But 69 percent of Dutch respondents saw a specialist within four weeks, just a shade less than the 74 percent of Americans who did.

In my next blog post, I'll examine the impact the reforms have had on quality and health outcomes, as well as efforts to encourage insurers to compete on quality as well as costs.

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