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European Health Care--No Longer an Epithet?

By John Reichard, CQ HealthBeat Editor

October 31, 2007 -- With Michael Moore's documentary "Sicko" as the impetus, much of this year's media buzz about universal health care coverage focused at first on government-run systems in other countries as models for change. As the months have gone by, however, presidential hopefuls have weighed in with plans they say are more oriented to the United States and the major role the private sector plays domestically in health care delivery. At a press briefing Wednesday, U.S. insurance industry officials sought to sharpen that focus on private sector approaches, insisting they favor universal coverage while pointing to European countries that require citizens to buy private coverage as potential overhaul models.

Shifting the focus back to Europe may seem ironic given the scorn heaped on the British health care and Canadian systems by many conservative politicians and business executives in the United States. But George Halvorson, CEO of Kaiser Permanente, one of America's largest health plans, said "it makes a huge amount of sense for us to understand what is going on in Europe."

There is a misconception that European health care in general is like Canadian and British government-run systems, when in fact countries like the Netherlands and Switzerland center their systems of universal coverage on the private sector, he said.

"In the U.S. there is a confusion between 'universal coverage' and 'government-run,' " noted Karen Ignagni, president of American's Health Insurance Plans (AHIP), which sponsored the briefing along with Kaiser. AHIP opposes single-payer government-run systems, but "we are fully committed to the concept of universal coverage," Ignagni said.

AHIP and Kaiser Permanente said their aim is not to endorse a particular system, but they flew in insurance executives from Switzerland and the Netherlands to talk Wednesday about the approach taken by those two countries. With a growing number of U.S. proposals focusing on mandates that individuals buy private coverage as well as relying on government subsidies to lower the cost in some cases, the two countries seem particularly apt.

Daniel H. Schmutz, chief financial officer of Helsana, Switzerland's largest health insurer, said each resident of the country is required to buy a basic package of private health insurance. The Swiss system is funded by individual premiums and tax revenue, with the government subsidizing the premium costs of lower-income individuals. Residents choose from among the offerings of 90 insurers, with varying levels of deductibles and managed care options resulting in different premium levels for the basic package. On average, a family of four in Switzerland pays the equivalent of 850 U.S. dollars per month for basic coverage, he said, and about 30 percent of the population gets government subsidies to help pay those costs.

Similarly, the Netherlands has switched to a system in which each individual is required to buy private coverage, said Willem van Duin, a board member of Eureko, the corporate parent of the Dutch insurer Achmea. Employers and individuals share premium costs roughly on a 50–50 basis. Individuals who can't afford their premium costs can obtain "health allowances" from the government to help pay their premiums.

The soaring costs of government-run health care drove the Dutch to that system in 2006. Before 2006, two-thirds of Dutch residents were enrolled in government health insurance programs, and one-third had private coverage. But "cost explosions" led to a sense of urgency about changing the system, Van Duin said. Health costs rose 7.7 percent in the Netherlands in 2000, 10.6 percent in 2001, and 11.9 percent in 2002, he said. Health care consumes about 9.2 percent of the Dutch Gross National Product; estimates were that the percentage would rise to 14 percent in 2040. To help tame those rising costs, the Dutch opted for a private sector-oriented competitive system.

Potential similarities, such as individual mandate and private subsidies to pay for it, between Switzerland and Holland on the one hand and the United States on the other go only so far, of course. Much would have to change in the U.S. system to come in line with those of the two European countries. For example, Dutch and Swiss insurers must take all applicants, unlike U.S. insurers, who now can refuse to take those likely to have high health costs. Another difference is that insurance in the two European countries is "community rated," meaning that healthy and sick alike are in a common pool and generally pay the same premiums, with some adjustments based on age. To help them pay for higher risks, Dutch insurers receive payments from a "Risk Equalization Fund."

Schmutz said the Swiss have a cruder form of risk adjustment that pays insurers more if its makeup of enrollees are relatively elderly.

Another potentially key difference is the willingness of the Dutch and the Swiss to pay individual income, corporate, and other taxes to fund the government subsidies. "In the Netherlands it's fully accepted that you pay income taxes," said Van Duin.

Schmutz said the Swiss are just as tax averse as Americans, but added that they are willing to pay for health care. Both executives emphasized the importance as well of "consensus" as the foundation of a system of universal coverage based on private insurance. A split electorate wouldn't allow such a system, Schmutz suggested. "I think we would have a very difficult time in Switzerland if we had a 51 to 49 situation," he said.

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