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Forum Analyzes European Approach to Health Care

By Leah Nylen, CQ Staff

April 11, 2008 -- When overhauling the health care system in coming years, Americans should consider European models, a panel of international health experts said Friday.

But U.S. health care system authorities cautioned that the country probably could not adopt European practices wholesale because of differences in government structure and public attitudes.

The event, hosted by the Alliance for Health Reform, featured German and Dutch specialists who outlined how their health systems differ from the United States'.

In Germany, consumers can choose public, or statutory, health insurance or they can select private coverage, according to Reinhard Busse, a professor of medicine at Technishe Universitat Berlin. About 87 percent opt for public coverage, which allows consumers to select from among approximately 250 different "sickness funds."

Both employers and patients contribute money to a general health fund run by the government. The health fund then pays out a flat amount to the sickness fund for each insured person it represents.

According to Busse, most actual health care mechanics are delegated to the sickness funds but the government plays an important role in regulating costs.

"The government is not controlling [the system] but steering it," he said.

Under changes to German law instituted in 2007, both public and private insurers are required to offer at least basic coverage to anyone who applies.

In the Dutch system, all citizens over the age of 18 are required to purchase private insurance, said Wynand PPM van de Ven, a health insurance professor at Erasmus University Rotterdam. Consumers can choose insurers and contracts, and—like in the German system—open enrollment is required of insurers.

Consumers pay a premium to their insurer of choice and also an income-adjusted contribution into the Risk Equalization Fund (REF). The fund then makes payments to insurers to help cover individuals who have higher risk factors, such as chronic diseases.

Although the system incorporates choice, van de Ven emphasized that the government still has a hand in risk equalization and maintaining transparency among insurers.

"It is a not a free market," van de Ven said. "It needs a visible hand to make the invisible hands work well."

Patricia Danzon, an expert in health insurance and risk management at the University of Pennsylvania, emphasized that the United States could learn a great deal from the individual mandate in both models.

"Experience shows that in today's labor market . . . the employee mandate just doesn't bring in everybody," Danzon said. "We need to move away from employment as a basis [for health insurance]."

With an individual mandate, she said, "It's not just the sick people out there looking for coverage."

While the opportunities afforded by the German and Dutch models hold some promise, it would be a mistake to push for wholesale adoption of either, said Stuart Butler of the Heritage Foundation.

"We tend to have 'love at first sight' " with some of the models, Butler said. "But it's important not to do that. It's important to recognize we have different values we have to take into account before applying this to the U.S."

For example, Butler noted that while there is a mandatory auto insurance requirement in the United States, only about 80 percent of U.S. drivers are actually insured.

The U.S. political system is also very different from those in Europe, Butler said, saying federalism could make it difficult to impose a nationalized health system. At the same time, some of the ideas of the European models, such as risk equalization, could work well if applied at the state level.

"The state system is integral to the United States," Butler said. "But it allows us to experiment in a way we can't at the national level."

Danzon agreed that some of the changes could not work in the United States, citing cost regulation mechanisms used in Germany and the Netherlands that might violate American anti-trust laws. She also did not recommend their prescription model, which relies on reference pricing and, in her view, could undermine innovation at pharmaceutical companies.

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