Compulsory medical insurance with a twist: Plans play a crucial role
Robert Royce, PhD
LONDON — Where can you find a health system with universal coverage via compulsory insurance purchased through individual insurers, not from governmental agencies, that delivers world-class services yet has a relatively low level of health care directly funded by taxation and high levels of patient satisfaction despite a high level of copayments?
The answer is Switzerland, a country whose health system can paradoxically delight both free marketers and socialists — providing they ignore the features of that system that do not fit into their conventional notions of what a consumer-directed or a social-solidarity-based health system should look like. Swiss health care defies such easy characterization.
Mandatory insurance is a highly contentious subject in America, which sets it apart from much of Europe, where essentially a social consensus exists that all citizens should be provided with at least basic coverage. What that coverage consists of, and how it is delivered, does of course vary between states. Switzerland fits into the European mainstream on this issue, but it has a distinct way of delivering such coverage, and it is likely to appeal to many Americans.
There is no government-run health insurance plan, although both the national government and the cantons do provide premium subsidies for low-income citizens. Switzerland, with a population of about 7.8 million, is a federation of 26 cantons, which have a level of autonomy somewhat akin to U.S. states.
Everyone is required to have health insurance. Parents also have to buy coverage for their children, although the premiums for children are much lower than those for adults.
There are few citizens of any developed country who wouldn’t be delighted to receive the range and standard of services available to Switzerland’s poorest citizens.
Subsidies are available — up to 100% for the poorest citizens. You can choose a basic package with different deductibles and premiums from products offered by the 80+ private health insurers that operate in Switzerland.
Those insurers must offer the basic package and they must charge all customers the same premium for that policy, regardless of age and health status. Insurers cannot earn profit on the basic benefit package but can do so by selling supplementary insurance policies, which are risk-adjusted. They also look to take advantage of the inadequacy of the current risk equalization mechanism that tries to ensure that those who end up with higher-risk patients on the basic package aren’t penalized.
Somewhat surprisingly, as the basic package is very generous by most countries’ standards, about 70% of the population has some form of supplementary insurance. This consists mainly of items such as private hospital rooms, dental coverage, and ensuring coverage for drugs and services (rehabilitation, for example) that are excluded under the basic package.
On pharmaceuticals there is a “positive” list (a formulary) of drugs that are covered within the basic package. Every item on this list is covered by every health insurer for anywhere in Switzerland. Drugs are also subject to copayments. Choosing a brand-name drug for which a generic substitute is available can result in a coinsurance payment of 20% of the cost of the more expensive drug unless the physician has expressly prescribed the brand name.
Switzerland has a higher level of out-of-pocket (OOP) expenditure than most countries — about 28% of Swiss health spending — and lower direct government funding. Insurance premiums cover about one third of Swiss health care costs, with taxes and OOP each contributing a third.
Everyone must have a minimum deductible of 300 Swiss francs (about $330) with a maximum deductible of 2,500 Swiss francs (about $2,350). Once the deductible for the policy the individual has chosen is met, there is 10% coinsurance for services up to a maximum of 700 Francs ($770) a year. Finally there is a copayment of just 10 francs ($11) a day for most inpatient care.
There is not much evidence that these levels of coinsurance curb demand for health care in Switzerland at a macro level, given that the country’s health care expenditure was 11.3% of GDP in 2012, set against an OECD (Organization for Economic Co-operation and Development) average of 9.3%, and it has one of the highest average lengths of stay (ALOS) and numbers of doctors, beds and high-technology equipment such as MRIs in Europe (Health at a Glance 2013 OECD Indicators (http://bit.ly/oecd-glance)).
Of course, 11.3% looks very reasonable compared with the United States’ 17.6%, whilst a study by Felder and Werblow (Swiss Social Health Insurance: Copayments Work; http://bit.ly/dice-03) concluded that the roughly 40% of the population that chooses high-deductible plans have a markedly lower rate of health care usage than the 60% who choose the minimum. So, as with so much else in the Swiss health care system, there are features to encourage whatever is your preferred mechanism for health reform.
If you favor the use of the private sector to deliver insurance, you can point to the free choice among a large number of insurers, the high quality of care available to all, and the lack of government-set payments for providers. However, one would also have to acknowledge that of the 80+ insurers, six account for 80% of the market, that insurers are basically just the payers of bills, and that there is little health outcome or quality information available on the Swiss health system.
In that sense, it is not acting like the American consumer-directed health system because consumers have little information on the quality of care that is being provided and no opportunity to choose providers based on price/quality. Moreover, despite sizeable differences in premium costs between insurance products, few people switch insurers.
The premiums vary considerably among the cantons. Each canton is effectively a discrete market. People are not allowed to shop between cantons for insurance, and this appears to reflect both the desirability of the canton as a place of residence and work and also the relative density of health care providers. In 2000, the Geneva canton had an average premium that was 2.5 times that of Appenzell Innerrhoden canton.
These differences remain essentially undisturbed over time, as do the premium price differentials within cantons. Price setting in Switzerland has been described by Uwe Reinhardt, PhD (“The Swiss Health System: Regulated Competition Without Managed Care”; JAMA. 2004;292(10):1227–1231. doi:10.1001/jama.292.10.1227) as “… a de facto cartel of insurers and health care practitioners who transact with one another in a tight web of government regulations.” This method of working is quite common in Europe, but it hardly appeals to market purists.
What accounts for this apparent apathy? Innate conservatism as a national characteristic? The fact that subsidies for the poorer section of the population and the indifference to cost of the richest mean only a minority truly have an incentive to switch? The fact that there are so many plans to choose from and the confusion this can cause?
No easy label
So this is a system that defies an easy label and has a number of notable flaws. It is a complicated regulatory environment and will not win any competitions for efficiency. However, there are few citizens of any developed country who wouldn’t be delighted to receive the range and standard of services available to Switzerland’s poorest citizens.
As this is delivered by a country that many consider the epitome of capitalism, this should give ideologues of all persuasions pause for thought.
Robert Royce, PhD, is European correspondent for Managed Care and an independent health care consultant.