Swiss Healthcare System - a "Free Market" Option

Swiss health-care system might serve as model for U.S.

By The Dallas Morning News Sunday, February 26, 2006

BERN, Switzerland -- Karl Zbinden's hospital room overlooked the snowy banks of the Aare River on a bleak January afternoon. The gaunt, 53-year-old biologist was in bed with pancreatitis, a serious condition that emerged after a kidney transplant.
Like all Swiss citizens, Zbinden has health insurance. And, like all Swiss, he pays for it himself with no help from his employer.

An American in his situation might face tens of thousands of dollars in expenses. But under the Swiss health-care system, individuals pay about a third less on health care than the average American, in part because of government-enforced price controls.
President Bush is pushing for health care reforms based on individual choice. The Swiss system offers some of those choices, and some health economists say their system works better.

"I think we're going to get there soon, not eventually," said Regina Herzlinger, a Harvard Business School professor who's studied the Swiss system. "The major reason is, most people agree that employer support for health insurance is just not going to continue."

Every resident of Switzerland is required to buy health insurance. If they don't, they pay stiff monetary penalties. Companies have no role. Health-care plans are chosen at the kitchen table, not through employee benefit departments.
And the plans can be costly. A family of four in Switzerland pays an average of $680 a month in premiums. Government assistance helps pay premiums for those less well off.

Health-care prices are set each year after negotiations between insurance companies and medical providers. The fee schedule has to be approved by the Swiss canton (or state) governments -- an approach Uwe Reinhardt of Princeton University compares to the doomed health-reform plan drafted by the Clinton administration.
Drug costs also are subject to price ceilings, but they still seem fairly expensive, at least in the minds of Swiss consumers.

"Within Europe, we are almost the only country left with a strong drug company sector," said Swiss congressman Felix Gutzwiller, a medical doctor who also heads the University of Zurich Institute for Social and Preventive Medicine.
"The public has a very peculiar attitude about that. They want a high level of innovation, but there is a permanent discussion about the cost of medications."
The Swiss approach insures everyone while eliminating the headaches and costs of health care for companies sensitive to global competition.
"People in Switzerland realize what these costs do to American business, and they don't want to add to the anti-competitive burden of Swiss businesses in the global economy," Gutzwiller said.

"Also, people do not want employers to get so much into their private life and lifestyle."

The Swiss think the quality of their medical care is among the best in the world. They spend more of their national income on health care, at 11.5 percent, than anyone except Americans, who spend 16 percent.

The Swiss have the freedom to see any doctor in their canton, and they don't have long waits. And Swiss health-care providers have much less paperwork than their U.S. counterparts.

In 2003, Switzerland spent an average of $3,781 per person on health care. The United States spent $5,635 per person, according to an October report of the Organization for Economic Cooperation and Development.

Herzlinger said consumer choice accounts for Switzerland's lower costs.
Bush and market-oriented health economists are all for consumer choice. They're urging Americans to start health savings accounts and buy high-deductible health care plans. Bush gave those ideas another push in his State of the Union Address. Critics call it health-care rationing by income, where only the wealthy have health savings accounts big enough to cover medical expenses.

While everyone in Switzerland is obliged to buy insurance, the 87 Swiss health insurance companies also have to offer a basic health-care plan priced without regard to risk.

The companies can't make a profit on this basic plan, and they compete for profits by offering high or low deductibles and supplemental benefits. A healthy 24-year-old living in Bern pays the same premium as someone like Zbinden (300 Swiss francs a month, or about $242).

Swiss insurers charge a premium for each family member. Children have a lower premium than adults, but for a family of four, insurance premiums for the basic coverage plan are about $8,167 a year. An American family with employer-provided health insurance pays an average of $2,713 a year in premiums, according to a survey by the Kaiser Family Foundation.

Deductibles and co-pays are comparable to those paid in the United States.
Swiss cantons subsidize health insurance premiums based on income. With premiums climbing an average of 5 percent a year over the last decade, subsidies now go to nearly a third of Switzerland's 7.5 million residents.

Swiss health insurance premiums are lower than the U.S. average when employers' costs are added, according to the Kaiser Family Foundation survey. For an American family of four, employers contribute an average of $8,167, for a total of $10,880 a year. That's up 73 percent since 2000, according to the Kaiser survey.

And fewer American companies are offering health insurance. In 2000, 69 percent of workers got health insurance as a benefit. In 2004, that dropped to 60 percent.
Small companies in particular are finding the costs too high, and the number of uninsured Americans is climbing, said Drew Altman, chief executive and president of the Kaiser Family Foundation. More than 46 million Americans have no health insurance.

"Americans have a clear sense of what they are paying out of pocket, and they're really upset about it," he said. "But as health-care premiums have gone up sharply, employers have eaten a significant share."

Devon Harrick, a health economist with the Dallas-based National Center for Policy Analysis, said employers got into the business of paying health insurance premiums when they couldn't compete for workers by offering higher wages.

"The only reason our current system exists the way it does is because of the tax laws in the 1940s. Price controls prohibited wage hikes, but you could attract employees with health insurance," he said. And, unlike payroll, health care benefits are not taxed.
"In the end, employees pay their own health-care costs," Harrick said. "A lot of employees don't understand that's really not a free benefit. It's part of their compensation."

In a consumer-driven health-care system such as Switzerland's, employers freed from health insurance obligations pay higher wages, said Herzlinger.

A health-care system based on choice would, in theory, also give consumers a way to compare the prices charged by doctors and hospitals. Those prices are hard to come by in the United States. But in Switzerland, they are all pretty much the same.

"Price (in the Swiss system) doesn't matter, because it's set by these negotiations," said Reinhardt, a professor of political economy at Princeton's Woodrow Wilson School of Public and International Affairs.

U.S. health care providers fiercely oppose that approach, said Altman.
"Government regulation to control costs of a kind practiced in every other developed country is opposed by our health care providers," he said, "so we are stuck in a bunch of half-measures."

Not all Swiss citizens are happy with the system. They complain that prices are getting too high, that their system encourages patients to stay in hospitals longer than necessary and that the insurance companies, trying to find ways to make money in a regulated market, offer such a bewildering mix of plans that most consumers aren't making informed choices.

"Theoretically, it's consumer-driven. But practically, no," said Gaudenz Silberschmidt, head of the international affairs division of the Swiss Federal Office of Public Health.

The complicated nature of the system is partly the fault of the insurers, he said. "They offer thousands of different premium plans, and when it's that many, it means it's not transparent."

"There is no best health-care system, no gold standard," he said.
There does seem to be a standard for what countries want to avoid, however.
"It's a sad thing, but when I go to international conferences, there's no question the U.S. health system is the bogeyman everywhere," said Reinhardt.
Zbinden's wife, Katharina, says the couple feels fortunate. "We are very grateful to have the Swiss system, even though it's expensive. We could not afford this in the United States."

http://www.pittsburghlive.com/x/pittsburghtrib/s_427691.html