This post was written by Maggie Mahar and Niko Karvounis
Every now and then HealthBeat takes a look at health care systems in other countries So far we’ve tackled Germany and China. Next on our list was the Netherlands, but it turns out Health Affairs beat us to the punch. In May, Wynand van de Ven and Frederik T. Schut, two professors at Erasmus University in Rotterdam, authored an excellent profile of the Dutch health care.
Why should we care how they deliver health care in a tiny country most of us will never visit? Few European health care systems have garnered the kind of attention from Americans that the Dutch system has received.—especially from folks not known for their Euro-philia, including the Bush Administration. In the fall, the White House sent a delegation to the Netherlands to learn more about the Dutch system. The Wall Street Journal also has praised the Dutch system for accomplishing “what many in the U.S. hunger to achieve: health insurance for everyone, coupled with a tighter lid on costs.”
What could make conservatives entertain the possibility that we might learn from Europeans? Under the Health Insurance Act of 2006, the Dutch have created a system of universal coverage delivered entirely through private insurers. In this, the Dutch plan is very much like the plan Dr. Ezekiel Emanuel proposes for the U.S. in his new book Healthcare, Guaranteed. (We wrote about Emanuel’s plan here and here), calling it a “fresh” proposal for reform.)
Consumers Have Choices
For those Americans uncomfortable with the idea of “Big Government” delivering their health care, the Dutch model is appealing. And Americans are bound to like the idea that consumers have many choices: according to the Commonwealth Fund, there are 14 private insurance companies in the Netherlands and several related subsidiaries. This means that individuals can shop for insurance—a process made all the easier by a Dutch government web site “where consumers can compare all insurers with respect to price, services, consumer satisfaction, and supplemental insurance, and compare hospitals on different sets of performance indicators.” Thus, much to the delight of consumer-minded health care reformers, the Netherlands has essentially institutionalized comparison shopping.
Individuals also have the option of paying extra to beef up their benefits package. Van de Ven and Schut note that the Dutch can buy “supplementary insurance for benefits that are not included in the mandatory basic insurance, such as dental care for adults, physiotherapy, eyeglasses, alternative medicine, and cosmetic surgery.” More than 90 percent of the Dutch population takes advantage of this option –which suggests that the supplementary insurance is not too expensive for the vast majority of the population. Van de Ven and Schut tell us that “most people [purchase their supplementary insurance] from the same insurer that provides their basic coverage.”
Insurers Must Take All Applicants: Individuals Must Buy Insurance
But it would be wrong to say that the Dutch health care system is
some sort of conservative utopia where the invisible hand of the market
reigns. Just as in Dr. Emanuel’s plan, insurers operate under many
regulations and restrictions. Most importantly, “they are
legally obliged to accept each applicant for basic insurance” and they
cannot charge someone more because of pre-existing conditions.
In the U.S., by contrast, if you don’t have employer-based coverage and
must buy your own coverage, insurers can charge you more based on your
medical history and risk profile. And in most states, if they consider
you too risky, they can simply refuse to sell you insurance altogether.
Because Dutch insurers must take all applicants, the government
“obliges each person who legally lives or works in [the Netherlands] to
buy individual private health insurance.” If the government
didn’t insist that everyone buy insurance, many people would wait
until they were sick before they applied—safe in the knowledge that the
insurer would have to take them, and cannot hike the premium. (This why
any system that won’t let insurers discriminate against the sick must
include a “mandate.”) The government also lays out what must be
included in the basic benefit package: physicians’ services, hospital
care, medications, physiotherapy and dental treatment for children.
Under the Health Care Act of 2006, the Dutch are now paying about €1,100 (roughly US $1,600) per adult for basic coverage.
(There is no premium for children under 18.) Every adult also has a
deductible of €150 per year which excludes GP services and maternity
care. Depending on their income, Dutch citizens may receive a subsidy
from the government to help cover their premium. Today, about
two-thirds of Dutch households receive such a subsidy, with the poorest
receiving as much as 1,464 (in 2008; about US$2,200) per household per
year.
Because insurers cannot charge sick customers higher premiums, the government pays companies that wind up with a large number of “high-risk individuals” a risk equalization fee
from the aptly named Risk Equalization Fund (REF). (Again, this is very
similar to Emanuel’s plan which also compensates insurers who end up
with a disproportionate share of sick or elderly customers.) Dutch
citizens fund the REF by paying a 7.2 percent tax on the first €31,200
of their annual income. But employers are legally obliged to compensate
their employees for these income-related contributions.
Will It Work?
Universal coverage, non-discriminatory premiums, and a focus on
affordability—it all adds up to an extremely equitable system. Little
wonder, then that many in the U.S. have shown interest in the Dutch
model.
But make no mistake, the Dutch system is still, as van de Ven and
Schut point out, very much “a work in progress.” One big question mark:
how do you enforce the mandate that everyone buy insurance?
The authors note that “although all Dutch citizens are legally obliged
to buy basic health insurance coverage, in 2006 about 1.5 percent
failed to do so.” The penalty for not having insurance is “130 percent
of the premium over the period of not being insured, with a maximum of
five years.” To enforce this penalty, the Dutch government compares
insurance files with civil registration files to see who is missing.
Then, “after identification, the uninsured will receive a warning
notice. If they persist in being uninsured, a last-resort option is
that some public authority will enroll them as insured with some
insurer.”
Emanuel’s plan avoids this problem by simply giving every U.S. citizen
a voucher that entitles them to insurance. No one has to buy insurance.
(The voucher is funded by a VAT tax on all purchases.)
Another potential worry is that some people with insurance won’t pay
their bills. In a system where insurers can’t refuse anyone coverage,
they also can’t refuse deadbeats with a history of defaulting on their
premiums. If I don’t pay my health care premium, my insurer can cancel
my contract and bar me from enrollment in their plans for the next five
years; but the next insurer I apply to can’t turn me away for my
behavior. By law, it has to accept me—which means folks can
systematically take insurance companies for a ride, if they’re so
inclined.
According to van de Ven and Schut, “about 1.5 percent of the insured
have not paid any premium in the past six months.” There is some
concern that, as folks realize that they can get a free ride, more will
do so. But right now, this is not a major problem.
More troubling is the possibility that, as the Dutch system grants
private insurers more freedom to compete, (which it plans to do),
insurers will have enough wiggle room to begin cherry-picking the
healthiest patients—just as they do in the U.S.
You might think this is not possible in a system where insurers must offer insurance to everyone. But there are loopholes. Although
Dutch insurers can’t reject risky individuals or charge them more for
basic insurance, when it comes to supplementary insurance they can turn
away customers, or boost premiums based on the applicant’s medical
history.
That means that, while everyone may have basic insurance, the
supplementary insurance market can break down along lines of
healthy/unhealthy, as insurers offer discounts to less expensive (i.e.
healthier) policy holders.(Dutch citizens are allowed to organize
themselves into groups and negotiate for lower prices. The discounts
that insurers can offer healthy groups are relatively open-ended).
The Health Insurance Act also gives private insurers more freedom to
negotiate contracts with health care providers. Today the government
still regulates most prices, but over time, it plans to ease up and
allow a more open market where insurers have more power to negotiate
with service providers.
The hope is that in a more open market, insurers will have the freedom
to make” smart purchases” by choosing doctors who provide
high-quality, cost-effective, and affordable care. Then they’ll turn around and offer a similarly good deal to policyholders—a win/win situation for everyone.
But it’s not yet clear that private insurers will actually do this. An
open insurance market is uncharted territory in the Netherlands, so no
one knows just how ‘smart’ insurers will be in their purchases. In
theory, competition will keep them honest, because ‘dumb’
purchases—contracts with poor providers who are too expensive—will
translate into a bad deal for consumers. As a result, individuals will
jump ship to competitors.
Yet individuals don’t always know whether they are receiving
high-quality care. They know whether they like their physician—and
whether she keeps them waiting. But, how do you know if your doctor has
failed to notice symptoms that suggest you are a candidate for a major
heart attack?
Meanwhile the system is designed to lead to mergers; ultimately,
observers say, a handful of players will control the market. At that
point, they may feel less pressure to make sure that they are
delivering high quality care. Rather than competing on quality, they
may begin to compete on price.
Already, competition between insurers has led to a “premium war,” with insurance companies reducing
their premiums to attract customers. The result in 2006 was a total
loss of €563 million (2 percent of revenues) in 2006. In other words,
competition is leading to losses —which affects the capacity of an
insurer to survive. Meanwhile, individuals looking for a better deal
keep switching plans: in 2006, an all-time high of 18 percent of the
Dutch population switched insurers.
This may sound like competition is working—and in a way, it is. But
the early stages of competition in a new market have a way of thinning
the herd—and as insurers see their profits and customer base erode,
their number will decrease. Already, insurers have begun to
merge with their competitors to survive. As a result, about 90 percent
of the Dutch population is insured by six large insurers, while the
other 10 percent is insured by seven smaller, regional insurers.
As the Dutch insurer market consolidates, the incentive structure for insurers will change: the fewer competitors a company has, the less pressure it feels to make smart choices that benefit its customers.
As Niek Klazinga, professor of social medicine at the University of
Amsterdam, told the Wall Street Journal in the fall, "if eventually you
have only three or five insurers, you might wonder how many market
incentives will remain.”
The question must be asked: at what point does the market become
so consolidated that the logic of the Dutch system—competition forces
smart insurance purchases which translate into quality coverage for
citizens—breaks down? No one really knows.
As health care reform continues to be a hot-button issue in the
American political conversations, it will be worth keeping an eye on
the Netherlands as a point of reference.
The most obvious way to be sure that mandatory insurance is actually purchased by everyone is to combine that payment with the income tax that everyone pays. Of course a small percentage of people don’t have to pay income tax, because they don’t earn enough. But, those people couldn’t buy the insurance anyway.
But, wait! If you combine the mandatory purchase of health insurance with the income tax, you are in reality just increasing the income tax being charged, and if you do that, why would you then turn over that tax money to private insurance companies? And, that leads us back to the single payer system, where we should be in the first place.
I don’t see any discussion of cost containment for treatment. A follow up article on the quality of care and all the other issues (besides insurance) that are claimed to make US health care expensive is needed to get a full picture.
Robert–
Quality in the Dutch system is very good–one reason why the Bush administratoin, the WSJ etc are so interested in it.
This from a recent NEJM article:
It is still too early to draw definitive conclusions about the effects of the reform of the Dutch health care system, which was implemented in 2006. But physicians and patients are now living under the new system, and some of its consequences are becoming clear.
Primary care has been at the center of Dutch health care practice for a long time. All citizens are registered with a general practitioner, who provides generalist and continuous medical care and deals with more than 95% of health problems. Specialist consultations are covered by insurance only after referral. (This contains costs–mm).
Although the Dutch system provided high-quality care at relatively low cost, many believed that the insurance system offered too little choice. (On high quality at a low cost, the NEJM article footnotes a Lancet article.
The high quality of the Dutch system, like the high quality of care in Scandanavian countries has been well-documented for quite a long time. We just haven’t heard much about it because Americans prefer to think that “we have the best healthcare in the world” and really don’t want to hear about systems with better outcome.)
The article continues: “Providers, who had essentially been guaranteed contracts with health insurers under the old system, now must negotiate more extensively over price and quality of care. Accordingly, there is increasing competition among both insurers and providers, which is meant to enable consumers to make better choices. . .
Health care providers, for their part, are more challenged by the new system. In their negotiations with insurers, they must now document the quality of care they provide, with reference to evidence-based guidelines and performance indicators . . .
Consumer organizations are participating in negotiations with providers, insurers, and policymakers and are represented on task forces that prepare professional guidelines and performance indicators.
As for the quality of care, it is generally agreed that the basic coverage, the contents of which are determined by the minister of health, is an important safeguard against inconsistency and inequity in essential care for similar health problems. Regarding the criteria for delineating the basic package, experts have recommended an evidence-based approach that considers the burden of illness, the effectiveness of interventions, and cost-effectiveness, guided by the advice of an independent national body of experts and consumers.3,4 This process can be supported by the evidence-based standards of the Dutch College of General Practitioners and clinical guidelines from the Dutch Institute for Healthcare Improvement — both of which also provide a foundation for the performance indicators being developed by professional organizations, the Health Inspectorate, the Ministry of Health . . .http://content.nejm.org/cgi/content/full/357/24/2424
Maggie,
I read the Health Affairs article on the Dutch system when it came out, and I think the Dutch are on the right track. There are a couple of things that don’t quite add up for me which perhaps you could clarify, however.
First, the 7.2% payroll tax that the Dutch pay on the first €31,000 of income is reimbursed by employers, but the reimbursement is subject to the income tax. Moreover, the employer presumably views this as part of the employee’s compensation which suggests that the employee, is, in fact, paying it. If one third of the reimbursement is paid out to the government in income taxes, that’s another 2.4% of income (for those who earn €31,000 Euros or less. On top of that, a two adult household will pay €2,200 Euros in premiums (before subsidies, if applicable) which would be an additional 7% or more of income at the €31,000 wage level. Altogether, that adds up to between 16% and 17% of income for basic health insurance plus whatever the family may spend for supplemental insurance and deductibles even though the Netherlands (and all other Western European countries) spend a significantly lower percentage of GDP on healthcare than the U.S. does. At the same time, GDP per capita in the Netherlands was over $38,000 in 2007 as compared to something over $45,000 in the U.S.
That leads me to question whether all of the comparative spending analyses are based on apples to apples comparisons. I’m struck by the comparatively large percentage of U.S. spending that is accounted for by services other than hospital charges, physician and clinical fees, prescription drugs and devices, and administrative costs. This includes everything from public health initiatives to research, investment in structures and equipment, nursing home care, dental fees, etc. I just don’t have a good sense for what each country includes as part of healthcare spending and how well and completely they account for it.
As for other countries, I know that France has a 13% payroll tax while Germany’s is 14.5%, though both apply only up to a certain point and not to all wages earned by high income people. The bottom line is that people in other countries seem to pay a considerably higher percentage of income than one would expect given the supposedly much lower percentage of GDP that the country overall claims to spend on healthcare. What gives?
Finally, I had a chance to read Ezekiel Emanuel’s book, Healthcare Guaranteed, and I remain skeptical about the amount of money that can be raised by a 10% VAT. I can envision exemptions (or at least much lower rates) applied to necessities like food (purchased in supermarkets), energy, healthcare, financial services, rent and new homes, college tuition, and most government services such as police and elementary and secondary education. People who are engaged in personal services who primarily sell their time will find it comparatively easy to evade the tax. The tax lends itself best to manufactured products which are a smaller and smaller portion of our knowledge and service based economy. Emanuel threw out the 10% VAT idea to finance the vouchers but there was zero discussion of issues like exemptions and other complexities. That all said, there was plenty in the book that I liked.
Maggie:
Kudos to Barry Carol for his thoughts on tax burden.
Perhaps you could shed some light on a couple of questions I have as well.
What is the medical malpractice scenario? Am I correct in recalling that there is a “no-fault” error recording system in which victims of medical misadventure as well as malfeasance are compensated from a dedicated fund? And that furthermore the error data is utilized to conduct root cause analyses to foster downstream prevention?
Did I read correctly that GP services are NOT included in the coverage of the Basic Health Plan? Is this not consistent with a core principle of the consumer-directed health care system that you so loathe?
Finally, with a very direct relationship existing between patient and GP, and with a presumably high level of patient competition to have access to the best GP’s, has any system akin to the “Concierge Medicine” model arisen?
I look forward to your thoughts.
Worth pointing out 3 things
a) the Dutch system is not derived from Emmanuel & Fuch’s model (which by the way was Fuchs’ idea first!) but from Fuch’s Stanford colleague Alain Enthoven. It’s absolutely the same as his consumer choice health model circa 1978
b) early anecdotal indications from the Dutch system suggest that insurers have responded to the incentives by decreasing waiting lists for elective procedures (by buying cheaper surgery on the margin from Spain and France) and also by improving Disease management approaches
c)moving to a Duthc system from a mostly state provided insurance system is MUCH easier than it would be to move there from the wild west insurance market that we have now. Not something you’re hearing much from the WSJ and other conservatives. No room for Mega Life and Health, or frankly much of Wellpoint et als behavior in the Dutch model.
Is it the likely future for the USA? I hope so, but I doubt it.
certainly interesting and innovative, but still quite radical by American standards in several ways:
1. employers required to make payments to offset premium costs (now only true for medicare taxes)
2. standard benefit package (even the gold-standard civil service plan in US has no such common standard). lotsa devils on those details.
3. all kids under 18 covered without any direct payment by parents. call it universal schip. do they have same coverage choices parents do?
4. most buyers get direct government subsidy financed by taxes paid by those at top, who are thus paying much more than would be the case in US (again an echo of Medicare).
finally, question as to whether beneficiaries must pay any costs (copays, deductibles) beyond premium.
Barry, Bingo, Matthew, Jim-
Thanks for your comments.
Barry–
You raise some interesting questions about taxes and what is and isn’t covered in each country.
You could Google to try to find answers. It would take quite a bit of time because you would have to research each country separately.
Bottom line: Europeans pay higher taxes than we do, and while they spend signficantly less per person than we do as well as significantly less as a % of GDP, they do cover
everyone.
And in some countries the care includes things like someone coming into your home to help after you’ve had a baby. In general, preventive care is much better.
For apples to apples comparisons of spending, you can use either % of GDP spent on healthcare or per capita spending on healthcare.
Emanuel’s calculations assume no exemptions on the VAT.
He acknowledges that Congress might decide it wanted to exempt certain items, but then the VAT would have to be 12%, or whatever.
There is really no reason to exempt items since the tax is not regressive (low-income families receive more in health care services than they pay in taxes) and the only reason to exempt college tuition etc. is if you thing these things are more important than health care.
One can argue that as a social good, health care comes first. You cannot take advantage of education, or life,liberty and the pursuit of happiness if you are not relatively healthy.
As for how much the VAT raises, all I can say is that you are the only person I have run into who questions it. And since Emanuel originally began the book with Victor Fuchs, a very good health care economist, I have to think he would have noticed if the math was wrong.
Bingo-
On no-fault medical malpractice, in the Netherlands, this is something they have been debating. This from U. of Rotterdam in 2005:
Department of Health Law, Institute of Health Policy and Management Erasmus MC University Medical Center Rotterdam, The Netherlands.
“In the Netherlands the total number of liability claims per year is about 2500, 100 of which are taken to court. Over the years these figures appear to be rather constant. It has been estimated that introducing a no-fault compensation system would lead to three to six times as many claims and would push up the costs of medical malpractice claims by a factor of three or even seven. When considering the introduction of a no-fault compensation system the main question to be answered is which problem has to be solved. Is it the improvement of the patients’ possibility to recover? Is the main goal to put a stop to the progress of increasing costs of liability claims? Is saving doctors from the threat of being sued the main issue? Or is there a problem of the insurance companies that has to be solved? No-fault compensation is not a panacea. In the end improving the liability system may turn out to be a better solution.”
Elsewhere I have run into complaints from doctors about no-fault malpractice saying that it denies doctors due-proces, that it can take months or years (and apparently in some cases the doctor cannot practice during that time) and that rather than lowering costs it raises them.
Some critics also point out that no-fault auto insurance hasn’t lower the cost of auto insurance.
As for GP care–yes, it is included in the coverage. Perhaps you misunderstood the sentence noting that GP care is excluded from the deductible. That simply means that if I have a $100 deductible and go to a GP and pay him $150, the whole $150 is covered.
If, on the other hand, I bought medicine costing $50 and had a $100 deductible, I would have to pay the $50 for the medicine–and the next $50 when I renewed the prescription, until I had paid the whole $100 deductible.
Matthew–
I didn’t mean to imply that the Dutch plan was modeled on Emanuel’s plan- just pointing out the parallels to readers since I recently wrote about Emanuel’s plan (and am writing about it again today.)
Probably most readers don’t know Enthoven (that’s another post), but you’re absolutely right: both Emanuel and the Dutch plan are similiar in many ways to Enthoven’s original ideas.
(And he is worth a post!)
Emanuel gives Fuchs full credit by the way. Fuchs wrote the foreward to the book, and there he talks about how they started the project together. (After writing a number of articles on the subject.)
But then Fuch’s wife died and he just didn’t want to go forward with it So he urged Emanuel to finish the book.
I agree completely that “moving to the Dutch systemfrom a mostly state provided insurance system is MUCH easier than it would be to move there from the wild west insurance market that we have now.”
Could it happen in the U.S.? It would take real political will to make something like this happen.
Today, I’m writing more about Emanuel’s plan where I quote Ezra Klein talking about how, as public policy, it’s excellent, but politically a long shot.
Conservatives would never go for it. But progressives might think about it and, perhaps, include elements of the Emanuel/ Fuchs plan in their plans for reform.
The problem with progressive plans right now is that they don’t admit to the cost of universal coverage, and really don’t have any plans for financing high quality universal coverage.
(I was at a meeting of progressives talking about health reform recently where one person announced that his/her group was doing an analysis of the financing of reform “but with no numbers.” Other people around the table nodded–good idea! This makes me nuts.)
Reformers who don’t want to face the costs could of course arrange for everyone to have something called “insurance,” but that doesn’t mean that they would have health care.
Jim– What I like about the Dutch plan (and the Emanuel/Fuchs plan) is that it is so egalitarian.
Everyone gets the same comprehensive menu of benefits–and yes, this includes the children.
If health care is a right, then why shouldn’t everyone get the same basic benefits that doctors agree we all need in order to pursue the opportunities that life offers?
And yes, as is the case with most European social programs, those who are wealthier help pay for those who are less affluent
. This is why these countries are largely middle-class. They don’t have the extremes of wealth and poverty that we
we accept.
Everyone has a 150 deductible, but the deductible doesn’t apply to seeing a general practicioner or maternity care. In those areas, you have “first dollar coverage” (i.e. the first dollar you pay is covered.)
yeah i totally agree with you hoppycalif you got a good point of looking at things
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But, wait! If you combine the mandatory purchase of health insurance with the income tax, you are in reality just increasing the income tax being charged, and if you do that, why would you then turn over that tax money to private insurance companies? And, that leads us back to the single payer system, where we should be in the first place.
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