Switzerland

You are currently browsing articles tagged Switzerland.

Health Care Around the World: Switzerland

April 23, 2008 in Health Care Around the World, International Health Care Systems | 9 comments

I have already written about Switzerland in previous posts (see Swiss Healthcare Sytem: Part I, and Part II). Still of all the countries with universal health care, Switzerland’s is the most market-oriented and merits discussion. Switzerland’s health care spending as a percentage of GDP is second only behind the U.S. (11.6% of GDP for Switzerland, 15.3% for the U.S. according to Frontline), yet the government pays for very little of this funding. The Swiss system is similar to the “managed competition” health care plan proposed by the Clintons in the early 1990s.

Percent Insured. 99.5%. Does this mean a mandated system system would lead to universal coverage in the U.S?  This is unlikely.  In Switzerland, a mandate for auto insurance has nearly 100% compliance, but in the U.S. the auto insurance mandate’s compliance rate is only around 83%.

Funding.  Insurance is purchased by individuals.  Individuals generally must pay the full cost of premiums, but the government helps to finance insurance purchases for the poor.  “These subsidies are designed to prevent any individual from having to pay more than 10 percent of income on insurance,” and one third of Swiss citizens receive this type of subsidy.    Thus, the Swiss government only pays for 24.9% of health care costs (compared with 44.7% in the U.S.).

Private Insurance.  All insurance is private insurance.  However, insurance companies are mandated to offer the same “basic benefits package.”  Some physicians operate outside the negotiated schedules and individuals are beginning to purchase supplemental insurance to cover the cost of these higher cost physicians.  Some estimates claim that 40% of Swiss citizens have purchased supplemental insurance.

Physician Compensation.  Physician compensation is negotiated between the insurance companies and doctors on a canton by canton basis.  Balance-billing is not allowed.  Switzerland has strong regulation with respect to nonphysician health care professionals (e.g., nurses, PAs, NPs,) and thus patients are often compelled to use expensive physicians even when this may not be medically necessary.

Physician Choice.  According to a WHO study, Switzerland ranks second only to the U.S. in terms of the ability of patients to choose their provider.

Copayment/Deductibles.  Premiums are community rated and only adjusted for sex and age.  Employers do not pay for workers insurance and thus many Swiss have opted for less expensive plans with higher deductibles.  This has lead to the Swiss paying for 31.5% through out of pocket expenses.

Waiting Times.  According to a WHO study, Switzerland ranks second only to the U.S. in terms of timely care.

Benefits Covered.  All insurers cover the “basic benefits package” so most competition between insurers is based on price and service.  A politically defined benefit package is susceptible to influence from special interest groups.  Thus, Uwe Reinhardt notes that “over time, the growth in compulsory benefits has absorbed an increasing fraction of the consumers’ payment, thus compromising the consumer-driven aspects of the Swiss system.”

Tags: ,

Risk Equalization and deductibles

April 1, 2008 in Health Insurance, International Health Care Systems | Permalink

In this blog, I have written about the Swiss (part one, part two) and Dutch healthcare system extensively. Both systems have a “regulated competition” where insurance is mandatory and insurance companies are mandated to provide a specific insurance benefit package. In the Swiss system, 85% of medical expenditures are financed by insurance premiums and 15% are financed by user fees. In the Netherlands, 50% of expenditures are paid by income-related contributions, 45% are paid by insurance premiums and 5% are paid by user fees. In both systems, the government pays a risk equalization premium to insurance companies who have a higher percentage of sick people to help eliminate cream skimming. However, does this risk equalization system still function when voluntary deductibles are introduced?

This is the question which a paper by van Kleef, et al. (2008) attempt to answer. Currently, the Swiss only count net claims (medical claims paid by the insurance company, ignoring out-of-pocket payments by insurers). Is this a problem? Let us give one example:

Let us assume that Healthy Hank spends $1000 on health care per year and is insured by HealthNet and Sick Sally spends $2000 on health care per year and is insured by SickFund. In the Swiss system, insurance companies receive (pay) a risk equalization payment based on whether they have above (below) average medical expenditures. This would mean that insurance premiums would be $1500, the average of Hank and Sally’s expenditures. HealthNet would pay $500 into the risk equalization pool and SickFund would receive $500.

What happens in the presence of deductibles? Let us assume that HealthNet offers an insurance package with a $500 deductible and HealthNet offers an insurance package with no deductible. Healthy Hanks will sort into the HealthNet deductible package and Sick Sallys sort into the no deductible SickFund package. Now, we have that HealthNet will have $500 of net claims on average since Hank will pay $500 and the insurance company will pay $500. SickFund will still have $2000 of cost.

Now the insurance premium will be $1250 since the insurance premium is based on net claims [(2000+500)/2]. HealthNet will have risk equalization payment of $750 and SickFund will receive $750. The insurance premium for Healthy Harry will be $1250 ($500 + the $750 equalization payment) . The premium for SickFund will be $1250 as well ($2000-the $750 risk equalization payment). Thus, there will be no benefit to choosing the deductible since there is no premium benefit. Yet policy makers would like people to choose the deductible plan to reduce moral hazard. The paper gives a few other scenarios where the risk equalization scheme fails and cream skimming occurs.

In general, economist love choice. Yet in insurance markets, the more choice is given to consumers, the more incentive insurance companies have to cream skim. Despite policymakers best attempts to control cream skimming through risk equalization payments, no risk equalization scheme will be perfect. Like everything in life, there is a tradeoff. In this case, the tradeoff is between offering consumers more choice, and reducing cream-skimming.

Tags: , , , ,

Swiss Healthcare System: Part II

February 26, 2008 in International Health Care Systems | 5 comments

In November, I wrote a post about the Swiss healthcare system. Today, I am giving you a bullet-point summary, offering more detail concerning healthcare in Switzerland. Most of this information comes from Frank and Lamiraud’s working paper.

In the Swiss healthcare system:

  • there is an insurance mandate for all individuals,
  • the government defines a what the insurance benefit will be for all standard health insurers,
  • insurance companies are not allowed to deny coverage to any individual,
  • health insurance and medical procedure prices are made publicly available,
  • in exchange for providing health insurance to consumers, insurance companies receive premiums from consumers and risk-adjustment payments from the government in order that insurance companies are not punished if they decide to insure a sicker population,
  • premiums are community rated, meaning that sick and healthy individuals pay the same price within each age group (the age groupings are 0-18, 19-25, >25 years old).
  • individuals are allowed to purchase supplement insurance as well (there is no regulated benefit for supplemental insurance),
  • there is significant cost sharing in all insurance plans (i.e.: deductibles, 10% coinsurance rates up to an annual ceiling),
  • open enrollment occurs twice per year (June and Ddecember).

In 2003, 49.7% of Swiss individuals choose ordinary deductible health insurance, 42.0% choose higher deductible health insurance, and 8.2% chose insurance with limited choice of provider networks (HMO-style contracts). Since only 8% of individuals are in managed care insurance firms, quality is fairly homogeneous across insurance companies.

Tomorrow, we will discuss other findings of the Frank and Lamiraud working paper.

Tags:

Swiss Healthcare System

November 27, 2007 in International Health Care Systems | 6 comments

Maggie Mahar has a interesting post discussing the Swiss health care system (“Herzlinger’s Meme on Switzerland and Consumer Driven Medicine“). The Swiss government mandates that all individuals purchase health insurance. While the insurance is subsidized by the government–and more heavily subsidized for poor Swiss individuals–most Swiss pay a large percentage of their insurance premiums. The government pays 25% of the premium while the individual pays the rest. Is having a “skin in the game” what is creating a more efficient health care system, where Switzerland has lower health care spending and better medical outcomes? Ms. Mahar doesn’t believe it (and neither do I):

But the truth is that Swiss patients have relatively little say over either the cost or the quality of the care they receive. Prices are regulated by the government, which also tries to make sure that consumers are getting value for their health care dollars by selecting which drugs, devices and tests insurance will cover. In fact, it is the very visible hand of a smart, largely efficient government that accounts for Switzerland’s relative success.

The key to consumer driven health plans (as recommended by Regina Herzlinger in the WSJ and JAMA 2004) is that 1) consumers–not employers–are the ones choosing their own health plans and 2) that consumers have adequate information regarding the quality of the plan.  The paradox of the Swiss system is that while the Swiss do decide their own plan and have quality information regarding their plan benefits, this quality information comes due to the fact that the government strictly regulates a minimum benefit.  This minimum benefit package on the one hand makes it easier for consumers to know what their health plan will cover, but on the other reduces the consumer’s health plan options and makes the health insurance system less “consumer-driven.”

Thanks to Joe Paduda for the link.

Tags: