Should the Swiss Health Care System Be Our Model?

Should the Swiss Health Care System Be Our Model?
The Gary Becker-Richard Posner Blog ^ | 10/5/2009 | Richard Posner

Posted on 10/05/2009 8:13:43 AM PDT by SeekAndFind

The New York Times published an article last Thursday on the Swiss health care system, which can be viewed here: www.nytimes.com/2009/10/01/health/policy/01swiss.html?_r=1&em.

The system is simple. There is no "public option," that is, there is no government health insurance program, such as Medicare or Medicaid. There is very little employer-provided health insurance, presumably because employee health benefits are not tax exempt; almost all health insurance is therefore bought by the insured. Everyone is required to buy a health insurance policy that provides a specified minimum of benefits (they can buy more expensive policies if they want), but there are subsidies for people for whom the expense would be a hardship; about 30 percent of the population receives a subsidy. Because of the heavy subsidization, the prices charged by the insurance companies are limited by government, but at a high level. (The limits therefore limit doctors' fees and incomes, and doctors are less well paid in Switzerland, relative to average wages, than in the United States.) There are many insurance companies, and people can switch freely among them. Copayments or deductibles are larger, and as a result the average out-of-pocket cost of health care is higher in Switzerland than the United States--an average of $1,350 per year, versus $890 in the United States. But the aggregate cost of health care is much lower in Switzerland--11 percent of GDP versus our 16 percent--though higher than in any other country besides the United States.

There is, as I said, no special program for the elderly, corresponding to Medicare--which may be why male life expectancy at age 65 is higher in the United States than in Switzerland, although female life expectancy at age 65 is higher in Switzerland and life expectancy at birth is substantially higher in Switzerland, in part because infant mortality is only about half as great as here. The quality of medical care does not appear to be inferior in Switzerland to that in the United States, and there appears to be no problem of queuing, as in Britain and Canada. Indeed the Swiss have significantly more doctors, nurses, and hospital beds per capita than the United States, which suggests that there may be less queuing there than here; and there is general satisfaction among the Swiss with their system, although there is some grumbling over the high cost of medical care.

Of course one must not put too much weight on a single article, but the information in the Times piece appears to be corroborated, at least the statistical data; and some of my description of the Swiss system is drawn from other sources.

If the United States could reduce its medical costs from 16 percent of GDP to 11 percent, the savings would be $700 billion a year; and if the reduction did not reduce the health or longevity of the American population or create queuing costs, there would be no offsetting cost; the $700 billion in savings would be net.

But while the Swiss health-care system may be great for the Swiss, comparing the health-care systems of two countries, even if they are broadly similar (both the United States and Switzerland are wealthy, modern, Western, democratic, capitalist nations), is treacherous, because beneath the broad similarities are potentially important relevant differences. Two of particular importance in the present context are, first, that the Swiss are probably healthier than Americans, on average, apart from any superiority of Swiss health care, and, second, that the Swiss probably have lower expectations of health care than Americans.

The Swiss do not have a large "underclass" (corresponding to the residents of our inner cities) that is poor and has a very high murder rate and high infant mortality and a high incidence of AIDS and other diseases. In addition, the Swiss do not have America's obesity problem, which is a source of abnormally high medical costs because of the treatment costs of diabetes and other diseases to which obese people are disproportionately prone.

And the Swiss people in all likelihood do not expect as much medical intervention as Americans too. Europeans tend to be more fatalistic than Americans. They do not share our preoccupation with extending the longevity of very old people, or our exaggerated faith in medical science that leads some of us to describe the death even of a nonagenerian relative as a "medical failure." Nor do they have as great a propensity as we to insist (after researching a disease on the Internet) on receiving medical care beyond what a doctor's professional judgment thinks warranted.

Our expectations regarding medical treatment are connected to our poor health: Americans want both to indulge in an unhealthy but enjoyable life style and live forever, and they try to square the circle by demanding extravagant (by international standards) health care. (I am exaggerating, of course; some of our poor health is due to ignorance rather than to a deliberate choice to substitute medical treatment for healthful living.)

So we might adopt the Swiss system and discover that our aggregate costs of health care had declined little from their current 16 percent of GDP. Indeed, because of increased coverage, it might increase (see below).

The proper use to be made of the experiences of other nations with health care is not advocacy for our adopting the health-care system of a nation broadly comparable to ours that spends a lower fraction of GDP on health care than we do. It is to note the methods used by foreign countries whose health-care systems are well regarded by the local population and see whether any of them could work well here, bearing in mind the dangers of piecemeal adoption of foreign methods. (An example of those dangers is the adoption by the Detroit auto companies some years ago of the "quality circles" used by Japanese auto companies to increase productivity by encouraging their workers to suggest productivity-enhancing innovations. The quality circles failed in Detroit because the auto companies did not realize that what made the quality circles work in Japan was the practice of lifetime employment; our workers were reluctant to suggest productivity improvements because they knew it might well result in a smaller workforce and therefore in layoffs.)

The features of the Swiss health-care system that seem well adapted to American conditions (though whether their adoption would be politically feasible is a separate question--to which the answer is "no," at least at present) are, first, repealing the tax exemption for employer-furnished health benefits, since the exemption both creates an artificial incentive for employers rather than employees to buy health insurance and disguises the cost of the benefits to the employees (in lower wages); second, making everyone buy health insurance, in order to prevent adverse selection (that is, excess demand by the unhealthy), the problem to which group (normally employer-group) insurance is a second-best solution; third, requiring significant copayments or deductibles so that the marginal cost of health care to the insured is not so low as to induce the overuse of medical resources; and fourth, providing no special program for the elderly, but instead requiring them to buy insurance like everyone else, with the cost subsidized only if they cannot afford the cost of the insurance rather than just because they are old.

Such reforms would probably produce a net savings in aggregate U.S. health-care costs, though this is not certain, because of the subsidies and because any extension of coverage--which would be considerable because everyone would be required to have health insurance and the number of uninsured in the United States exceeds 40 million persons--is likely to increase the demand for health care. The subsidies are transfer payments rather than costs in the sense of consuming real resources, but worrisome nevertheless because of the potential long-term harm to the economy from our soaring public debt. But the aggregate transfers and (real) costs would probably be less under a version of the Swiss approach than under the approach urged by the Administration, which does not have credible cost-saving measures build into it.

TOPICS: Business/Economy; Constitution/Conservatism; Culture/Society; Editorial
KEYWORDS: healthcare; swissmodel; switzerland

1 posted on 10/05/2009 8:13:44 AM PDT by SeekAndFind

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To: SeekAndFind

Appears to be logical and can be mathematically defended.

Neither thing can be done by the present idiots in White House and the associated congresscritters.

2 posted on 10/05/2009 8:16:50 AM PDT by Da Coyote

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To: SeekAndFind

It’s still a tax.

3 posted on 10/05/2009 8:19:07 AM PDT by CarlosFonke

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To: SeekAndFind

Interesting ideas worthy of discussion. I have to wonder when the AARP will show up to picket him for being insensitive to the needs of seniors. Seriously, though, I also wonder what this would mean to the income of doctors.

4 posted on 10/05/2009 8:21:49 AM PDT by T-Bird45 (It feels like the seventies, and it shouldn't.)