Switzerland and the squeaky wheel

Aaron Carroll was pushing back on Avik Roy and Doug Holtz-Eakin invoking Switzerland as a model to reform the ACA by noting (correctly in my Professor who teaches comparative health systems at Duke view) that Switzerland is more regulated and controlled than is the ACA in many ways. Austin Frakt was noting that most posts noting the Roy and Holtz-Eakin post didn’t link to Aaron’s post, which is true of the brief post I did.

I think this is mostly because the news in Holtz-Eakin and Roy’s piece was and is primarily political, and doesn’t really have much to do with any facts or policy. They both (and many others) have overstated the case against the ACA for quite a while in my mind; that doesn’t mean I don’t read their stuff. And Holtz-Eakin was Senator McCain’s chief health policy advisor and Avik was an advisor to Gov. Romney. Given all this, the main content of the piece was reform of Obamacare v. strident ideological language arguing against something without offering an alternative that has been the norm for most opponents of the law for the past 34 months. So, even though my first thought was “Switzerland! I thought you guys hated mandates” I am personally glad to welcome them down from the ledge.

For most on my research career, health policy was not really front page news except for short periods (think 1997-2007). Then it became a huge political horse race story, and professors and researchers had to figure out where the line was between advocacy, research, policy analysis, often with great frustration at our being crowded out by other voices. But, it is complicated! is a frustrating answer for a reporter….The incentives in terms of getting broad,popular attention are definitely to overstate and to be as bombastic as possible, but in the end, as an academic all you have to offer is your credibility. I understand Austin’s frustration, but I am not sure what the answer is to fix it. I think TIE has done it very well all considered, and has lots of credibility in ‘bringing evidence to the debate.’

I am not teaching Comparative Health Care Systems this semester, but I went and looked at my overview notes for Switzerland, and well, sign me up:

  • Individual mandate that achieves ~ universal coverage
  • Cantons (like States) regulate medical provision and have lots of discretion in doing so
  • System community rated (I think this was Aaron’s main point; it is less underwriting than allowed in the 3:1 by age with tobacco in the ACA); end community rating and you don’t have Switzerland
  • Employers can pay premium, but it is not tax preferenced; income based premium subsidies for lower income
  • Prices for medical care are set, but not the provision (but there is increasing ‘managed care’ esp on the profiling of doctor behavior by private insurance companies)
  • It is basically the second most expensive health system in the world on a per-capita basis; premiums are similar to employer based in U.S., but docs make less
  • Higher out of pocket share than in the U.S.

As an aside, I think the Netherlands might be a better model for the U.S. down the individual mandate/use of private insurance that is regulated roughly like a public electric utility branch of reform options because of their data driven post hoc risk adjustment in which they don’t worry so much up front above adverse selection, but instead ‘rebalance’ after the fact based on risk pool.

cross posted at freeforall

Comments

  1. James Wimberley says

    It’s also worth noting that Swiss insurance companies can’t make a profit on the basic package. which removes the adverse selection problem and the endless US hassle. The incentive for the insurers is to sign up customers for gold plated supplements (private rooms etc.) and for other products, so they play nice.

  2. Katja says

    The cost of the Swiss healthcare system can be relativized a bit; both cost of living and wages are much higher in Switzerland than in the rest of Europe.

    Still, I’m not the biggest fan of the Swiss system. While it has plenty of good ideas, I have concerns about how well it works for low-income families. In particular, the implementation of the franchise (deductible/co-insurance/copay) is something that I don’t particularly like.

    First of all, there is an annual deductible of 300 CHF. In addition to that, there’s 10% co-insurance/copay, up to a limit of 700 CHF. This can be a fair amount if it hits you in a short period of time. Worse, you can get lower insurance premiums by accepting a higher co-insurance/copay limit; but this tradeoff mostly incentivizes the poor, who can least afford the consequences of actually paying more out of pocket. To the best of my understanding, low income in Switzerland only entitles you to reduced insurance premiums, not to a reduced franchise.

    And yes, the ACA has many of the same problems. (I.e., bronze plans.)

    For this, I favor the German model, which caps copay/co-insurance at a small percentage of income (2% for most people). You can tune the numbers, but such an income-based approach creates an incentive to not consume healthcare services unnecessarily while still not discouraging anybody who does need treatment from seeking it.

    • NCG says

      Yes. I saw in the paper recently that the California exchange might end up costing as much as $85 a month for someone making $20,000 a year. It sounded high to me, frankly. (I assume the article was including any federal subsidy the person would get, since otherwise, that would be a silly way to write an article.) You know what? Let me go doublecheck…

    • paul says

      Oh, my. I know we’re not directly comparable because there’s not a tax to pay for this in the US, but I would claw my way over a field of broken glass while people hurled rocks at me for an annual deductible of $350 and an out-of-pocket limit on co-pays of $800. Both of those are a comfortable order of magnitude less than our current plan (purchased in the individual market). Which costs just short of $20K a year.

    • Davis X. Machina says

      That’s roughly 5% of gross. At $20,000 you’re not paying a lot of income tax, if any. Payroll tax, yes.

      The federal cap on premiums at 400% of FPL — roughly twice our $20,000 example — is 9.5%, for comparison.

      Here’s Vermont’s 2012 cap and subsidy numbers.

      • Anonymous says

        Thanks, that’s very interesting. I see that in Vermont, someone with about 1600 take home per month would pay somewhere between $56 and $100-something.

        The 56 sounds more like it. 5% doesn’t sound like much, unless one is actually trying to live on 20K.

        My prediction: anyone healthy and poor is going to avoid this system. I wasn’t wild about ACA to begin with, and now, I am even less impressed. We simply shouldn’t be bleeping poor people. Sure, if you have cancer, it’s a *great* deal. Whoo hoo. For anyone else, I don’t see it. And I don’t know that that penalty’s ever going to be applied. So, it looks a bit foggy to me. With so much waste in our system, this is what we came up with. It’s so sad, especially because I know the state health people have been working so hard.

        • paul says

          How many people are there who are healthy and poor? Many/most of the poorish people I know have pretty much constant low-to-midlevel medical issues, from RSI to workplace injuries to accidents to the usual respiratory stuff. I think young, healthy and middle-class (without kids) is another matter.

          • NCG says

            You may be right, technically. But anyone who isn’t actually bleeding may very well not bother. Which is what we have now.

    • Katja says

      $20,000 before taxes was about what I made as a grad student [1], and I think $85/month should be quite manageable. What would be a problem would be the $2,250 out of pocket expenses if it ever came to that (we’re talking about nearly two monthly incomes after taxes).

      For purposes of comparison, under current exchange rates, a UK resident with £13,000 (approximately $20,000) in annual income will also pay around £54 (approximately £83) in National Insurance tax (employee contribution), if my numbers are right. And while National Insurance does also contribute to the national pension scheme, it does not fully finance the NHS (for which additional money out of other tax revenue needs to be appropriated). So, $85 does not sound too outlandish to me.

      [1] Mind you, that included full tuition credit plus actual health insurance, and knowing that I had affluent parents who would back me up if I ever ran into an emergency, so I wouldn’t have realistically called myself poor, as I did not have to concern myself with the existential fears that low income creates; but I think I still have a fairly realistic idea of what one’s cash flow under these circumstances looks like.

      • NCG says

        Katja, I hate to even *seem* to disagree with you, you are so wicked smart. I learn a lot from you.

        Thing is, this $85 is getting sucked out of some poor slob even though we already pay more per capita for healthcare in government funds, for every person in the country, even though there is not universal care, than most any other “developed” country. And now, “we” are going to pay even more.

        If someone described the ACA as a stealth way to expand Medicaid, well, that might make some sense. This doesn’t, to me at least.

        And I still think $85 a month is a lot to ask from someone who is barely making it. I think not many people here fit in that category.

  3. Mike S says

    It’s worth also noting the payment mechanism in Switzerland has built-in cost controls. Most medical procedures are paid directly by insurers, who then bill patients for the co-pay (a small number of providers bill directly and require you to claim back, but it’s a minority). As a result, insurers employ analysts who sift through medical bills looking for interventions that are unreasonably expensive or unnecessary. Where they suspect medical practitioners of over-prescribing or over-testing, they send a “blue letter” (written warning). Too many blue letters leads medical professionals to be black-listed by insurers, to all intents and purposes ending their ability to practice in Switzerland. This is a powerful incentive to contain costs.

    Also, contra your point above (in Geneva, at least), employers *cannot* pay premiums. Insurance must legally be in the name of the individual (or family), and paid by them. Some employers pay a healthcare “allowance” to cover the cost of the premium. This is treated as being just part of salary for tax purposes (although the cost of insurance premiums themselves are deductible from taxable income).

  4. Geo says

    I think the analysis misses on a very key point. Which is that the wages and salaries in Switzerland are higher than the mean in the U.S., in order to compensate for the costs of mandated medical coverage. The Swiss on average earn much more than we do here in the states. The Swiss model of almost anything is more efficient, productive and streamlined than almost anything here in the U.S. partly due to cultural aspects (Swiss actually retain genuine pride in their nation and their history) as where we in the states will sell out for a buck like two-bit whores. Also, in part because of less political partisanship. While more regulated in some aspects, more economic and social freedom abounds in Switzerland which can be traced to their Direct Democracy system in play. The Swiss tend to to see the bigger picture, than the short-term gains that may be more attractive, but more harmful down the road. I admire the Swiss much more than I admire most of what this nation has become. The U.S. would do well to mimic as closely as possible all of the economic and social systems of Switzerland. Of course not all would work, but using the Swiss as a template is good start. Seeing as they have one of the best quality of life ratings in the world.

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