How mandatory health insurance altered Swiss health care
Lessons from Abroad for Health Reform in the U.S.
9 March 2009
Washington, DC
For decades, Switzerland’s pluralist health care model managed to combine extremely high standards with very wide coverage. It attracted countless foreign patients and was envied by many. Isadora Duncan, Fyodor Dostoevsky, and Friedrich Nietzsche are amongst the multitude of historical figures who came to Switzerland seeking treatment in the soothing atmosphere of its romantic lake-sides or its fabled Alpine sanatoriums.
These days, famous foreign visitors are more likely to come for the skiing. Houston and Cleveland have taken over as world centers for medical excellence, while Singapore and Bombay offer life-saving alternatives to patients threatened by rationed medical technology or by regulated organ shortages. Some Swiss now travel to the U.S. for second opinions or for complex cancer treatments that cost-obsessed insurers are reluctant to finance.
A turning point in Swiss health care: compulsory insurance
The second half of the 20th Century saw health care costs rise as a result of technical progress, higher life expectancy and multiple other social and evolutionary factors. At the same time, governments in Europe became more involved in the collective provision of health care.
In Switzerland, health care rose from consuming 3.5% of Swiss GDP in 1950 to 8.5% by 1990. Along with many of their European peers, Swiss policymakers came to believe the only way to deliver health care in a cost-efficient way was a greater role for government in redistributing and regulating health care. This culminated in 1994 legislation which made it henceforth mandatory for all residents to purchase health insurance. Physicians accepted this as a necessary evil; some believed that the profession might even gain from it. They did not predict that this measure would spawn a powerful insurance cartel whose power would be used against them and their patients.
These reforms were somewhat analogous to the 1993 Clinton health care plan, or the 2006 Massachusetts health reforms, under which citizens are legally obligated to purchase insurance from one of several competing health insurers. Unlike these systems, in Switzerland sickness insurance is purchased individually, rather than through an employer.
These compulsory insurance premiums cover 35% of Swiss health expenditures. Taxes finance approximately 25%. Supplementary insurance and contributions from private institutions account for 10%. The rest is met by out-of-pocket payments and deductibles that range from $250 to $2,100 per year. Patients pay for 10% of outpatient care. Insurers want parliament to raise this to 20%. Co-payments for branded drugs have already been boosted to 20%, when “equivalent generics” are available, regardless of the wishes of the physician. Although patients pay the regulated health piper through taxes, premiums, co-payments or deductibles, in reality it is insurers who call the tune.
One unforeseen consequence of the move to compulsory insurance was the emergence of a powerful cartel of health insurers. Prior to the 1994 reforms, decentralized federations loosely coordinated the activity of sickness funds at local, cantonal levels. The 1994 reforms called for regular consultation and negotiations between federal health authorities and representatives of health service providers and insurers. Mutual fund concordats and other categories of health insurer forums merged to create a single entity, Santé-Suisse, which would henceforth represent them at the federal level.
A number of this organization’s executives are members of Switzerland’s federal parliament, while at least two of seven federal government ministers were directly associated with sickness insurance funds before being elected to power. This, added to the captive market of customers created by compulsory insurance laws, has given Santé-Suisse an unhealthy influence on the formulation of health policy.
Rationing Swiss hospitals
The 1994 reforms saw the government initiate a whole swath of federally driven cost-containment measures. First in the line of fire were public hospitals, which reduced bed numbers by 6% between 1998 and 2000 via forced mergers of regional hospitals, closure of acute care units, centralizing of more complex technology and rationing of nursing care.
This downgrading of local hospitals inadvertently created inequities in access to specialized units and sophisticated medical technology. Patients from small towns or Alpine valleys are often bounced from one local hospital to another before receiving appropriate care. Ambulances (and even helicopters) have come to replace elevators as a routine means of transfer from one specialty unit to another: this may create savings for some providers, but the overall cost remains the same or more.
Regulators next tried to cut average lengths for hospital inpatient care. These fell from 12.9 days in 2000 to 9 days in 2004. Reimbursement tariffs encourage outpatient surgery when it might not be clinically appropriate, such as when the risk and discomfort to the patient is higher. Low fees for demanding procedures (linked to longer stays in the hospital) dissuade surgeons from performing more complicated elective surgery. This has led to waiting lists in some disease areas, particularly in university hospitals.
Meanwhile, complications linked to medical errors, hospital infections and premature dismissals at large public hospitals have become a cause of public concern. A 2007 survey revealed rates of “critical incidents” of up to 40% at the university hospitals of Geneva and Lausanne. Scary newspaper headlines about elementary hospital errors are no longer confined to neighboring France: last Christmas, a 4-year-old girl died of a fever after being incorrectly discharged from Aarau Canton Hospital.
Hitting physicians and their tools
In 2004, doctors and insurers reached agreement on a time-based fee scale (TARMED), meaning higher pay for so-called “intellectual work.” The “neutrality of costs” clause included in the deal involved a substantial reduction in fees for technical procedures. This has resulted in detailed monitoring of all aspects of medical activity, such as the length of consultations, the daily number of visits or average costs of prescriptions. TARMED has significantly increased doctors’ administrative paperwork, taking time and energy away from patients.
There are 25,000 doctors in Switzerland, 55% of whom practice privately. Based on the questionable assumption that total health costs depend on the number of practicing physicians, the federal government introduced a ban on new private medical offices in 2002. This decree was actively supported by the insurance cartel, even though it circumvents constitutional rights. Predictably, there is now a looming shortage of GPs, forcing the government to exploit loopholes to allow more practices to open. Bizarrely, the federal government intends to extend the ban until 2011.
Increasing regulation and the attendant bureaucratization of health care is undermining the morale of physicians. Frustrations climaxed in an unprecedented demonstration of 12,000 doctors in Bern in 2006. Further unrest lies ahead. Pascal Couchepin, president of Switzerland, and a known ally of a dominant health insurer, announced that the cartel of insurers would be entitled to slash lab-test reimbursements by approximately 20% in 2009. This controversial move will inevitably lead general practitioners to close their labs, forcing simple diagnostic tasks to be sent elsewhere. This will slow down diagnosis, causing unnecessary delays to sick patients. Geneva GPs have announced strikes in protest, and other Canton medical associations are expected follow.
Conclusion
Increasing regulation in Switzerland has led to arbitrary bans on medical practices, rationing of hospital beds, a weakening of the diagnostic tools available to doctors, and the irresponsible promotion of generics. It has mainly been pushed by the powerful cartel (Santé- Suisse) that emerged from mandatory health insurance legislation of 1994. Setting aside its morally questionable coercive essence, mandatory insurance ultimately damaged the quality of Swiss medical care without reducing costs.
Sadly, the relative decline of Swiss health care is becoming increasingly apparent. Long ranked amongst the top four in world health care, Switzerland sunk to 8th position in the 2008 Euro Health Consumer Index,* lagging behind countries such as Holland, Austria and Luxembourg. On the other hand, total health expenditures (11.3% of GDP in 2006) remain well above the OECD average of 8.9%.
Some parliamentarians are beginning to challenge the disproportionate influence of the insurance cartel on health lawmaking. One socialist MP, Jacqueline Fehr, presented a motion designed to bar MPs associated with sickness insurance from key legislative health care commissions. Her proposal is currently under debate at the Swiss federal parliament.
Ms. Fehr faces a tough task. Once cartels have entrenched themselves, there is no easy way to dislodge them. Americans should think twice before opting for compulsory insurance, unless they believe that cartelized and rationed health care is really in the interest of patients.
