October 2, 2009

ONE MORE FOR HARRY LIME'S LIST...:

Health Care’s Swiss Solution: Fostering competition among insurers has empowered consumers and controlled costs. (Alphonse Crespo, Philip Stevens, 2 October 2009, City Journal)

U.S. policymakers still enamored of European solutions have better models to choose from. Switzerland enjoys some of the highest quality health care in the world, largely because it has avoided some of the pitfalls of the Franco-German model, allowing a large measure of consumer-driven competition while subsidizing premiums for the indigent with taxpayer dollars. It’s not perfect: mandatory insurance has led to some cartel-like behavior among insurers and given the government increased control over health-care provision, but it has kept a lid on health-care inflation while continuing to offer patients high quality and more choices.

The Dutch have followed suit. The Netherlands for years labored under a Franco-German health-care model that absorbed 30 percent of its GDP growth. In 2006, it shifted to a Swiss-style system in which all citizens must purchase insurance from one of 41 competing private-insurance funds. This introduced a strong element of price competition into the system, with large numbers of switching customers forcing insurers to focus on patients’ needs and increase their back-office efficiency. The new arrangement has injected innovation into the system, too, as insurers seek to steal a march on their competitors. Crucially, costs have been kept under control without rationing. Since the Dutch enacted their reforms, health-care spending inflation has slowed from 4.5 to 3 percent annually, even as quality has improved.

The lessons for the U.S. are clear. Creating a state-subsidized insurer or non-profit co-op to cater to those unable to afford private premiums is the most expensive way of covering the uninsured. As Switzerland and the Netherlands demonstrate, lifting barriers to competition among insurers can provide a more sustainable solution to the cost and access problems that plague American health care. Mandatory insurance, however, needs careful checks on insurance cartel power.

Better still, a uniquely American solution would create universal health-savings accounts (with government subsidies targeted at the poor and high-cost patients) that would encourage consumers to adopt healthy lifestyles and seek care in cost-effective settings—like buying generic drugs at Wal-Mart or seeking basic care from retail clinics. The central insight now lacking in the health-care debate (whether in Europe or the U.S.) is that consumers demand better technology at lower cost from every market where they have “skin in the game”—whether it be electronics or automobiles. A combination of high-deductible catastrophic health insurance and HSAs is the only kind of “universal health care” that will, in the long run, work.


One of the GOP candidates needs to hurry up and make that the Pawlenty (or Daniels or Jindahl...) Plan.

Posted by Orrin Judd at October 2, 2009 6:31 PM
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