Posted on August 9, 2004

Is Switzerland's health care consumer-driven?


Is Switzerland’s health care consumer-driven?
September 8, 2004
Consumer-Driven Health Care
Lessons From Switzerland
By Regina E. Herzlinger, DBA; Ramin Parsa-Parsi, MD, MPH


Switzerland’s universal-coverage health care system consumes a larger fraction of gross domestic product than most other countries, likely reflecting its citizens’ preferences and resources. Health care expenditures are closely linked to income. Yet, in contrast with the United States, whose health care expenditures are the highest percentage of gross domestic product in the world and where more than 40 million citizens are uninsured, the consumer-driven Swiss health care system achieves 30% lower per capita health care costs and universal coverage while providing reasonable quality of care. These results can be attributed primarily to the control exercised by Swiss consumers and the relatively high cost transparency of the system, requirement for universal coverage, and risk adjustment of insurers. Additional savings would likely be ttained with liberalization of provider coverage and reimbursement policies.

September 8, 2004
The Swiss Health System
Regulated Competition Without Managed Care
By Uwe E. Reinhardt, PhD


Health services research seeking to test hypotheses on the basis of
nonexperimental data frequently faces the problem that a given database
support 2 or more rival hypotheses. The Swiss health system is a case in point.
In the view of Herzlinger and Parsa-Parsi, the Swiss health system provides
empirical support for what is now known in the United States as consumer-directed health care. That approach expects insurance policies with high deductibles and coinsurance to convert hitherto excessively insured, passive recipients of health care into vigilant shoppers for health care, motivated to control both its cost and its quality and capable of doing so. Because Swiss households do bear relatively high out-of-pocket costs for both health insurance and health care, one can appreciate how this interpretation might be reached.
However, others might not be persuaded by this argument, for several reasons. First, across nations there appears to be no correlation between cost sharing and per capita health spending. Relative to Switzerland, Germany, the Netherlands, and Canada, for example, have much lower levels of cost sharing by patients but also much lower per capita spending on health care. Second, cost sharing by patients in Switzerland is unlikely to have begotten the allegedly superior quality of Swiss health care because, as Herzlinger and Parsa-Parsi point out, Swiss patients have virtually no information on the quality of the care they receive.

Finally, what is most impressive about the Swiss health system is the role tight government regulation plays throughout the entire system. One can plausibly rgue that this regulation is chiefly responsible for both the high quality and (relative to the United States) low cost of Swiss health care. Absent that regulation, the Swiss health system probably would metamorphose into something resembling the much less regulated, high-cost US system, which is both more inefficient and more inequitable than the Swiss system, as Herzlinger and Parsa-Parsi take pains to point out.

Comment: The rhetoric of reform has shifted from managed care to consumer-driven health care (CDHC). The health care system in Switzerland has several features of the CDHC model supported by Regina Herzlinger and others here in the United States. Supporters of CDHC will cite the Swiss experience as proof that CDHC is highly successful in improving health care value by placing the consumer in control. As Herzlinger and Parsa-Parsi state in their article, it would be even more successful if additional features of the model were adopted.

Uwe Reinhardt, in his commentary, concedes that the given database on the
Swiss health system can support rival hypotheses. However the wish-it-were-true comments that provide support for the CDHC hypothesis is countered by the fact that (1) there is no correlation between consumer-sensitive cost sharing and per capita health spending, and (2) superior quality could not have been achieved by Swiss health care shoppers because they have no reliable source on health care quality. CDHC has not been the source of the market ideal of higher quality at lower cost. Before our nation dives into a transformed CDHC system, we should look at some of Herzlinger and Parsa-Parsi’s “Lessons for the United States” wherein the Swiss CDHC model falls short:”To attain cost control and consumer responsiveness, it is necessary to permit considerable experimentation in insurance policies’ coverage, benefits, and terms…”
“To reward efficient, effective providers, it is necessary to permit health care providers to innovate freely in the delivery of health care and its pricing… Providers will thus be motivated to innovate in health care services for the sick and to earn revenues by responding to consumer demand rather than relying on guaranteed budgets or clients.”

“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. To avoid growth in compulsory benefits, it is necessary to require coverage in terms of dollars, not benefits; for example, require insurance for all health care expenses exceeding a certain amount, rather than specific benefits.”

This is not code language. Any health policy analyst understands precisely the policy implications of these concepts. Not realizing that these articles would be released today, in yesterday’s Quote of the Day message I discussed mandatory purchase of insurance by individuals (individual mandate) in a highly regulated insurance environment. This seems to describe the Swiss system fairly accurately. Loosening regulatory controls and depending more on marketplace choice, as Herzlinger and Parsa-Parsi suggest, would threaten rather than enhance the value that the Swiss are currently receiving in health care.

Moving in the other direction, merging all insurers into a single payer would provide the opportunity to ensure maximal value by corralling costs and by rewarding providers for quality. Consumers understand that they will never have enough knowledge to fully orchestrate their own care. They just want to have confidence in a system that is designed to provide maximal value. And single payer is specifically designed to do just that.