Is the Swiss Health Care System a Good Model for US? Becker

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10/04/2009

Is the Swiss Health Care System a Good Model for US? Becker

The Swiss health care system has several important properties that I (and many others) have been advocating should be incorporated into any reform of the US health care system. One major advantage of the Swiss system is that employer-provided health care does not receive any special tax breaks, whereas the US system is built on these tax breaks. As a result, only a rather a small fraction of Swiss health care is obtained through employment. Mainly, Swiss families buy health care on their own, so that, unlike in the US, their health insurance does not reduce their incentives to change jobs because job changes do not endanger their health coverage. Unfortunately, probably due to union pressure, Congress is not planning to eliminate this tax break for employer-provided health care. Indeed, many Congressmen want to increase the pressure on employers to provide health care to their employees. The Swiss system includes a mandate that everyone buys a minimum amount of health care coverage. This solves the American problem where over 40 million persons have no health care coverage. If uninsured persons get sick-fortunately this is not frequent since they are mainly young-that raises the cost to everyone else since the uninsured typically seek treatment for any illnesses at hospital emergency rooms. The health care reform bills in Congress do include various coverage mandates, although they are not as straightforward or as desirable as the Swiss mandates. The Swiss system typically has much larger co-payment rates than the US does for anyone seeking medical care or buying drugs. By shifting more of the cost to individuals and away from insurance companies, the Swiss give individuals greater incentives to economize on their health care spending since health care is more expensive to them. On the other hand, the Swiss system does not seem to have the equivalent of health savings accounts (HSAs) that allow consumers to carry over from one year to the next any balances in their health accounts that are not spent. These HSA accounts should become a more important part of the American system. The Swiss do not give any special medical advantage to older persons, for they have access to the same health subsidies and same private health insurance system, as does everyone else. The US could approach the Swiss way by making Medicare much more means tested, so that higher income older persons would pay a much larger share of the costs of their medical care than they do now. Unfortunately, neither President Obama nor either political party is willing to tamper much with the Medicare system as presently constituted. The Swiss system has no public insurance option, and relies on competition among private health insurance companies. I have argued strongly against a public option (see my post on August 17th of this year), and while it appears that this option is being dropped from most Congressional bills, liberal Democrats are still lobbying to have such an option included in any reform package. Although I do not know the details of the Swiss system, it appears to provide good health care while spending only about 11% of its GDP on health care compared to the US' 16%. I say " appears" because previously the British and then the Canadian heath care systems were held up as models for the US to emulate until further evidence revealed that these systems had serious flaws, such as long queues for many types of treatments. In fact, the Swiss system does have some unattractive features that should not be emulated when reforming the American system. For one thing, the Swiss impose sharp price controls on drugs, lab tests, and other medical procedures. To take drugs as one important example, Swiss price controls reduce prices of top selling US patented prescription drugs to about 40-50% below their American prices. In particular, the cost of lipitor in Switzerland is about 1/3 of its American price. In reality, what the Swiss (and other countries) do is free ride off of the incentive provided by American drug prices for pharmaceutical companies to invest the huge amounts of resources required to produce blockbuster drugs like lipitor. Very small countries like Switzerland can get away with this free riding since their demand for drugs is so much smaller than that of the US. However, were the US to emulate the Swiss system, and there is a call from some Congressmen for greater control over drug prices, the incentives biotech and pharmaceutical companies have to innovate would be greatly reduced. It is precisely the greater price freedom in the US that induced many drugs companies to relocate their research labs out of Europe and into the United States. Even though the Swiss spend a much lower fraction of their incomes on health care, their life expectancies at age 50 are about 1.5 years better than those in the US. However, as I argued in earlier posts (see, for example, July 28 of this year), life expectancies depend on many other factors than medical care, and the United States does not look good on most of these factors, such as obesity. More relevant comparisons are access to various tests, such as mammograms and PSA tests, and survival rates from major diseases, such as cancers and cardiovascular disease. The US does much better than other countries, including Switzerland, on both sets of criteria. So despite the obvious conclusion that various reforms of the American health care delivery system are desirable, Americans are getting some important advantages for their large spending on health care. It is crucial that these advantages not be forgotten when evaluating how much better other countries health delivery systems, including the Swiss system, are than the American system, and in deciding how to improve the American system.

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Welcome to the new Becker-Posner Blog, maintained by the University of Chicago Law School.

10/04/2009