EUROPEAN PAPERS ON THE NEW WELFARE

Health Care System in the Industrialised Countries and the Role of Private Insurance

In the various systems, health care is pursued through a whole set of funding sources, ranging from general taxation to the payment of contributions or premiums to sickness funds and insurance companies, while part of the health costs are borne by citizens who must share in costs directly.
Historical reasons are mainly at the root of the financing schemes in force in Europe, based on the one hand on social insurance schemes and on the other on national health care systems, where the State is responsible for meeting its citizens’ needs. The economic implications of these two taxation principles are clear: with the first, health care financing affects the cost of labour, with adverse effects on the competitiveness of companies; with the second, costs are charged to the general taxation.
The social insurance scheme dates back to the first social security system for industrial workers conceived by Bismark in the late 19th century. Used throughout Central Europe — France, Germany, Switzerland, Austria and Benelux — it was almost the only social security system in place in Europe until the second world war. Later, in some countries these system were abandoned following the requests of the population for a health care system with no discrimination among groups of citizens. The national health system was established in the UK in 1946, in the Nordic countries in around 1970, in Italy in 1976 and in Spain in 1986.
The boundaries between social insurance and national health systems, however, are not clear. In France, for instance, the State plays a key role in the system, because it sets the health spending ceiling, it defines benefits and sets regulations. In addition, the State ‘supplements’ the system funding by resorting to general taxation.
In the Netherlands, the Health Insurance Act came into force on 1st January 2006. This reform requires all residents to join a private insurance scheme to cover basic health care expenses. This new system is strictly monitored by the State to safeguard the social nature of insurance. Insurers have to provide all residents with an insurance coverage regardless of their age, gender or physical conditions; indeed, these variables do not contribute to premium setting. Furthermore, the Healthcare Allowance programme gives a contribution to all the citizens who cannot afford to pay insurance premiums, thus ensuring general access to health care. Finally, the coverage may be extended beyond basic services by taking out supplementary insurance.
Like the Netherlands, Switzerland also has its peculiarities in integrating public and private sources of financing. Swiss citizens have legally been obliged to purchase a private health insurance coverage since 1996. In compliance with the law, policies cover diagnostic and therapeutic services, hospitalization costs, hospitalization in nursing homes, domiciliary care and other minor services. The basic coverage has been extended since 1999 and has included alternative or complementary treatments with respect to traditional medicine.
In terms of supply of health services, State and not-for-profit health care providers play a key role in all countries. The number of private, for-profit health care facilities is very low: it ranges from zero in France and 0.8% in Germany to a more significant 15% in the UK, the US and Spain. Private facilities generally offer treatment for non serious pathologies and do not require expensive equipment that only public facilities can afford to buy. Besides, private hospitals are mostly non-profit and have fewer beds as compared to public hospitals.
Generally, there is a clear distinction between healthcare service providers and fundholders. However, in the UK and in Spain, to control costs better and improve the quality of service, there are insurance companies that have their own health facility networks. In the United States, agencies have been created within the framework of the so-called Managed Care Organisations, specializing in the management of health care services, a form of vertical integration between service providers and sponsors (HMOs can own and operate their own hospitals and pay salaries to their own physicians).
The different approach adopted by the health care systems affects the health care costs of industrialised countries who allocate a different share of their wealth to the health care system. In the United States and Switzerland, the overall health care expenditure is very high: in 2003, it accounted for 15% and 11.5 % of the GDP respectively (OECD Health Data 2005, Table 1). In the UE, in the same year the incidence of health expenditure accounted for 9.3%2. Countries with social insurance schemes have high costs (in France and in Germany, the health care sector absorbs over 10% of resources), whereas these costs have a lower incidence in countries with a national health system (Italy 8.4%; UK 7.7%).
There are also considerable differences in terms of per capita health care expenditure. In 2003, a US citizen spent USD 5,635 annually for health as against USD 2,968 spent by a European citizen. The yearly per capita health care expenditure accounted for USD 2,258 in Italy, USD 2,996 in Germany and USD 2,903 in France.

Figure 1: OECD health data 2005
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2 Estimates Assicurazioni Generali Research Department on OECD data.


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