EUROPEAN PAPERS ON THE NEW WELFARE

Costs of Political Intermediation and Sustainability of the European Social Model in Health Care: the Dutch Example

4. The Future of European Health Care: New Prospects from the Netherlands

While all European countries have been attempting for years to preserve universal health care cover mainly through added patches bound to prove insufficient in the long term, the 2006 Dutch reform has been in our opinion the most intelligent and original reform experiment so far.
The Dutch reform10, that replaced a previous dual public and private system, did not question the European social model, and universal health care coverage, available and accessible to everyone, as its fundamental pillar. On the contrary, it set the conditions for such cover being guaranteed with greater certainty also in the future. It did so by abolishing at root-level all costs of political intermediation in the direct management of health care services, and promoting an almost total privatisation of the system, both for insurances and for services provided. The strict regulation laid down by the reform, far from compromising the correct functioning of market mechanisms, allows its real effectiveness in a sector where relying on simple laissez faire, for the aforementioned reasons, prevents its functioning. In the Netherlands the rules necessary for the development of effective competition have been set in a market by its nature incapable of producing them spontaneously and for what is probably the most effective system of containment of costs and accountability of all providers of services. In assessing the model and in order to take into consideration its profound differences from the American one, one must consider that the Netherlands are one of the European countries where social inequalities in accessing and taking advantage of health care services are relatively minor.
The reform provides for a compulsory and universal insurance system for all residents in the Netherlands, and also an obligation to contract respecting equal treatment and conditions on the part of companies offering health care insurance. As a consequence, all useless or harmful preliminary clinical tests and all those mainly aimed at evaluating the persisting profitability of the contractual relationship for insurers become pointless. All costs and inequities typical of adverse selection are thus averted.
The contents of the basic benefit package are set by law. Premium fees comprise a fixed sum (sc. nominal part), which is the same for all those insured and paid directly to the insurer (this amounts to about half of the insurers’ health care receipts), and a sum proportional to individual income which is transferred to a risk equalisation fund collected and redistributed by the state to the insurance companies to compensate for financial imbalances deriving from the obligation to enter a contract with any applicant, regardless of one’s personal health conditions. This certainly implies that the annulment of the parasitical costs of political intermediation in the strictest sense achieved with the reform did not also entail an equally radical reduction of bureaucratic intermediation costs, but that is how the principle of the universal mutualistic sharing of costs is safeguarded.
Minors are exempt from paying the premium (this is the only part of the funding of the health care system that is paid for exclusively through general taxation proper). Lower income individuals get subsidies for the payment of the premium proportional to income.
Insurance companies cannot fix the nominal part of the premium fee at a cost superior or inferior to a modest percentage of what is annually established by the state for the basic benefit package (that amount was set at 1051 Euros in 2007 and raised to 1085 in 2010). They can however compete freely in offering supplementary insurance policies, that are cheap enough to be taken out by over 90% of the population and may include dental care, physiotherapy and visual aids including those for adults, but also alternative medicine and plastic surgery. This latter point will deserve a closer examination later, given its theoretical and principle-related implications.
Insurance companies can choose the final providers of health care services — and in this case, differently from political bodies, choices will be made exclusively on the basis of the quality-price ratio offered by providers. They can also, however, allow the insured to freely choose their doctors and hospitals, and that is what has mainly happened so far. The point, as will be examined later on, is crucial for the effective functioning of real competition, not only among insurers but also among service providers. The insured can choose among different insurance products and have the right guaranteed by law to change insurance company every year at no additional cost, this being an instrument essential to ensure effective competition, a control of costs and real freedom of choice by customers. All customers, regardless of the kind and legal categorisation of their job or decisions made by employers, are entitled to the same opportunities of choice. They also have the right to be compensated for care received abroad within the expense limits established for the same services in the Netherlands.
Cost containment is thereby ensured by competition among insurance companies, an instrument clearly more effective than internal controls implemented by the same public authorities that elsewhere also directly manage health care themselves (in Italy, by the regional governments that provide the service, appoint the managers and personnel of public health care providers and conclude agreements with the private ones).
It is noteworthy that, in a system like the Dutch one, funding universal health care cover has a very reduced impact on public finances. This is crucial, above all in times of economic crisis and recurring disturbances in the financial markets, and especially for countries with high levels of public debt like Italy. Possible increases in health care costs — inevitable, as already said, over the coming decades — cannot result in huge imbalances of public accounts that would lead to a rise in the debt service, with the well-known relevant systemic consequences of wealth redistribution to the benefit of financial revenue on government securities. Higher risks of default and consequent difficulties in the placement of public debt securities are also much less likely.
In the Netherlands, after the passage of the reform, a lot of discussions focused on the very wide freedom of choice so far guaranteed to the insured with respect to final health care providers. This freedom of choice, it is argued, would have negative effects on the competition among providers, as competition among insurers currently focuses more on the cost of premiums than on the quality of health care, which might otherwise be the case if companies decided to contract selectively with health care providers. Currently, as mentioned, the choice of providers is made mostly by final users. They, it is argued, do not have the same expertise and knowledge of facts and records, as companies have, to ascertain quality and effectiveness of health care provided, due to information asymmetries, overwhelming for final users on the health care market. But users actually seem to prefer the guarantee of freedom of choice to a selection of services made by insurers that would require a very high degree of confidence in them (a trust that, in the hypothetical case of a transplant of the Dutch model to the Italian situation, would probably and understandably be even lower). How difficult the assessment of the quality of health care is, is however revealed by an estimation contained in a Dutch government study, according to which, in the second year of enforcement of the reform, insurers themselves were not yet able to make definitive comparative evaluations on the quality of health care supplied by different individual providers11.
Anyway, in a system like the Dutch one, economic interest is the tool for ensuring economic efficiency and the overall soundness of the system, rather than the goodwill and the presumed foresight of the sole political class and bureaucracy. This tool implies more demanding productivity standards than those usually enforced by political management and is probably more effective also in curbing prescription drugs abuse (despite some pessimistic forecasts, the Dutch pharmaceutical spending is now equal to half that of the US). But it is probably more efficient, above all, in ensuring the primary objective of achieving the sustainability of health care coverage for the entire population, which is, as mentioned at the beginning, everywhere at high risk for very objective reasons.
Neither should the strong economic interest that pushes Dutch insurance companies to invest significant resources in information campaigns and to offer their customers significant economic incentives aimed at promoting lifestyles and behaviours that favour effective prevention be underestimated.
The Dutch experience seems to suggest so far that Europeans are culturally less inclined than Americans to exceed in irrational and wasteful health care expenditure, since, as already said, competition among insurers, fuelled by an unexpected willingness of customers to exercise the power to change company upon annual expiry of policy at no additional cost, is mainly carried out on the grounds of the price to be paid. This behavioural pattern has also been fostered at the beginning by the provision for group negotiation (for professional categories, consumer associations, groups of employees, members of sports clubs, etc.), which actually covers about 50 % of all contracts. The provision for group negotiation does strengthen the bargaining power of the insured, but is considered by some to be a feature of the health insurance market that could in the future prove an obstacle to the readiness, as already mentioned, strong so far, to reassess annually the persisting expediency of the previously chosen option.
A legislator willing to take on the Dutch reform model could obviously provide for the possibility of copayments by the insured parties for services actually used, similar to that experienced in Italy with the system of prescription charges (oddly called “tickets” — in English — by the Italian media), that proved quite effective even if low-priced, in order to avoid uncontrolled growth of costs fuelled by health care consumerism stimulated by market strategies or by “moral hazard” rather than by effectiveness or soundness of treatments and screenings. This risk, as is well known, is one of the main objections usually raised against any form of privatisation of health care services in Europe. And of course there would be nothing to prevent a legislator from possibly providing that contracted copayments be proportional to income, even if it is quite obvious that any such allowance would then have to take into consideration the possible iniquities due, especially in countries like Italy, to the state and performance of the entire public machine in charge of revenue monitoring.
In the event of the Dutch system being broadly transplanted to other countries other possible forms of copayment could be required of insured parties engaging in unhealthy behaviours and lifestyles (smoking, alcohol, psychotropic substances, pharmaceutical drugs, overeating, etc.), obviously in cases where these can be detected by medical tests. This might be the case especially if these behaviours persist even after the individual concerned has already taken advantage of medical treatments needed to deal with their consequences. Further treatments should not be made conditional on advance copayment, but it should be enjoined afterwards and possibly also be proportionate to the harmfulness of the behaviour concerned. From a liberal perspective it is not the job of society to defend its adult and sane members from themselves or from harmful lifestyles they have freely chosen — this point deserves a closer examination further on. This, however, should not mean that the contribution required of every taxpayer (or every insured individual) for the sake of universal health care coverage be pushed to the point of forcing them to settle the economic costs of others’ harmful or irresponsible behaviour.
In the Netherlands, the containment of unnecessary treatments has been pursued more schematically, first through a 255 Euro rebate for those who in the previous year did not take advantage of any treatment (other than routine medical tests, prevention services and those related to maternity and childbirth). In 2005, for example, about a quarter of the insured were granted the rebate. From 2008 on, the containment has been pursued through the provision of a mandatory annual deductible of 150 Euros (increased to 165 in 2010) from which the chronically ill are exempt. Voluntary deductibles up to 500 Euro can be negotiated in exchange for reduced premium. It should however be again remarked that compulsory insurance only covers the legal basic benefit package, subject to continuous review and reassessment in order to exclude (all and only) frivolous, unnecessary and non-essential treatments.
The first four years under this new Dutch system have proved the reform’s promoters right. In fact from the very start, despite its profoundly innovative features, the reform has been appreciated by a large majority of the Dutch, although opinions are obviously not unanimous. The system has maintained its level of excellence in Europe, according to the results of the Euro Health Consumer Index 2009 drawn up by Health Consumer Powerhouse, a leading independent international research centre based in Stockholm (that ranks Italy 15th in Europe)12. At the same time it has so far proved able to slow down the cost increases especially compared to those occurring in the last five years of implementation of the previous system. Dutch health care spending is now 9.8 % of GDP, just above the Eurozone average (9.6), an area where national health care systems are mostly public. And no doubt the introduction of the new system has created a general and keen awareness, unparalleled in Europe, of the actual cost of health care and costs trends.
If it is still too early to assess the long-term results of the Dutch reform, two main factors will be very important in the future. On the one hand the effectiveness of monitoring competition among insurers and of antitrust regulations. From this point of view, concerns are raised over the strong competition on premiums in order to gain market share occurred in the first years of implementation of the new system. The consequent losses incurred by all insurers and the limited number of insurers operating in this field on the Dutch market after the concentration process that took place — five of them currently cover 82 % of the market — could trigger a forthcoming significant increase in premiums, once the number of competitors is further reduced. Perhaps it might also be advisable to prevent insurance companies from controlling or being associated with companies and institutions running hospitals or directly providing services, so as to ensure that control and containment of expenditure remain a priority interest for the insurance companies.
On the other hand effective monitoring of the quality of services provided is also essential. In the Netherlands this task is assigned to an independent authority (IGZ, Inspectie voor de Gezondheidszorg)13 that has no political, propagandistic, electoral, reputational or patronage related reasons to defend or make programs or management choices made by insurers look smart, as is instead the case where it is the same political power that directly appoints, or exercises its influence over the appointment of, its own controllers. That is inevitably the case in the Italian system and entails a permanent source of obvious and inherent conflict of interest. Equally important is the circulation, reliability and availability of information offered to the public on the actual results historically obtained by health care providers and on the actual scope of the cover provided by insurance companies. Similarly, in a system that allows a wide freedom of choice and demands individual responsibility, health education has even greater importance, both in schools and in the media.
In the Netherlands the results achieved by insurance companies are also evaluated annually by a comparative quality index published on a ministerial website (KiesBeter.nl) that includes software that helps individuals to identify the best deals on the market, matching their objective condition and subjective preferences.
What is essential is constant monitoring by truly independent bodies. Independent, that is, both of private economic interests and of those of politicians and their more or less hidden stakeholders with their own electoral, patronage related and economic agendas. In addition circulation of information made available for public evaluation and discussion by the media, consumer organisations and users is also essential. These are the best instruments for avoiding the typical risks to every health care system based on private insurance. These include competition only on the price of premiums, on the length of waiting lists, staff courtesy and the quality of accommodation in hospitals or other merely whimsical and imaginary needs. These are things that can be evaluated by all users. What ordinary users are generally not able to evaluate is the quality, effectiveness and appropriateness of health care according to scientifically reliable criteria — at least for those who do not consciously want to reject them: assuming, however, in this case, as will be argued further on, full personal responsibility. In this area, the behaviour of other European consumers — at least that of the British, that has already been the object of specific studies — seems much less experienced so far than that of Americans.
For the moment no more than 1.5 % of Dutch citizens have violated the obligation to buy insurance, a violation punishable with a fine amounting to 130 % of the cost of the basic insurance package. Many of these people are part of the extreme fundamentalist Christian minority who believe that they should not receive treatment because diseases are God’s will. This is similar to the percentage of citizens that consistently refuse free and compulsory vaccinations.
As already mentioned, the current Dutch health care system has only been in force for four years. But its guidelines follow, in a more accomplished and consistent way, a pattern of private but closely regulated health care system already in place in Switzerland since 1996, its only fully comparable precedent14. The two systems share a high degree of satisfaction among customers and a high level of quality of services supplied (Switzerland ranks 5th in Europe according to the aforementioned Euro Health Consumer Index 2009, behind only the Netherlands, Denmark, Iceland and Austria). Both also score among the highest, compared to other European countries, in achieving the lowest levels of social inequality in the access to and use of health care services. It should however be acknowledged that the Swiss system is also quite expensive, costing 10.8 % of GDP, a level exceeded only by France in the EU, and one point higher than the Dutch one, which in turn is not among the lowest. Since, as mentioned, the competition on premiums, unleashed in the first years of implementation of the reform in the Netherlands, has forced insurers to operate at a loss and has triggered a concentration process so far not averted by law or regulators, the question is raised whether it is just a matter of time before a similar increase in costs occurs there too15.
Four specific features of the Swiss system, that make it different from the Dutch one, could indeed be responsible for high costs. One is the lack of uniform legislation, as most of the implementation rules in Switzerland are enacted by individual cantons, making it less easy to distinguish the economic effects of the different regulations. Another is the mandatory domestic and non-profit character of health care insurers in Switzerland that could perhaps result in lower competitiveness and relatively inadequate management efficiency. A third feature is the possibility of accessing specialist care without previous general practitioner prescription, provided in Switzerland by many contractual schemes (no gate-keeping function of GPs, as usual in the US), a possibility excluded instead in the Netherlands (as is mostly the case throughout Europe). Finally, and most importantly, high Swiss costs might also be the consequence of a much less sophisticated regulation of risk adjustment factors for the allocation of the risk equalisation fund (the fund resulting from solidarity contributions required of policyholders and redistributed by the state among insurers). In Switzerland, like in the Netherlands, insurers are not allowed to refuse a contract based upon the individual health risk profile of buyers. However the factors for risk equalisation are not only calculated differently in individual cantons, but, at least until 2011, only relate to age and sex (after 2011 hospital admissions in the previous year will also be taken into account), whereas in the Netherlands parameters are much more well structured and detailed upon the health profile of the insured party. Consequently many Swiss insurance companies chose, or were forced, to leave the health care sector, or introduced strict selective contracting in the offer of supplementary policies. This is a trend that certainly triggered, for the reasons argued in the discussion of the American system, a general cost increase in Switzerland, but that phenomenon is quite limited in the Netherlands, at least for the time being.
It is therefore prudent to postpone a definitive judgement on the measure of the aptitude of the new Dutch system to achieve an effective containment of the growth of costs of a health care system available to all citizens. So far, however, the reform seems to have proved it is possible to avoid both waste and the risk of misappropriation and abuse that characterise the Italian-style party-political management of health care, along with the diseconomies and iniquities that characterise the total deregulation of the American system.


10 A synthesis on the Dutch system, compared to the British one in Claire Daley and James Gubb, Health reform in the Netherlands, CIVITAS Institute for the Study of Civil Society, 11/2007. A discussion on the Dutch reform compared to the American system in Maggie Mahar and Niko Karvounis, Going Dutch for health reform ideas, The Health Care Blog, 22/6/2008. Marco Romanelli, Sistema sanitario olandese, saluteinternazionale.info, 3/3/2010.
11 Rudy Douven, Marco Ligthart, Esther Mot, Marc Pomp, Early experiences with the Dutch health care reform, EUROFRAME-EFN Autumn 2007 Report, CPB Netherlands Bureau for Economic Policy Analysis.
12 Arne Björnberg, Ph.D., Beatriz Cebolla Garrofé, Ph.D. and Sonja Lindblad, Euro Health Consumer Index 2009 Report, Health Consumer Powerhouse, Stokholm 2009.
13 The Health Care Inspectorate in short, www.igz.nl/english/
14 Robert E. Leu, Frans F. H. Rutten, Werner Brouwer, Pius Matter, and Christian Rütschi, The Swiss and Dutch Health Insurance Systems: Universal Coverage and Regulated Competitive Insurance Markets, The Commonwealth Found, January 2009. This report was jointly produced by two country teams at the request of the Dutch Ministry of Health, Welfare and Sports, the Swiss Federal Office of Public Health, and the Swiss Secretary of State for Economic Affairs.
15 A discussion of the implications of the global crisis for the Dutch health care system in Hans Maarse, Cost Control in the Netherlands: Testing Market Practices, in Cost Control and Health Care Reform: Act 1, Commentary from the Health Care Cost Monitor blog, May-September 2009, The Hastings Center, 2009.


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