Network News

X My Profile
View More Activity

Should America Copy the Dutch?

I wrote this a few months back for the Outlook section, but because of various scheduling issues, it never got published. But with Jon Cohn talking about the Dutch health-care system, and with risk adjustment and failed exchanges in the news, it seems worth posting. The basic story is that the Dutch run a health-care system that looks like a very sophisticated version of the Baucus plan. If we're going to rebuild in their image, we might want to take a closer look at what they've learned over the years.


"We're America," Max Baucus likes to say. "Which means we have to write a uniquely American solution." But the health-care solution that actually seems to be emerging in Congress -- which looks like the health-care solutions proposed by Barack Obama, Hillary Clinton and John Edwards during the campaign -- isn't all that unique. Not only does it look like another country's health-care system, but it also looks like a European country's health-care system. Quel Horreur!

In truth, it's seeming more and more likely that America is going to go Dutch. And that's not a bad thing. The Dutch have, by most measures, a high-performing, cost-effective health system. Every year since 2005, the Swedish consultancy firm Health Consumer Powerhouse has released the European Health Consumer Index. The EHCI compares Europe's 33 health-care systems against one another on a variety of patient-oriented measures. "During the past four years, the HCP has been unable to design an Index where the Dutch are not in the top three," marvels the group. In 2008, the Netherlands led not only the basic rankings, but, along with Estonia, the "bang for the buck" measure, which weights the system's performance against the amount of money the country spends. Closer to home, the respected journal Health Affairs published an article asking whether the Dutch system was "A Model For The United States?" The answer, basically, was yes.

And that's been borne out. The specifics of the Dutch approach will be broadly familiar to anyone following the American debate. Private health insurers dominate the system. An individual mandate forces everyone to purchase coverage from the providers of their choice. Insurers are not allowed to turn anyone away for basic coverage, nor can they discriminate based on preexisting conditions, age, sex or location. Individuals pay premiums, but the government provides subsidies tied to an individual's income. It sounds, basically, like what Max Baucus proposed in his much-touted white paper.

But for all the apparent similarities, there are some key differences beneath the hood.

The Dutch have recognized that the key to fostering productive competition between insurers is to keep them from competing unproductively -- that is to say, keep them from competing to deny coverage to the sick and cherrypick the healthy, as happens in the United States. To address this, the Dutch have developed a sophisticated "risk equalization" system. The Dutch estimate the health costs of individuals by tracking not just age and sex, but also historical use of pharmaceuticals and past hospital use. Insurers who cover riskier people are paid more by the government. Meanwhile, all insurers are forced to put part of their profits in a shared fund. The money is then distributed to insurers whose patients proved sicker than expected. Suddenly, kicking out the ill and ensuring only the healthy becomes less a viable business strategy for insurers and more a strange decision to opt in to a hefty tax. American politicians have talked a bit about risk adjustment, but nothing on this scale.

The other important difference is historical. In recent years, the Dutch system has been moving in a more market-oriented direction. But it still holds fast to certain crucial elements of yesteryear's more centralized regime. In particular, the government still sets the prices of most services. There is, unlike in America, a health-care budget. That's been the key to the Dutch health-care savings (they spend about $2,700 per capita, while America spends more than $6,000). Similarly, their physicians aren't paid on fee-for-service. They're given a lump sum every year, eliminating the financial incentive to overprescribe care. Together, these policies have done a very good job controlling prices but had certain adverse impacts on the responsiveness and consumer friendliness of the system. That's why the Dutch have spent the past decade or so building the managed competition model that now excites our policymakers.

America's problem is the opposite: We're starting from a free market position and trying to better control cost. Though the Dutch model has been a shift towards market-driven health care for the Netherlands, it would be a lurch towards government-driven health care in the United States. The concern, however, is that it won't take us far enough. We seem to be near copying the reforms the Dutch instituted to improve satisfaction with their system. We're ignoring, however, the hard cost controls -- the government spending cap -- that have historically kept the Dutch health-care systems’ costs at about half of what we pay. We may, in other words, be cadging the wrong part.

For more on the Dutch system, see this article by Ab Klink, Minister of Health, Welfare and Sport in the Netherlands. Pay particular attention to his discussion of pricing. For a lot more on the Dutch system, see this Health Affairs study.

By Ezra Klein  |  October 6, 2009; 3:32 PM ET
Categories:  Health Reform , Health of Nations  
Save & Share:  Send E-mail   Facebook   Twitter   Digg   Yahoo Buzz   Del.icio.us   StumbleUpon   Technorati   Google Buzz   Previous: Gaming the Exchanges
Next: The Fake Health-Care Debate

Comments

My fear is that without cost controls, which are not really addressed in current reform proposals, the whole thing is likely to blow up long before we have a chance to do any 'shifting' to a more effective system. We're going to throw a lot more money into a system which already has way too much money sloshing around in it, and there is going to be a revolt similar to the one that caused the repeal of the catastrophic provision in Medicare a number of years ago.

Posted by: exgovgirl | October 6, 2009 3:51 PM | Report abuse

I will say it once again- in this country we have a cost problem and the insurance problem is secondary. This bill does nothing at all meaningful to control costs because the democrats thought that they had a better chance of simply blaming the insurance companies. But as long as the cost issue is not addressed then this is going to end up being a lousy bill.

Posted by: spotatl | October 6, 2009 4:04 PM | Report abuse

"In recent years, the Dutch system has been moving in a more market-oriented direction."

As are a number of other systems-- UK, France, Spain, Australia and others-- you can find reform elements in their plans that are decidely market-oriented as well. Which I think is one of my main macro-level points on comparative systems analysis: There is no doubt a lot for us to learn from other countries. But our objective should not be to replicate where they WERE in 1995, but were they ARE going in 2020. We've got a lot to catch up on-- and getting to a heavily regulated, sophisticated market-oriented system is different than what either Republicans or Democrats are offering right now.

As Cohn notes in his piece, the public option is being offered IN LIEU OF a better regulated system. The move to direct government control, rather than a regulated, market-oriented solution is the opposite direction that European countries are going. Meaning, the public option is closer to Europe 1995 than Europe 2020. That's the big issue.

On risk adjustment-- yeah, that's a no brainer, we should be doing that to further discourage cherry-picking. It is worth noting however, that we already do risk-adjust Medicare Advantage. When Obama speaks about the $x billion overpayments to private insurers, a significant portion of that "overpayment" is an extrapolated estimate on our inability to appropriate risk-adjust the MA patient population. So as folks know, risk adjustment has its limits as well.

Posted by: wisewon | October 6, 2009 4:07 PM | Report abuse

There are some additional important differences between the Dutch system and the proposals in the US.

1. *Everyone* in the Netherlands is covered by the same program -- employed, self-employed, unemployed, seniors, children. That's what makes the other features sustainable.

2. There are no premiums for children under 18. They are automatically covered in their parent's plans.

3. The program is financed by a combination of income-based payroll deductions (reimbursed by employers) that are used to "equalize" risk across the private companies, plus individual premium payments.

4. It is estimated that *2/3* of Dutch households receive subsidies from the government to achieve the goal of affordable care

5. All participating companies use "community rating" for the basic package

For all intents and purposes, the only thing the current Senate proposal has in common with the Dutch system is that it places private insurance at the center of the national health policy. The current proposal is not a "system" in any recognized meaning of the word.

Posted by: Athena_news | October 6, 2009 4:24 PM | Report abuse

The Dutch model seems quite effective but there is an enormous difference between a system in which all physicians receive a lump sum salary (Dutch) and one in which most doctors are paid on a fee-for-service basis (US). It would take a fundamental shift in our health economy to implement that type of reimbursement structure in this country (though it probably would significantly reduce health care costs and improve outcomes).

Posted by: rlplant | October 6, 2009 4:53 PM | Report abuse

I'm no expert, but many of the comments I read in this blog about how health care reform has to do more to control costs by addressing over utilization seem to me to be rather pro-hospital/doctor/insurer and anti-consumer. Maybe I've just got a heart of stone, but all this talk about how awful government set prices are and how so many doctors and hospitals are struggling because medicare rates are too low just doesn't resonate with me. I mean it's not like the choice is between market set prices and government set prices here. Didn't Kenneth Arrow pretty much establish that there's no meaningful competition in the health care market like 50 years ago? If it's a choice between some private insurance monopoly setting a price and the government setting a price, I'll take the government every time. If the hospitals can't cut it or the doctors cry because they aren't making as much as they used to then I say boo-hoo.

Posted by: nklein1553 | October 6, 2009 5:19 PM | Report abuse

Notwithstanding the other (in my opinion, correct) comments here about the Dutch system (salaried docs, high subsidies) and our basic problem (high cost and over utilization), risk adjustment using age/gender/drug use has been shown to be remarkably realtime and accurate. Prescription drug use is known with little of the lag of other health care services, and shows the emergence of chronic disease, what pushes costs more than anything, very quickly.

Posted by: scott1959 | October 6, 2009 6:07 PM | Report abuse

Ezra,
In the Dutch system, private insurers do not "dominate"...they play in the playpen very carefully structured for them by a powerful government regulator. Furthermore, missing from this and Jon Cohn's account is that profit for the private insurers is circumscribed for the basic mandated insurance. I believe they can only potentially make profits on 50% of that package.

Also you and Cohn are taking the 3-year old Dutch reform as a fait accompli. The Dutch system is still in its "warm up" phase and may need various overhauls before it arrives at a stable state. The Dutch are almost as market-mad as the US, despite having by comparison a MASSIVE welfare state (beyond health insurance) and this reform may end up being an "episode" that turns into something like what the French or Japanese have. Specialists, for instance are currently getting paid in the Netherlands, in relative terms way too much (I think about twice or three times as much as primary care physicians).

When I read these articles that point out that every other nation doesn't have a single payer or socialized medical system, it seems to me that the writer is saying "Oh look, we Americans don't have to radically change our outlook on healthcare delivery and finance!!" when in fact, if they looked closely, they will see how far away current proposals are from, for instance the Dutch or the Swiss systems. There is no way around standing down and shrinking the for-profit insurance market here and reinforcing a public service orientation within medicine and healthcare management.

Posted by: michaelterra | October 6, 2009 7:17 PM | Report abuse

Responding to the question in the title, I think we need to institute an entirely non-profit basic health insurance system and see how it serves us. It is OK to have profit in supplementary insurance, like the Medigap and other Medicare supplements. I think we need to go in the opposite direction of the Dutch because they are coming from a very different place. Their system is still at 3 years, a rapidly evolving experiment.

Posted by: michaelterra | October 6, 2009 7:24 PM | Report abuse

This is my healthcare reform prescription from late August, which doubts that the US Government can regulate as well as it can deliver services:

http://healthcare4us.wordpress.com/2009/08/27/lessons/

I could be wrong about the regulation vs. direct services but that has been my take on it so far.

Posted by: michaelterra | October 6, 2009 7:29 PM | Report abuse

In the Netherlands, your doc can put you on disability or partial disability for 5 year increments, during which time you receive up to 70% of your salary.

I'd trade the entire U.S. health care industry for a disability safety net like that. No wonder medical bankruptcy is non-existent there.

Posted by: bmull | October 6, 2009 9:12 PM | Report abuse

In the recent annual ranking of European Health care systems, the Netherlands came out at the top for the second time in a row.
See the report, and previous year's reports, here:
http://www.healthpowerhouse.com

Posted by: LouisP1 | October 7, 2009 9:39 AM | Report abuse

Wisewon : "The move to direct government control, rather than a regulated, market-oriented solution is the opposite direction that European countries are going."

Two important points: the degree of regulation, covering everything from price of coverage to rates of payment to the profits companies can make, in Europe is considerably more than anything most American businesses and their political allies would consider a "regulated, market oriented solution."

Second, the opponents of Obama's plan are even more determined to stop regulation than they are to stop any of the proposals now on the floor of congress. Even Wyden-Bennett, with its extremely weak regulations, is considered anathema by the usual suspects, who have gone so far as to label Bennett a rino -- Republican in name only -- because of his involvement. Several of the former Republican co-sponsors dropped their names from the bill this year.

I would certainly favor the development of a strongly regulated private insurance approach to US health care, although it would have to contain significant regulation of ineffective health care and dangerous lack of quality assurance if we hoped it would work with the success it enjoys in Europe. However, there is actually less support for that right now than there is for single payer, and almost zero support from right of center. That is the main reason that that approach has not been tried.

The proposals being offered by the Finance Committee certainly leave room for evolution in that direction in the future, but there is no support for now.

Posted by: PatS2 | October 7, 2009 5:22 PM | Report abuse

What michaelterra said: the coverage that comes under the straight-up public remit of the ABWZ includes things that, in the US system, either balloon premiums and out-of-pocket costs, or get thrown to the federal government, or to the states where they're underfunded and usually reserved for people who are at the point of indigence or a danger to self and others.

Disability. Long-term hospital care. Home care. Psychiatric care. These shouldn't be seen as small exceptions to a private insurance system: the private system functions as it does in the Netherlands under its new regime only because so many big-ticket, and frankly messy public health costs are covered through taxation.

The Dutch system has its private insurers on a very short leash in a dog park. The American non-system has private insurers running feral, crapping everywhere and biting small children, and I don't think those bad dogs can be tamed.

Posted by: pseudonymousinnc | October 8, 2009 2:55 AM | Report abuse

The comments to this entry are closed.

 
 
RSS Feed
Subscribe to The Post

© 2010 The Washington Post Company