Businessweek Archives

Can Europe Help Cure America's Health Care Mess?


Social Issues

CAN EUROPE HELP CURE AMERICA'S HEALTH CARE MESS?

Imagine a country where everyone has health insurance. Nobody is denied coverage or charged extra because of a bad medical history. Patients can choose their own doctors. Hospitals have state-of-the-art equipment. Yet this nation's total health care costs as a percentage of national income actually declined during the 1980s.

Utopia, you say? Actually, it's Germany. But to an American, Germany's well-oiled health machine might seem like a distant fantasy. While the U.S. struggles with rampant health care inflation and 35 million uninsured citizens, Germany seems to be able to combine universal coverage with a tight rein on costs. The same is true across Europe. And even though Europeans are grappling with problems, they have managed to stabilize or slow the growth of health care spending. None of these countries devotes more than 9% of gross domestic product to health costs, while the U.S. tab is over 12%--and rising fast.

Small wonder that American politicians and health care experts have been turning to Europe (and Canada, page 54) for ways to tame the U.S. health monster and extend coverage to the uninsured. Senate Majority Leader George J. Mitchell (D-Me.) has introduced a bill that mimics features of several European systems. And the General Accounting Office recently finished a study of the French, German, and Japanese systems. These countries "are natural laboratories to look at," says David J. Gross, one of the GAO report's authors. "We can learn which things work."

And--just as important--which don't. No country has discovered the Holy Grail of health care. Europe is struggling with the same cost pressures as the U.S., brought on by expensive new treatments, aging populations, and rising patient expectations. Still, it seems to have a better track record.

While the systems vary greatly, from Britain's entirely nationalized service to Germany's decentralized network, there is one common theme: a set of health y contrast, Europeans emphasize public health and equality of care. So they have accepted a stronger government role in health planning and control.

SIMILAR MIX. Many U.S. researchers are homing in on Germany. Unlike Britain, Sweden, and Spain, where health taxes are collected by the government and hospitals are run by the state, Germany has features similar to the U.S.: an employer-based system, numerous insurers, and a mixture of private and public care.

The Germans have solved the problem of universal coverage by simply mandating that everybody join an insurance plan. Most Germans sign up through work. The fee, which averages a stiff 12.4% of annual wages, is evenly split between employee and company. Employers then arrange for insurance through one of 1,200 Krankenkassen ("sick people's funds"), nonprofit organizations charged with looking out for patients' interests. The government covers retirees and the unemployed.

The key is the clout that the Krankenkassen have with providers. By law, associations of doctors and hospitals must enter into annual negotiations with the funds, much as German unions wrangle with powerful employers' associations. The government sets an overall target, then lets the negotiators hash out how to divide it. In case of a stalemate, an arbitrator steps in. "The collective system ensures a certain framework in which prices can't spiral out of control," says Gerhard Schulte, head of health care and insurance at the Health Ministry in Bonn. Result: Inflation-adjusted German health care spending rose 20% during the 1980s, compared with nearly 50% in the U.S.

To some U.S. planners, what's especially attractive about this model is the absence of direct government control over prices. In other countries, including Canada and France, governments get intimately involved, politicizing the process and adding bureaucracy. The Germans force doctors and other providers to shoulder responsibility for implementing cost controls. Of course, one big question is whether Germany's collective-bargaining-style system would work in individualistic America.

In a way, the U.S. private sector is emulating Germany's model via preferred-provider organizations, in which a company contracts with a set of doctors and hospitals to treat employees at negotiated rates. But PPOs are too limited to have enough effect on the U.S. system, which Jean-Pierre Poullier, director of health policy studies at Paris' Organization for Economic Cooperation & Development, likens to a cash register: "The money pours in and goes out, and when the kitty is empty, they raise the premiums." In Europe, negotiated rates work because they are comprehensive, covering nearly all providers.

Europeans also give the cash register some clout through strict government supervision of capital spending. The idea is to allocate costly gear where it's needed, avoiding the U.S. phenomenon of several hospitals in a small city each buying expensive new devices--and driving up costs through superfluous treatments to pay for them. In France and the Netherlands, for example, any new construction or acquisition of expensive equipment needs approval from the government. France takes the measure one step further, requiring government approval to use equipment. Of course, a government clampdown on the purchase of machines has its drawbacks. French doctors complain that the regulations often mean long delays in getting equipment. And patients often have to travel farther or wait longer for treatment.

On the other hand, says Bengt Jonsson, a health economist at the Stockholm School of Economics: "If you compare prices for similar procedures, there's a big difference between the U.S. and Europe." In 1989, Jonsson studied lithotriptors, the $1.3 million machines that zap kidney stones with sound waves. Dissolving the same kidney stone cost $3,900 in Sweden, vs. $5,700 in the U.S.

Europeans seem to have found the solution to another of the U.S.'s key problems: the link between an individual's health risk and insurance payments. In America, people with "preexisting conditions" have trouble getting coverage or pay astronomical fees. And a catastropic illness incurred by one or two employees can double or triple a small business' insurance premiums--or even get its policy canceled.

European governments spread the risks across the entire population or large chunks of it. About 80% of France's citizens are insured through a single government fund. People contribute according to their income--not their health status--usually through a payroll deduction. To American eyes, the amounts seem high: Employers contribute 12.6% of their total payroll to health insurance, and employees a steep 6.8% of their paycheck. But there are few complaints, notes a Senate staffer who studied the French system: "They don't view it as a tax, but as a contribution."

The French government establishes prices for most services, including doctors' fees, which are set at a reasonable $16 per visit. The French government also backs up its fee structure with strict spending caps. Hospitals are simply given budgets, for example. If they go over budget, they have to economize the following year. The GAO report estimates that from 1984 to 1987, inflation-adjusted hospital spending was 9% less than it would have been sans budget caps. They "are the teeth" that keep costs in line, says the GAO's Gross.

HOUSE CALLS. In addition to strict budget controls, Europeans place a high priority on prevention--even the British, who spend only 40% of what Americans do on health care. Britain's much-maligned centralized National Health Service, with its long delays and constant funding crises, is hardly an ideal model. But it has at least one enviable feature: its maternity and newborn care. All pregnant women are treated free of charge, and after a new mother comes home from the hospital, an experienced midwife makes daily house calls to offer advice. In contrast, maternity care in the U.S. is an ad hoc affair--great for the rich, terrible for the poor--and a health care headache for everyone, since neglect of a teenage mother can result in premature birth, which can add up to $70,000 in hospital costs.

Emulating any of these systems would have its drawbacks. Even with centralized planning, Europeans still find that controlling costs is like squeezing a balloon: They just pop out someplace else. In France, where physicians' fees are regulated, some popular doctors demand under-the-table payments from patients. In Germany, where per-day hospital rates are preset, insurers find that hospitals boost fees by keeping patients longer--an average 13 days, vs. 7 in the U.S.

The essential European formula of "spend less to cover everyone" can mean painful compromises that Americans might not like. In Britain, 1 million people are on waiting lists for "nonemergency" surgery--including cataract removal and hysterectomies. Some patients wait more than two years. And those over 60 often don't get costly kidney dialysis. "If I were rich, I'd rather be in America," says Julian Le Grand, professor of public policy at the University of Bristol.

Other experts point out that more research needs to be done on overall health indicators--i.e., whether people fare better or live longer in the U.S. or European systems. For example, the U.S. spends a lot of money on geriatric care--and it shows: Americans over 80 have the world's second-longest life expectancy, just behind Iceland.

But beyond the pros and cons of different systems and the feasibility of adapting them in the U.S. lies one overriding principle: To Europeans, health care is a fundamental right, not an employment perk. Trevor J. Andary, a 23-year-old teacher from Kentucky, has had first-hand experience with this philosophy. He broke his spine in a tumble off a Welsh mountainside last October and was paralyzed from the chest down. After emergency treatment, Andary wanted to return home. But he had no health insurance and wasn't covered by his parents'. So, instead, he has been taken care of--at no cost--through Britain's National Health Service and is now undergoing extensive rehabilitation.

Even if he had been insured in the U.S., Andary believes cost pressures would have meant less rehab and a more difficult adjustment for him. "They're le to take more of the human side here and take as long as needed with a patient," he says. That's one lesson the U.S. would do well to learn.Mark Maremont in London, with Gail E. Schares in Bonn, Stewart Toy in Paris, and Susan B. Garland in Washington


Hollywood Goes YouTube
LIMITED-TIME OFFER SUBSCRIBE NOW

(enter your email)
(enter up to 5 email addresses, separated by commas)

Max 250 characters

 
blog comments powered by Disqus