International Comparisons of Health Care - Overviews Of Selected Health Care Systems
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The OECD international health data enable researchers to compare health systems to one another in terms of health care costs and quality. In May 2004 Peter Hussey, Gerard Anderson, Robin Osborn, Colin Feek, Vivienne McLaughlin, John Millar, and Arnold Epstein published "How Does the Quality of Care Compare in Five Countries?" (Health Affairs, vol. 23, Issue 3, 2004). The investigators considered how well five countries—Australia, Canada, England, New Zealand, and the United States—performed on twenty-one measures of health care quality developed by the Commonwealth Fund International Working Group on Quality Indicators. The measures included survival rates for selected cancers, kidney and liver transplant, acute myocardial infarction (heart attack), and ischemic stroke; avoidable outcomes such as suicide, asthma mortality, and the incidence of pertussis (whooping cough) and hepatitis B; and process measures such as rates of screening for breast and cervical cancer as well as influenza and polio vaccination rates. The measures were selected by the group of health care quality experts as key indicators of health system performance, and also because they identify opportunities for improving health and health care.
The investigators concluded that no one country delivers the best or worst medical care and observed that there was room for improvement in health care delivery in every nation. For example, while the United states spends the most money on health care and boasts the highest five-year survival rates for breast cancer, it had higher mortality rates for asthma than Australia or England and the lowest five-year survival rates for kidney transplants. Australia had higher rates of breast cancer screening than other countries and the lowest mortality rates for persons suffering from acute myocardial infarction but also the lowest five-year survival rates for childhood leukemia and a higher incidence of pertussis than other nations.
Canada had the highest five-year survival rates for childhood leukemia and the highest polio vaccination rate; however, it also reported the second-highest incidence of pertussis and the highest rates for ischemic stroke. England had the lowest five-year survival rates for breast cancer and lower survival rates for colorectal cancer than other countries but boasts the highest polio vaccination rates and among the lowest rates for suicide. New Zealand reported the highest five-year survival rates for colorectal cancer and non-Hodgkins lymphoma but also suffered the highest suicide rates, particularly among young people aged fifteen to nineteen, as well as the highest mortality rates for ischemic stroke.
Another article in the May 2004 issue of Health Affairs, "U.S. Health Care Spending in an International Context" by renowned political economist Uwe Reinhardt and his public health colleagues Peter Hussey and Gerard Anderson, found that the United States spent $4,887 per capita on health care in 2001, far outstripping other OECD countries, and averaging $2,000 more per capita than Canada, the next-highest spending country of the five quality indicator nations, which spent $2,792. Australia spent $2,513 per capita, the U.K. $1,992, and New Zealand $1,710.
The authors cited several factors contributing to higher U.S. health costs—a fragmented financing system that generates higher administrative costs; and health care providers with greater market power than health care purchasers, which allows prices to rise above levels of other countries where the government intervenes to control prices. They also noted that the U.S. health system provides a more specialized, intensive form of care and observed that although U.S. prices for drugs are high by international standards, there is widespread speculation that foreign governments keep drug prices artificially low, while simultaneously forcing the United States to assume the significant economic burden of drug research and development. The authors also wondered whether the growth of health care spending as a component of the U.S. GDP is economically or politically sustainable. Like other industry observers, they predicted that increasing health insurance premiums might prompt some firms to drop coverage for low-wage workers, adding to the ranks of the uninsured.
In 2001 Reinhardt, Hussey, and Anderson analyzed OECD data describing the health care systems in the thirty member countries. The researchers studied the economic development, spending, supply, population health status, service utilization, and technology, and issued a paper detailing key differences between the systems, "Cross-National Comparisons of Health Systems Using OECD Data, 1999" (Health Affairs, May/June 2002). An earlier report by Anderson of the Center for Hospital Finance and Management of Johns Hopkins University ("Multinational Comparisons of Health Care," Commonwealth Fund, October 1998) provided a comprehensive examination of health care expenditures, coverage, and outcomes in eight OECD member countries. These overviews draw upon these researchers' and industry observers' assessments of the strengths, weaknesses, and challenges faced by the various models of health service delivery.
The U.S. health care financing system is based on the consumer sovereignty, or private insurance, model. There are more than one thousand private insurance companies in the United States. Employer-based health insurance is tax-subsidized: health insurance premiums are a tax-deductible business expense and are not generally taxed as employee compensation. The premiums for individually purchased policies purchased by self-employed Americans became fully tax-deductible in 2003. Benefits, premiums, and provider reimbursement methods differ among private insurance plans and among public programs as well.
Most physicians who provide both ambulatory care—hospital outpatient service and office visits—and inpatient hospital care are generally reimbursed on either a fee-for-service basis, per capita (literally, per head, but in managed care frequently per member per month, or PMPM) and payment rates vary among insurers. Increasing numbers of physicians are salaried; they are employees of the government, hospital and health care delivery systems, universities, and private industry.
The nation's more than sixty-five hundred hospitals are paid on the basis of charges, costs, negotiated rates, or diagnosis-related groups (DRGs), depending on the patient's insurer. There are no overall global budgets or expenditure limits. Nevertheless, managed care (oversight by some group or authority to verify the medical necessity of treatments and to control the cost of health care) has assumed an expanding role. Health maintenance organizations (HMOs), preferred provider organizations (PPOs), and other managed care plans and payers (government and private health insurance) now exert greater control over the practices of individual health care providers in an effort to control costs. To the extent that they govern reimbursement, managed care organizations are viewed by many physicians and other industry observers as dictating the methods, terms, and quality of health care delivery.
IS THE UNITED STATES SPENDING MORE AND GETTING LESS? A primary indicator of the quality of health care delivery in any nation is the health status of its people. Many factors can affect the health of individuals and populations: heredity, race/ethnicity, gender, income, education, geography, violent crime, environmental agents, and exposure to infectious diseases, as well as access to, and availability of, health care services.
Still, in the nation that spends the most on the health of its citizens, it seems reasonable to expect to see tangible benefits of expenditures for health care—measurable gains in health status. This section considers three health outcomes—measures used to assess the health of a population—including life expectancy at birth, infant mortality, and the incidence of cancer, to determine the extent to which Americans citizens derive health benefits from record-high outlays for medical care.
Overall life expectancy at birth consistently increased in all thirty OECD member nations between 1960 and 2002; however, in every year including 2001, U.S. life expectancy was slightly below the OECD median (half were higher and half were lower) for males and females. (See Table 7.10.) Infant mortality also declined sharply during the same period but the United States fared far worse than the majority of OECD countries—in 2001 the United States had the sixth-highest infant mortality rate. (See Table 7.11.) Finally, despite the well-funded U.S. battle against cancer, in 2000 the incidence rates of cancer per one hundred thousand were higher than seven of the sixteen OECD nations reporting (321.9 per one hundred thousand). (See Table 7.12.)
Reinhardt and his colleagues suggest that part of the explanation of why exceedingly high U.S. health care expenditures do not produce better health outcomes is excessive spending on health care administration. The researchers note that financing a less complex and less costly administrative bureaucracy might enable the United States to focus more resources on direct provision of health care services.
The German health care system is based on the social insurance model. Statutory sickness funds and private insurance cover the entire population. Approximately twelve hundred sickness funds cover about 92% of the population. Employees and employers finance these sickness funds through payroll contributions. Nearly all employers, including small businesses and low-wage industries, must participate.
During the late 1990s Germany had the second-highest per capita health care expenditures, but by 2002 Germany ranked sixth in health expenditures per capita. (See Figure 7.3.) Contributions to sickness funds averaged about 13% of a worker's salary, and about 10% of sickness fund members purchased complementary private insurance. Another 8% of the population chose not to participate in the public system and were fully covered by private insurance. Nearly three quarters of all health expenditures were public, and about 11% were direct, out-of-pocket payments. Less than 1% of the population does not have health insurance.
Unlike U.S. health insurance, which is not always "portable," losing or changing jobs does not affect health insurance protection in Germany among the sickness fund members. The German government does not require its wealthiest citizens to purchase health insurance, but almost all of them do so voluntarily.
Ambulatory (outpatient) and inpatient care operate in completely separate spheres in the German health care system. German hospitals are public and private, operate for profit and not-for-profit, and generally do not have outpatient departments. Ambulatory care physicians are paid on the basis of fee schedules negotiated between the organizations of sickness funds and organizations of physicians. A separate fee schedule for private patients uses a similar scale.
Public (federal, state, and local) hospitals account for about 50% of hospital beds; private voluntary hospitals, often run by religious organizations, account for 35% of beds; and private for-profit hospitals, generally owned by physicians, account for 15%. Ambulatory care physicians are generally self-employed professionals paid on a feefor-service basis, while most hospital-based physicians are salaried employees of the hospital.
On January 1, 1993, Germany's Health Care Reform law went into effect. Among its many provisions, the law tied increases in physician, dental, and hospital expenditures to the income growth rate of members of the sickness funds. It also limited the licensing of new ambulatory care physicians (based on the number of physicians already in an area) and set a cap for overall pharmaceutical outlays. Still, in 2002 Germany boasted 3.3 practicing physicians per one thousand population, a higher ratio than well over half of the OECD countries reporting. (See Table 7.9.) The 1993 legislation also changed the hospital compensation system from per diem payments to specific fees for individual procedures and conditions.
Other German healthcare reform measures instituted in the 1990s also served to stimulate competition between sickness funds, and improved coordination of inpatient and ambulatory care. During the mid-1990s, the government also attempted to control health care costs by reducing health benefits, such as limiting how often patients could visit health spas to recuperate.
The health care reforms were not, however, successful at containing health care costs. In 2002 total health care spending accounted for 10.9% of the GDP, with only Switzerland and the United States allocating more of their GDP to health. (See Figure 7.1.) Growth in health care spending was attributed to the comparatively high level of health care activity and resources along with rising pharmaceutical expenditures and efforts to meet the health care needs of an aging population. Discharge rates and selected surgical procedures are higher in Germany than in relation to other OECD countries, and Germany has above average levels of resources.
In a January 20, 2004, address, "Health Systems—Approaching the Future," Dr. Berglind Ásgeirsdóttir, the Deputy Secretary-General of OECD, observed that improved quality of care was not necessarily linked to higher spending and identified multiple opportunities to improve the efficiency of all health care systems, including Germany's. For example, the Deputy Secretary-General cited adopting the U.S. hospital reimbursement schema based on diagnosis-related groups (DRGs) as a strategy that would enable Germany to better respond to health care needs without increasing costs.
The Canadian system has been characterized as a provincial government health insurance model, in which each of the ten provinces operates its own health system under general federal rules and with a fixed federal contribution. All provinces are required to offer insurance coverage for "all medically necessary services," including hospital care and physician services. Additional services and benefits, however, may be offered at the discretion of each province. Most provinces cover preventive services, routine dental care for children, and outpatient drugs for the elderly (with a co-payment) and the poor. No restrictions are placed on a patient's choice of physicians.
Canadian citizens have equal access to medical care, regardless of their ability to pay. Entitlement to benefits is linked to residency, and the system is financed through general taxation. Private insurance is prohibited from covering the same benefits covered by the public system, yet more than 60% of Canadians are covered by private supplemental insurance policies. These policies generally cover services such as adult dental care, cosmetic surgery, and private or semiprivate hospital rooms. Seventy percent of all health expenditures are public, and consumers pay about 30% of health care expenditures out-of-pocket. (See Table 7.1 and Table 7.2.)
The majority of hospitals are not-for-profit and are funded on the basis of global institution-specific or regional budgets. (A global budget allocates a lump sum of money to a large department or area. Then all the groups in that department or area must negotiate to see how much of the total money each group receives.) Physicians in both inpatient and outpatient settings are paid on a negotiated, fee-for-service basis. The systems vary somewhat from province to province, and certain provinces, such as Quebec, have also established global budgets for physician services. The federal government's contribution to Canada's health care bill has progressively declined in the past two decades. During the early 1980s the federal government paid for a historic high of 50% of the total health care bill. This dropped in subsequent years, to 38% in 1990, 30% in 1993, and less than 20% in 1998. The resulting shift in costs has increased expenditures by the provinces and territories as well as out-of-pocket expenses paid by Canadians. The delivery system is composed largely of community hospitals and self-employed physicians. About 95% of Canadian hospital beds are public; private hospitals do not participate in the public insurance program.
FINANCIAL PROBLEMS. During the 1990s public revenues did not increase rapidly enough in Canada to cover rising health care costs. The Canadian government attributed many of the financial problems to lower revenue from taxes, higher prices for biomedical technology, and relatively lengthy hospital stays. In 1993, for the first time since Canada instituted universal health insurance twenty-seven years earlier, Canadians were required to pay for common services such as throat cultures to test for streptococcal infections (the bacterial cause of strep throat).
As a result of cutbacks and inadequate equipment, waiting times for nonemergency surgery, such as hip replacement, and high-technology diagnostic tools, such as computerized tomography (CT scans), could amount to months, or even years. Although Canadians generally still support their present system, physicians and consumers have expressed growing dissatisfaction with the rising costs and long waiting periods for diagnostic tests and nonemergency treatment.
THE SAFETY VALVE TO THE SOUTH. Some Canadians cross the border to the United States to avoid the waiting lines in their hospitals, clinics, and physicians' offices. Canadian physicians have been known to refer seriously ill patients in need of immediate medical attention to U.S. hospitals in such nearby cities as Buffalo, New York; Cleveland, Ohio; and Detroit, Michigan. In fact, many American hospitals market medical services, most notably cardiac care and addiction treatment, to Canadians. Overall, however, there has been very little border-crossing to seek health care services. Canadians accounted for less than 1% of total admissions in the nine border hospitals surveyed by the American Medical Association.
CONTROLLING COSTS. The general consensus is that no one wants to disassemble what has become Canada's most popular social program, but most agree that change is inevitable. The Ontario Health Insurance Plan insures ten million people, or almost 40% of all Canadians. They have managed to cut costs in several ways, such as:
- Reducing fees to commercial laboratories and allowing them to bill patients directly for tests performed
- Stopping payment for certain services connected with employment. For example, many Canadians must pay out of pocket for pre-employment physical examinations.
- Ending coverage of electrolysis (removal of unwanted hair) and reviewing coverage of services and procedures such as psychoanalysis, vasectomies, newborn circumcision, in vitro fertilization, as well as chiropractic, podiatric, and osteopathic services
- Increasing co-payments—the amounts patients must pay for prescriptions covered under the Ontario Drug Benefit Plan, which is used mainly by persons over age sixty-five
Similarly, in an effort to cut hospital costs, British Columbia has moved to shift some services away from hospitals to outpatient clinics, public health programs, and home care. Canadian officials hoped that cutbacks in covered services, caps on physicians' fees and hospital budgets, and controlling the use of expensive medical technology could keep the popular health care system afloat.
The United Kingdom employs the National Health Service (NHS), or Beveridge, model to finance and deliver health care. The entire population is covered under a system that is financed mainly from general taxation. There is minimal cost sharing. About 12% of the population also purchases private insurance as a supplement to the public system. Slightly more than 83% of all health spending is from public funds, and in 2002 about 8% of health expenditures were out-of-pocket payments. (See Table 7.1.)
Services are organized and managed by regional and local public authorities. General practitioners serve as primary care physicians and are reimbursed on the basis of a combination of capitation payments (payments for each person served), fee-for-service, and other allowances. Hospitals receive overall budget allotments from district health authorities, and hospital-based physicians are salaried. Private insurance reimburses both physicians and hospitals on a fee-for-service basis.
Self-employed general practitioners are considered independent contractors, and salaried hospital-based physicians are public employees. The United Kingdom continues to face acute physician shortages: there are fewer physicians per capita (2.1 per one thousand population in 2002) than in most other OECD countries. (See Table 7.9.) Of the United Kingdom's hospital beds, 90% are public and generally owned by the National Health Service. As of 1991 it became possible for large physician practices to become "budget holders" and receive larger capitation payments. Similarly, individual hospitals may become "self-governing trust hospitals," enabling them to compete for patients and market their services. While emergency health service is immediate, persons requiring elective surgery, such as hip replacement, may end up on a waiting list for years.
The NHS pioneered many cost-containment measures that are currently used by the United States and other countries seeking to slow escalating health care expenditures. These approaches to evaluating and managing health care costs include:
- Cost-effective analysis: Calculated as a ratio, and often expressed as the cost per year per life saved, the cost-effectiveness analysis of a drug or procedure relates the cost of the drug or procedure to the health benefits it produces. This analysis enables delivery of clinically efficient, cost-effective care.
- Cost-minimization analysis: Primarily applied to the pharmaceutical industry, this technique identifies the lowest cost among pharmaceuticals alternatives that provide clinically comparable health outcomes.
- Cost-utility analysis: This measures the costs of therapy or treatment. Economists use the term "utility" to describe the amount of satisfaction a consumer receives from a given product or service. This analysis measures outcomes in terms of patient preference and is generally expressed as quality-adjusted life years. For example, an analysis of cancer chemotherapy drugs considers the various adverse side effects of these drugs because some patients may prefer a shorter duration of symptom-free survival rather than a longer life span marked by pain, suffering, and dependence on others for care.
The French health care system is based on the social insurance, or Bismarck, model. Virtually the entire population is covered by a legislated, compulsory health insurance plan that is financed through the social security system. Three major programs, and several smaller ones, are quasi-autonomous, nongovernmental bodies. The system is financed through employee and employer payroll tax contributions. More than 80% of the population supplements their public benefits by purchasing insurance from private, nonprofit mutuels, and about 2% of the population has private commercial insurance. Among OECD countries, the share of health care financed by private insurance is the third highest behind the United States and the Netherlands, two countries where private coverage is the primary source of payment for a large percentage of the citizenry.
The public share of total health spending is 76%, and about 19% of expenditures represent direct, out-of-pocket payments. (See Table 7.1.) Physicians practicing in municipal health centers and public hospitals are salaried, but physicians in private hospitals and in ambulatory care settings are typically paid on a negotiated, fee-for-service basis. Public hospitals are granted lump-sum budgets, and private hospitals are paid on the basis of negotiated per diem payment rates. About 65% of hospital beds are public, while the remaining 35% are private (and equally divided between profit and nonprofit).
In April 1996 the French government announced major reforms aimed at containing rising costs in the national health care system. The new system monitored each patient's total health costs and penalized physicians if they overran their budgets for specific types of care and prescriptions. In addition, French citizens were required to consult general practitioners before going to specialists. Initially, physicians—specialists, in particular—denounced the reforms and warned that they could lead to rationing and compromise the quality of health care. Over time, however, these cost-containment efforts met with less resistance from physicians and consumers. By 2004 physicians and hospitals were generally accepting of moderate fee schedules, cost-sharing arrangements, and global budgeting to control costs.
Japan's health care financing is also based on the social insurance model and, in particular, on the German health care system. Three general programs cover the entire population: Employee Health Insurance, Community Health Insurance, and Health and Medical Services for the Aged. About 62% of the population obtains coverage through some nineteen hundred not-for-profit, nongovernmental, employer-sponsored plans. Small businesses, the self-employed, and farmers are covered through Community Health Insurance, which is administered by a conglomeration of local governmental and private bodies. The elderly are covered by a separate plan that largely pools funds from the other plans. The Japanese health expenditure is below the expected level for a country with Japan's standard of living, and its emphasis is on the government, as opposed to business, bearing the major financial burden for the nation's health care.
The health system is financed through employer and employee income-related premiums. There are different levels of public subsidization of the three different programs. Limited private insurance exists for supplemental coverage, which is purchased by about one-third of the population and accounts for 7% of health expenditures. In 2003 public expenditures accounted for about 75% of total health spending, while out-of-pocket expenses account for about 20%. (See Table 7.1.)
Physicians and hospitals are paid on the basis of national, negotiated fee schedules. Japan manages with fewer physicians per capita than most OECD countries—less than two per one thousand population. (See Table 7.9.) Physicians practicing in public hospitals are salaried, while those practicing in physician-owned clinics and private hospitals are reimbursed on a fee-for-service basis. The amount paid for each medical procedure is rigidly controlled. Physicians not only diagnose, treat, and manage illnesses, they also prescribe and dispense pharmaceuticals, and a considerable portion of a physician's income is derived from dispensing prescription drugs.
A close physician-patient relationship is unusual in Japan; the typical physician endeavors to see as many patients as possible in a day in order to earn a living. A patient going to a clinic for treatment may have to wait many hours in a very crowded facility. As a result, health care is rarely a joint physician-patient effort. Instead, physicians tend to dictate treatment without fully informing patients about their conditions or the tests, drugs, and therapy that have been ordered or prescribed.
About 80% of Japan's hospitals are privately operated (and often physician-owned) and the remaining 20% are public. Hospitals are paid according to a uniform fee schedule, and for-profit hospitals are prohibited. Although hospital admissions are less frequent, hospital stays are typically far longer than in the United States or any other developed member nation of OECD, allowing hospitals and physicians to overcome the limitations of the fee schedules.
The health status of the Japanese is one of the best in the world. Japanese men and women are among the longest-living in the world. In 2002 life expectancy was 85.2 years for women and 78.3 years for men. (See Table 7.10.) The Japanese infant mortality rate in 2002, at three per one thousand live births, was tied with Finland and remained almost the lowest in the world, bested only by Iceland at 2.2 and Sweden at 2.8 per one thousand live births. (See Table 7.11.) These two statistics are usually considered reliable indicators of a successful health care system. It should be noted, though, that Japan does not have a large impoverished class, as the United States does, and its diet is considered to be among the healthiest in the world.
While Japan's health care system has no doubt contributed to this preeminent health status, the current state of research in health economics does not permit the determination of the extent of its contribution. The Japanese system, based on social insurance, has provided both basic care and free choice of doctors to every citizen at affordable costs. It has, however, become increasingly clear that the system has not succeeded in its efforts to allocate resources properly, ensure financial equity, and adapt to changing patterns of demand.