Switzerland a Model for ACA Reform?

By Cyril Tuohy InsuranceNewsNet

With the repeated failure of the Republican attempts to repeal the Affordable Care Act, attention in Congress has turned to how best to improve the controversial law.

Could tiny Switzerland, with its private decentralized health care system for 8 million people, provide a model for U.S. health care reform going forward?

Like many things made in Switzerland, where I spent a few days on vacation last month and my five cousins live and consume Swiss health care services in various cities and towns around the country, quality is good, often very good.

But if people in Switzerland are generally satisfied with the quality and services of care, the high quality doesn’t come cheap.

Swiss residents pay for some of the highest health care costs in the world -- about 35 percent to 40 percent of the population receives a subsidy.

Health care spending has reached 11.5 percent of Gross Domestic Product in 2014, still far less than the 17 percent of GDP Americans paid for their care, according to the Organization for Economic Cooperation and Development.

A Big Difference: Delivering on Value

Here’s perhaps the biggest difference between the U.S. and other European private health care systems.

The U.S. ranks dead last in overall health care performance rankings compared with 11 other high-income nations of varying health care models studied by the Commonwealth Fund in a report titled “Mirror, Mirror 2017,” published last month.

Switzerland, at number six, ranks in the middle of the pack. Another small country with a privately-run system, the Netherlands, in the No. 3 slot, did even better.

As in the U.S., ownership of Swiss health care provider services – doctors and hospitals – consist of a mix of public (as in nonprofit) or publicly subsidized institutions.

Much like in the U.S., payments to Swiss doctors and hospitals are structured mostly as fee-for-service with fixed pre-arranged monthly payments received by the doctor or the hospital per patient enrolled in a health plan.

Employers in Switzerland don’t sponsor coverage and residents are required by law to buy individual health insurance within three months of arrival. Group health coverage does not exist but health care coverage is near universal.

The Cost-Containment Bugaboo

Complex public and private financing arrangements employed by different countries aside, the U.S. and Switzerland share in at least one common challenge: how to contain costs.

Medical inflation in Switzerland is reported to be running at about 4 percent annually and with an ageing population, the nation is a voracious consumer of health care services.

The system of regulated insurer and medical provider competition has come under fire for not doing enough to hold down costs.

Some Swiss health care critics point to insurers manipulating risk pools to cover only the best risks.

Other experts point to dual funding of hospitals and pressure on insurers to contract with all certified health care providers as reasons for higher rates of health care inflation.

Switzerland’s Health2020 agenda, a blueprint for correcting some of the shortcomings in a health care system that has generally been considered a success, calls for increasing flat-rate payment mechanisms, reducing duplicative services and revising fee schedules to limit incentives for doctors and hospitals, according to Commonwealth Fund researchers.

What Switzerland and its private decentralized health insurance structure can teach the U.S. is that the individual mandate can work, and work quite well.

Any ACA reform, however, which Congress will take up after their summer recess, is going to have to incorporate strict cost-control measures.

InsuranceNewsNet Senior Writer Cyril Tuohy has covered the financial services industry for more than 15 years. Cyril may be reached at [email protected].

Cyril Tuohy is a writer based in Pennsylvania. He has covered the financial services industry for more than 15 years. He can be reached at [email protected].