Foreign Health Care is No Model for the United States

Originally posted at The Hill, September 2017.

Repealing ObamaCare would produce better outcomes for patients, those who care for them, and those who pay their bills. To understand why, policy makers must recognize that national expenditures on health care are not the same as health care costs, admit that international comparisons omitting the costs of waiting lists are invalid, and refrain from the nasty habit of cherry-picking the data used for international comparisons.

An end to the fetishism about “coverage” would also help. Coverage is not medical care. Too much coverage adds insurer overhead to the basic cost of producing medical care. Forcing everyone to have coverage encourages wasteful utilization. Efforts to control utilization end up extending government price and quantity controls to every aspect of medical care, misallocating resources and reducing productive efficiency.

ObamaCare incorporates many of the features of the Swiss health care system. The Swiss system has been the intellectual fashion for some time, especially among those who say they prefer a private health system while refusing to support ObamaCare repeal. Unfortunately, the Swiss system is inefficient and relatively expensive. Thanks to ObamaCare, many of its problems are beginning to show up in the US.

Though the Swiss system relies on nominally private insurance payments, government and its client organizations control most health care resources. Patients have little direct effect on health care organization, pricing, or offerings. The federal national fee-for-service price list tightly controls medical service reimbursement rates. Cantons or municipalities own or subsidize almost 70 percent of hospital beds. The cantons provide direct subsidies for inpatient care, nursing homes and home care. They provide long-term care, rehabilitation, and psychiatric care. They manage hospitals and organize specialty care.

All of this government direction is expensive. While the Swiss federal tax rate is a relatively low 11 percent, the value-added tax is 8 percent and cantonal individual income taxes range from 22.86 percent to 44.75 percent.

ObamaCare mimics the Swiss mandate to purchase a basic health plan. The Swiss federal government details the content and form of the mandated plan. It sets the minimum payment and approves premiums. Premiums vary by region. The cantons control eligibility for means tested-subsidies. Twenty-nine percent of the Swiss received subsidized premiums in 2012, and about 20 percent of the Swiss chose coverage in newer HMO-style plans with restricted provider coverage.

Basic insurance is guaranteed issue, but people may buy risk rated supplemental coverage for out-of-network services and those not included in the basic plan. About 20 percent of people purchase supplemental coverage.

Because governments subsidizing health care always try to control health expenditures by limiting access to care, the Swiss have a physician shortage. Switzerland imposed quotas on the number of medical students from 1998 to 2012. It also limited the number of new private practices. A quarter of its physicians are foreign.

Government control is expensive, and too much government control may be one reason why Swiss health care is more expensive than U.S. health care. The OECD calculates health purchasing power parity price estimates. The estimates compare national prices for the same basket of health care services. In 2014, Americans paid 14 percent more than the OECD average for the standard OECD basket of general health services. The Swiss paid 71 percent more. Americans paid 30 percent more than average for a standard basket of hospital services. The Swiss paid 92 percent more.

In addition to increasing cost, the government mandated health plans expose Swiss households to significant financial losses. Roughly 26 percent of total Swiss health spending is out-of-pocket. In the U.S., 11 percent of spending is out-of-pocket.

Swiss out-of-pocket expenses hit the poor and elderly especially hard. Katherine Baird of the University of Washington Tacoma estimated theout-of-pocket health expenses for people who had expenses that were greater than 10 percent of their disposable income. In pre-ObamaCare 2010, this category included 12.8 percent of U.S. residents. In 2004, it included 16.5 percent of the Swiss. High spending Americans in poverty spent 17.3 percent of their income on out-of-pocket health care. High-spending Swiss in poverty spent 31.7 percent.

In the pre-ObamaCare U.S. system, Americans benefited from more health care and better outcomes than the Swiss. In the late 2000s, 89.2 percent of American women with breast cancer survived 5 years. In Switzerland, just 84.6 percent did. Sixty-four percent of Americans with colon cancer survived 5 years. The Swiss percentage was 61.4 percent. In 2012, colorectal screening rates were 65 percent in the U.S., and 22.2 percent in Switzerland.

ObamaCare imposed Swiss-style government control on a large segment of the U.S. private health care system. Swiss-style government control increases health care costs. U.S. officials should stop listening to people who peddle misleading claims about health arrangements in other countries and support ObamaCare repeal, freeing individual Americans to make mutually beneficial arrangements with those who supply and finance their health care. Properly done, it has the potential to lower U.S. costs even further.

This article was originally published at The Hill on September 21, 2017. (