Social insurance fuels best healthcare model

By DAVID G. GREEN*

New Zealanders have more chance of dying prematurely than people in most other OECD countries.

The rate is 14 per cent higher than in Australia.

Until recently we had to rely on crude death rates to compare health systems, but the OECD now produces a better comparison based on deaths below the age of 70.

Instead of treating all deaths as equally serious, whether at age 90 or 9, the method counts potential years of life lost, thus giving greater weight to early death.

Like death rates, the figures still reflect lifestyle choices such as smoking and drinking alcohol, but give a better idea of the performance of healthcare systems.

European-style social insurance has proved a better method of providing healthcare than the public sector monopolies of countries such as New Zealand and Britain. Countries with social insurance schemes, such as France, Germany and Switzerland, have few, if any, waiting lists, and more doctors per head.

Take Germany. With the exception of about 2 million permanent civil servants and the self-employed, Germans who earn below the national insurance threshold must join one of the statutory sickness funds. Those above the mandatory threshold may choose to buy private insurance but many opt to remain in the state system.

German sickness funds are required to be financially self-sufficient and premiums are set as a percentage of income. In recent years, this percentage has varied from fund to fund, with a low of about 9 per cent and a high of 17 per cent. The premiums are deducted from pay packets and employer and employee pay half each.

Since the early 1990s, German Governments have been trying to increase competition. Insurers can easily be compared on the internet, and for those without web access, there are magazines and rankings by independent consumer organisations. The result has been a big shift away from the traditionally dominant funds, although competition is muted compared with America.

People who see a large chunk of their pay packet disappear each month make demanding patients and expect both quick treatment and value for money. They shop around, go for second opinions, and change doctors frequently.

No money changes hands at the point of service. Instead, doctors are reimbursed by sickness funds via their regional physician associations.

Hospitals are under diverse ownership, which further encourages competition and constant efforts to raise standards. Around half of hospital beds are in the public sector, about 30 per cent are run by private, non-profit organisations and some 20 per cent are private, for-profit institutions.

The real contrast is not between public and private, but monopoly and competition. Some workplaces make it hard for even well-motivated employees to give of their best, and some make it easy. Few now believe that a public sector monopoly brings out the best in people.

How real is the consumer choice? If you walk along a typical shopping street in search of healthcare professionals, you might see an optician, probably a pharmacy, and maybe a dentist, but it would be most unusual to see a heart specialist, a dermatologist, an ear, nose and throat specialist, a paediatrician or even a smattering of GPs.

Not so in Germany, where queuing up in a hospital outpatient department to see a specialist is largely unknown. First, Germans are free to visit any doctor they like. They may walk in off the street, or ring for an appointment that will invariably be booked for the same morning or afternoon. Consumers can and do penalise bad service. Our recent study of German consumers commonly produced reactions like this: "I saw a long queue, so hopped on the tube and went to a different practice"; "She was rather ill-tempered so I never went back"; "The facilities were drab, so I went to a different one next to my office"; "I felt rushed at his practice so didn't go back".

Second, Germans do not have to see a GP before visiting a private specialist. GPs do act as gatekeepers to German hospitals, but about half of all specialists practise outside the hospitals.

German hospitals provide few out-patient services. Instead, there are many independent clinics, invariably with the most sophisticated diagnostic equipment.

Most Germans have a favourite GP, although many maintain a relationship with more than one. But if they need to see a specialist they would not waste time seeing a GP first.

What about the unemployed?

A distinction is made between those who have previously been in work and those who have not.

The majority, who have previously worked, are included in the national insurance system, but instead of the employers paying, the benefits agency pays. For unemployed people who have never worked (about one-third of the unemployed in Germany), provision is made through a social fund which arranges cover directly with doctors or through one of the local funds of last resort, which cover about 40 per cent of the population.

What problems are there in Germany? The media are not excited by the subject. There are no patients lying on trolleys in A&E. Germany suffers no real rationing. Yes, problems occur from time to time. Just at the moment, there is a shortage of nurses, and many Germans feel that care is expensive, but serious complaints are few.

Does the German healthcare system deliver an acceptable standard of care for serious illness to all members of society? Do the poorest in society benefit from a higher standard of healthcare provision than those in New Zealand? The answer to both of these questions is an emphatic "yes".

What can we learn? In Germany, insurance provides a connection between working people and the resources available to healthcare providers. Most Germans who pay their national insurance contributions accept that they must also pay for the poor, but there is no expectation that, in order to ensure access for all, there must also be public sector monopoly.

On the contrary, Germans have successfully combined consumer choice and access for everyone. It is true that the rich can always buy a premium service. But German policymakers do not waste their time trying to stop someone getting more than anyone else. They make sure that the standard of care available to the poorest people is acceptably high.

Perhaps the biggest disadvantage of the German system is that employers pay half the cost of social insurance. In countries with no tradition of employers bearing such a burden it is unlikely that there would be much support for the German system. But there is another model just over the frontier in Switzerland which relies on personal payment of premiums without employer involvement. It, too, ensures that all members of society - from the richest to the poorest - have access to a high standard of care, as well a free choice of doctor.

The strength of social insurance schemes is that they have not been side-tracked by the pursuit of equality. They are based on social solidarity.

People who have gone out to work and earned good money are free to spend it as they see fit, but as part of the bargain they must pay for a high standard of care for the poor.

Social insurance schemes involve compromise. They are not full-fledged market systems, but nor are they totally collectivised.

There is the price-conscious consumer choice, without which no system can work, and there is real competition between rival hospitals and doctors, but no one is left out.

* David G. Green is director of Civitas: the Institute for the Study of Civil Society.