Republicans have long championed global competitiveness as an important political and economic goal, and the power of market competition as the royal road to get there. But, as two recent studies show, right under our noses are two little-noted facts that tell against that belief, most relevantly in the health reform debate.

One of them is that, by well-accepted standards of international economic competitiveness, every country that does best is also one that has both strong government-run or regulated universal health care systems and comprehensive welfare policies. The one exception to that pattern is the United States. The other fact is that nowhere in the world is there a health care system that controls costs by letting the market have its head.

The September release of the Global Competitiveness Report of the World Economic Forum for 2011–2012 (noted for its annual meeting in Davos), tells the competitiveness story. That report ranks the countries of the world for their competitiveness. Save for the U.S., every one of the top 10 are countries that have just those social policies most despised by American conservatives: Switzerland is first, followed by Sweden, Singapore, Finland, Germany, Denmark, the Netherlands, Japan, and the U.K. The U.S., once ranked first, has now dropped to fifth place. In addition to universal health care programs, the countries that rank highest for global competitiveness have notably strong social and welfare programs.

A recent study in the BMJ Quality and Safety, coauthored by one of us (Elizabeth H. Bradley), showed that the average ratio of social services to health care spending among most industrialized countries is 2:1, compared with 0:9 here. Social spending includes expenditures on housing, employment training, unemployment benefits, old age assistance, social security, and family support services. Furthermore, the countries with a higher ratio of social to health expenditures get better health outcomes, notably higher life expectancies and lower infant and maternal mortality rates. The evidence seems undeniable: good welfare policies produce healthier populations.  

Moreover, to rub it in a bit, those countries have much higher rates of personal taxation than our country, leading to a larger portion of their GDP going to government expenditures in (e.g., in 2008, 47.1 percent for Sweden vs. 26.9 percent for the U.S., and close to 50 percent for many of the other countries).

Representative Paul Ryan has become the Republican leader in singing the praises of competition in health care and the cutting of taxes. His latest foray in late September, following an earlier push for turning the Medicare program into a “premium support” plan – a variant in name only of government vouchers to purchase care – is a move well beyond Medicare reform.  Taking up an idea once pushed by Senator John McCain, Ryan would eliminate tax breaks for employers who pay for their employee’s health care. Employer health care now covers some 60 percent of American workers. The net result would put the Medicare program and most other health care spending directly in the hands of consumers as supposedly savvy shoppers and insurance companies as competitive cost cutters.

It is a good thing he did not use the present competition of American insurers as an example of the power of choice and competition to lower costs. The Kaiser Family Foundation annual study of employer-sponsored health care found a 9 percent increase in family premiums for 2011, only 1 percent to 2 percent of which could traced to the addition of an increased age for young adults to stay on their parent’s insurance policies. The insurers are already competitive but they are also highly ineffective in keeping their prices down (not helped by the underlying costs of an expensive system).

Anyone who has recently priced health insurance plans can not fail to note how little they differ in offering similar benefits for comparable prices. The Federal Employees Health Benefit program, offering over 100 competitive insurer choices to government employees, while it saw a rare 3.8 increase last year in average premium costs, has historically been in the 7 percent annual cost increase range, and sometimes much higher.

More broadly, it is just about impossible to find more than a few examples anywhere in the world where competition has effectively controlled health care costs and generated better outcomes.

The only example market supporters can offer of late is the Medicare part D program for drugs. Competition has worked there, but considerably helped by the relative ease in effectively pressuring drug manufacturers to lower their prices, as can be seen in the great variations in drug prices for the same drug in different countries. And in any case controlling the costs of drugs, a single medical commodity, is a long way from controlling insurance company prices for entire health care systems.

The International Monetary Fund tried competition in developing countries in the 1980s and 1990s and failed. In 2006 the Netherlands led the way in Europe by enhancing the competition of insurance companies to better manage annual cost increases. That policy has also failed.

Most distressing, we continue to spend valuable time and political capital on jiggering the health care system to be more efficient and of higher quality. Many social programs are already languishing or targeted for budget cuts. Creative ideas about reforms of those programs are pushed aside and, ironically, even threatened by an increased focus on health care. A bypassing of social programs and a faith in competition as a cost-reducing, quality-enhancing, strategy is a mixture designed for failure. Health care itself will be hurt as will millions of Americans.

Daniel Callahan, co-editor of the Health Care Cost Monitor,  is President Emeritus of The Hastings Center and the co-author of Medicine and the Market: Equity v. Choice. Elizabeth H. Bradley is a professor of public health at Yale School of Public Health and the director of the Yale Global Health Initiative.

Many health policy watchers follow the Netherlands’s health care reform experience with great interest. The 2006 reform ended the traditional dividing line between the sickness fund scheme, which covered about 67% of the population, and private insurance covering the rest, and it introduced a single mandatory scheme carried out by private insurers who may go for profit. These insurers must cover all legal residents.

The reform is intended to bring about a system of regulated competition in health care. The aim is to introduce competition while upholding fundamental social values, in particular solidarity in health care financing and universal access to health care. Another aim is to enhance consumer choice. Everyone has the right to switch insurance providers by the end of the year.

People pay a set annual contribution, which in 2011 was 7.75% of income for employed persons and 5.65% self-employed persons. To induce competition, everyone also pays an annual premium set by each insurer separately, which this year ranged from 1,068 to 1,272 euro. The government pays the premium for children under 18.

Most people (89%) also purchase complementary health insurance to cover care that is not included in the basic scheme, such as physiotherapy and some forms of dental care. Insurers of these policies are not required to accept each applicant. Risk selection is permitted, but so far it has been quite limited: all insurers have given priority to the preservation and extension of their market share.

Is the health insurance reform a success? The answer depends on the perspective taken. First, the integration of the sickness fund scheme and private health insurance into a single scheme has strengthened solidarity. However, the premium charge (including the employer’s part and the contribution for the exceptional medical expenses scheme for long-term care) as a percentage of income is still significantly lower for persons with an income of 100.000 euro than for persons with an income of only 10.000 euro; the percentages are about 7 and 25% of income respectively. How to assess these differences in premium charges is of course a matter of political preference.

Second, although insurance is mandatory, this requirement is not perceived as a serious restriction of freedom of choice. In fact, the reform has enhanced freedom of choice because of the yearly option to switch insurers. This year (2011) consumer mobility is 5.5% versus 3.9% in 2010. However, insurers and subscribers have only limited freedom regarding the composition of the benefits package because it is set by the government.

Third, the 2006 reform the number of insurers has dropped by nearly half from about 57 to 29. However, these figures obscure the concentrated structure of the health insurance market because four major companies (Achmea, Menzis, Uvit and Menzis) have a market share of about 90%, with 20 of the 29 insurers belong to one of these companies. In some regions the market structure is so concentrated that it may restrict freedom of choice.

Fourth, it is fair to say that managed care by patient steering and selective contracting is still in its infancy. So far, insurers have mainly used soft instruments to influence patients, in particular by giving them information on the waiting times of hospitals. However, there are indications of change. Some insurers recently announced that they will only contract hospitals which meet the quality standards of care, for instance in the field of breast cancer surgery.

Fifth, one may argue that that the results as regards the reform’s objective of keeping health care affordable do not point to much success. From 2006 to 2009 health care expenditures rose by 19.4% compared to 16% over the period 2002–2005 The fraction of publicly financed health care in GDP grew from 6.8% in 2002 to 7.1% in 2005 and from 8.5% in 2006 to 9.5% in 2009 (the jump in 2006 is due to the integration of private health insurance into the basic health insurance scheme). The contribution rate period increased from 6.5% in 2006 to 7.75% in 2011. Over the same period the insurer premium rose by about 38%. Even more problematic is that for the years to come the growth of health care costs is expected to outstrip the growth of GDP by at least 2% a year.

More reforms are therefore foreseen for the near future. An important issue is how to respond to the expected growth of health care expenditures. The first and most frequently used strategy is to raise contributions and premiums. A second strategy is to raise private payments, for instance by raising the mandatory deductible, asking more and higher co-payments or reducing coverage by removing health services from the basic benefits package. This strategy is politically highly controversial. Private payments have always been very unpopular politically, which helps explain why the fraction of private payments in health care financing (9% to 10%) is low in the Netherlands compared to most European countries. A third strategy is to spur insurers to negotiate low prices with health care providers.

The last strategy relates to the government’s strategy in market reform. The government recently announced a continuation and acceleration of the market reform. But it also wants to retain the instrument of fixed budgets to control total expenditures (which implies that cost overruns must be offset by expenditure cuts the following year). Thus, the market reform remains to be a political compromise between the objective of freedom and entrepreneurship on the one hand and the need for central control on the other hand. How the market reform and the tension between freedom and control will evolve in future, is written in the stars of health care policymaking.

Hans Maarse, PhD, is a professor of health care policy analysis in the Department of Health Services Research, School of Public and Primary Care, at Maastricht University in the Netherlands. He is the author of numerous articles on health policy and reform in the Netherlands and other countries. A longer version of this article can be found here Maarse Dutch health care reform.   h.maarse@maastrichtuniversity.nl

After years of rapidly rising spending on Britain’s National Health Service, a new age of fiscal austerity is about to dawn. Rising demands for health care from an aging population will have to be met out of what is effectively a static budget. The NHS will have to find savings of £20 billion out of a total budget of about £100 billion, according to its chief executive, Sir David Nicholson. Hence the attractions of transferring responsibility for commissioning services from Primary Care Trusts to consortia of general practitioners, the centerpiece of the new model.

It is GPs, after all, who generate and filter demands for expensive hospital care: in the U.K. all hospital referrals are routed through GPs (though there has been a rising trend in patients referring themselves to emergency departments). If GPs are directly responsible for budgets, they will have a direct incentive to develop alternative (and cheaper) services in the community and to be selective in their referrals. So runs the logic, at any rate.

A further political attraction is that in the decisions about how best to allocate resources will be seen as clinical, not managerial or political. The public, every survey shows, trusts doctors but not managers let alone politicians. So while there may be little reason to think that GP consortia will be more efficient than primary care trusts, as Tony Culyer pointed out in his recent post here, their decisions should be more acceptable, putting a screen between the politicians who determine the NHS’s resources and the consequences at the coalface. Or so at least Ministers may hope.

The logic is not new. Twenty years ago Margaret Thatcher introduced GP “budget holding;” i.e., GPs practices could opt to hold a budget, set by the government, from which to buy services for their patients. It is the radical, disruptive scale of the proposed change that is new. Interestingly, the medical profession is sharply divided.

While some GPs welcome the new model as an opportunity to innovate and show some muscle vis-à-vis the hitherto dominant hospital providers, others see it as a poisoned chalice for precisely the same reasons that it appeals to Ministers – that it will force them to take the hard decisions involved in managing scarce resources at a time of rising demand. GPs see themselves as the patient’s advocate and are reluctant to become responsible for rationing: deciding what should be available to whom.

The role will be all the harder now that the NHS’s traditional way of coping with excess demand – rationing by delay – has become less of an option. The reason is that waiting times to see a doctor or have a procedure have shrunk in recent years as money has poured into the service and Ministers have used targets and sanctions to push providers into speeding the patient journey.

So what does the future hold as GP consortia take control of the purse strings? The answer is that it will be very much like the recent past, only with a harsher fiscal environment. I believe that the GP consortia will follow where the primary care trusts have led – struggling to contain demand and balance their books – using many of the same strategies.

Some of these strategies have not changed since the 1990s, when commissioners became explicit, for the first time in the history of the NHS, about what they would and would not purchase. They issued lists of exclusions, which were, and still are, dominated by cosmetic surgery. More recently some primary care trusts have expanded their lists to exclude, among other things, diagnostic arthroscopy, uvulopalatoplasty for snoring, and dilation and curettage.

Financially, these lists involve the small change of the NHS: no major savings are to be made by excluding the removal of tattoos or buttock lifting. Further, in all cases primary care trusts allow for appeals: for the referring GP (and in some cases the patient) to argue that a particular case is “clinically exceptional.” The proportion of appeals allowed varies. A recent inquiry into the way primary care trusts handle appeals about the use of expensive drugs for end-stage cancer care – drugs either not approved by the National Institute for Clinical Excellence or still awaiting assessment – showed that the proportion allowed ranged from zero to 100 percent.

In making decisions about what should or should not be on the NHS menu, primary care trusts use a variety of processes. There is no national template. NICE recommendations or guidelines are taken into account, and so is other evidence about cost and effectiveness. Other criteria, such as equity and patient acceptability, are also used.

Two more recent developments need noting. The first development is the increasing use of thresholds for treatment – meaning imposing stricter criteria for patients to have procedures such as hip replacements and cataract surgery. For example, in the case of hip replacements, patients in one primary care trust only become eligible for treatment if they score a sufficient number of points on a questionnaire that asks them about their mobility and ability to perform the tasks of daily living.

The second development is the introduction of referral management. This comes in a variety of forms but in essence it involves GP referrals of patients to hospital being screened either by their peers or by a service run by the primary care trust. Here the aim is to discourage unnecessary or premature referrals. To what extent this can be seen as a form of rationing or as a way of promoting effective medicine is an open question.

This last example suggests a degree of convergence between U.K. and U.S. practice. It reminds me of a visit many years ago to a U.S. HMO and my surprise at seeing a battery of nurses screening the referrals of clinicians over the telephone. Further, I wonder how the various exclusions in U.S. insurance policies and health plans compare with the primary care trust lists. I suspect that the U.S. rations health care in a variety of ways even while refusing to acknowledge the fact and while holding up the U.K. as an example of what to avoid.

Rudolf Klein, Fellow of the British Academy, is Emeritus Professor of Social Policy, Bath University, and a visiting professor at the London School of Economics. He is the author of The New Politics of the NHS, 6th Edition (Oxford University Press, 2010). rudolfklein30@aol.com.

The latest re-disorganization of the National Health Service is about to be unleashed in England and Wales. Instead of continuing the trend of developments set in motion under the previous government, the new ”Condem” Coalition government of Conservatives and Liberal Democrats seeks to pursue what seem to be identical aims through entirely new and untried means. Who knows, they may actually work. But who knows? Does anyone?

The biggest change is to replace the existing Primary Care Trusts (PCTs), which commission services of all kinds for their local communities, with new bodies, called ‘GP Consortia’ whose purpose is to commission services of all kinds for their local communities. They buy services amounting to about £80 billion ($127 billion) a year. The difference? There will be more of them (probably) than there are PCTs, though no one can tell how many since the Consortia are to be created by voluntary local initiatives led by GPs – not, of course nurses or public health folks.

They will be smaller in staffing terms, though how much smaller no one can tell since their commissioning job is the same as the PCTs’ job and requires the same varied practical and technical skills in identifying local needs, the clinically effective ways of meeting them, and doing both things in a cost effective fashion. And they will have to perform these functions with about 25 percent less resource than was available to the PCTs.

Despite doubts, however, there is every reason, short of actual evidence, that these new procedures will bring doctors closer to patients, widen patients’ choices of general practitioner and hospital, and reduce ”bureaucracy.” No one has been very precise as to which of the “bureaucrats” in the commissioning process are the ones we can well do without, or where the new skills (if there are any) demanded of the new system are to be found. Neither has anyone been able to explain why it will be a more manageable task for the new commissioners to deal with poorly performing hospitals (or GP practices, or local authority social care services) than it was for their predecessors.

Another possibly significant (or insignificant) change is the creation of a national NHS Commissioning Board – at arm’s length from the Department of Health – in order to reduce the political micromanagement of the NHS and to support the evident, in a top-down sort of way, bottom-up nature of the reforms. This political micromanagement has been a feature of the NHS since its foundation in 1948, and it’s no wonder that it’s so. There are few politically hotter potatoes than health care – in the U.K. as in the U.S. – and any major local change inevitably gets transferred rapidly from a local member of Parliament up to the Secretary of State for Health.

It’s inconceivable that this could change. Nye Bevan, who oversaw the founding of the NHS back in 1948, famously declared: “If a bedpan is dropped on a hospital floor in Tredegar, its noise should resound in the Palace of Westminster.” Plus ça change!

These are bold moves that throw caution to the winds. The cautious amongst us wonder why the objectives – most of which were already strictly in the NHS brief – could not have been achieved more readily, with fewer redundancies (and the expense thereof), with no one required to go through the demoralizing experience of applying for their old job (or something very like it), and with a better chance of success by virtue of using people already well-skilled in the commissioning business.

The reforms are supposed to improve the U.K.’s standing in the international league tables of mortality from the major killers like cancer and heart disease. Trouble is, the U.K.’s standing has already improved enormously, mostly as a result of changes made years ago in the speed of access to care on the one hand and (probably more importantly) on the other by preventive public health actions and public education. The trend is already there – and the impact of changes like these takes years to have effect, not weeks or months, if indeed re-disorganizations like this have any direct effect at all on health outcomes.

You may wonder what’s in store for NICE – the National Institute for Health and Clinical Excellence. The Secretary of State recognizes NICE as a world leader in its field of health technology assessment. It will continue to have a central role, both in undertaking pharmaco-economic assessments and in providing advice to the NHS on the relative clinical and cost effectiveness of treatments, despite rumours put about last year by a poorly briefed junior minister to the contrary.

A new job for NICE is to develop authoritative quality standards for health and social care, along with tools and guidance to support commissioners in delivering them. Although the government has not yet made this clear, it seems more than likely that its plan for a new ”value-based pricing” system of pharmaceuticals will be based on methods very close to those used by NICE in preparing its existing NHS guidance. If so, it seems that the means lie readily to hand.

But we must be cautious. After all, a ready competence did not save the PCTs. However, one of the many competencies ably displayed by NICE has been its ability to absorb new functions and deliver the goods authoritatively (if not always promptly) and my money is on NICE playing a key role in the future pricing of drugs. Beware, those of you scared of international reference pricing!

Will the changes open the floodgates of privatization? Many fear they will. However, three cautions are in order.

First, the existing health care commissioners like PCTs already have a much greater scope for commissioning care from the private sector than they have chosen to exercise. Second, negotiating, writing, and enforcing complex contracts with providers entails major transaction costs. Third, commissioning care from within the “NHS family” is often more likely to deliver appropriate care to an agreed standard at an agreed cost than commissioning from “outside,” where trust may be untested, values not necessarily shared and, save in straightforwardly simple and standardized procedures, both the processes of care and their outcomes are complex. If anything, the new commissioners will be less well-placed to commission very sophisticated services than the PCTs on account of their smaller size and more limited skill infrastructure.”Watch this space,” as the saying goes. The winds of change are blowing – though from where and towards what only time will tell.

Anthony J. Culyer, PhD, is the Ontario Research Chair in Health Policy & System Design at the University of Toronto and professor of economics at the University of York, England. tony.culyer@york.ac.uk; 011‑1904-433762.

As the U.S. health care reform struggle (on both sides) becomes increasingly about political beliefs and power politics rather than about practical solutions, it is to be expected that comparative data will also be politicized. Statistics are, as always, particularly vulnerable to intentional as well as unintentional misrepresentation in the political arena. The September 15 report released by the Joint Economic Committee’s ranking Republican Senator, Sam Brownback, unfortunately fulfills that expectation.

The report seeks to divert attention from an annual snapshot of comparative health expenditures – in which the U.S. spends far more than other developed countries, with far more unmet need as well – to a consideration of the rate of change in these expenditures. According to this analysis, the U.S., at 5.9 percent growth per year, is less than the average of 6.6 percent growth per year among all countries in the Organisation for Economic Cooperation and Development (OECD).

The report makes a particular point that the U.K., at 7.2 percent, is higher than the U.S. in this statistical series. Based on this data, the report concludes that a) the U.S. is doing a better job than many government-run health systems in controlling health care costs, b) the U.S. would do a worse job of controlling health care costs if a “government-run” system were adopted, and c) “government-run” health systems control costs through rationing necessary care.

To reach its first conclusion, the report focuses on the U.S. number alone while conveniently missing the real story that the other data in this series conveys:

• Twelve countries (out of 30 in the OECD) had lower rates of growth than the U.S., including archetypal social-health-insurance based systems with nominally private health insurers(Germany, Switzerland, France) and highly regarded tax-funded systems with publicly owned hospitals and salaried doctors (Sweden, Denmark, Finland).
• Countries with higher rates of expenditure growth than the U.S. are poorer countries with far lower per-capita annual expenditures (Mexico, at $823 per capita, or Turkey, at $618 per capita) or post-Soviet countries with high import costs for pharmaceuticals combined with rapidly increasing wages for low-paid doctors and nurses (Hungary, at $1,388. per capita, and Poland, at $1,035. per capita), or the U.K., which just finished intentionally  increasing its health care expenditures from 6 percent to 8.6 percent of gross domestic product (GDP) over the past five years in a concerted effort to reach the European Union average per capita expenditure of $2,992. By comparison, the equivalent U.S. expenditure figures are 16 percent of GDP and $7,290 per capita. (These are 2007 OECD figures).
• All of the above noted other countries – indeed all other OECD countries – have lower baseline expenditures for health care (from 5.7 percent to 11 percent of GDP). The U.S. figure of a 5.9 percent annual growth rate generates further increases on a 16 percent baseline. The U.S. pattern of expenditure growth signaled in this data series – compounded over 20 or 30 years into the future – is a formula for financial catastrophe, not a policy success to be trumpeted, especially in a fiscally incontinent country where the national debt is already increasing $1.8 trillion in 2009 alone.

The second conclusion of the report – that the U.S. would have less control over its health expenditures with a larger federal government role – seems hard to justify even on the one-statistic data series the report presents. Twelve European countries with far more public control over health care finances than the U.S. (typically from 70 percent to 85 percent of total health sector revenues, compared to 46 percent in the US) have lower rates of increase in the chart presented.

If anything, the data presented here suggest that greatly increasing federal control over health care expenditures may be the best way to reduce aggregate rates of growth in current U.S. health costs. This fiscal solution may be neither feasible nor desirable in the U.S. for a variety of policy reasons, but the central point here is that the data alone points in the opposite direction from what the report claims.

The third conclusion of the report – that government-run systems control costs “largely through government-imposed-rationing” – appears to directly contradict the report’s claimed second conclusion. If government-run health systems are unable to restrain increasing costs (as the report claims), then how can these same health systems successfully restrain their costs through effective government-imposed rationing?

In reality, of course, on this third point, nearly all other developed country health systems in varying degree do ration care by a number of established mechanisms (restricted physician training places, restricted permits for hospitals, constrained funding for service delivery, as well as waiting lists in most tax-funded health systems), although less so in social-health-insurance countries like Switzerland and Germany. Moreover, health economists on both sides of the Atlantic are busy developing techniques and justifications to further restrict future health care spending (QALYS, DALYS, comparative effectiveness, etc).

Thus in practice, on this third issue, the report is correct – most other developed countries have substantially more rationing than do adequately insured Americans (uninsured or poorly insured Americans also confront rationing). But these restrictions are one of the key issues raised by the relative success of government control over expenses, not its failure to do so as the report claims.

Ultimately, however, this single comparative data series does not demonstrate the success of any wealthy OECD country in adequately restricting the growth of aggregate national health expenditures. Long term, the numbers are bad for all wealthy countries in an era of burgeoning national budget deficits and a permanent shift of economic activity to Asia.

If the Joint Economic Committee wants to do something helpful about the dynamic pattern of health expenditure growth in the U.S., it would be well advised to drop casual analysis of comparative health system figures and instead concentrate on developing a solid strategy to expand the funding base for health care in this country by stimulating real private sector investment in real industries that have the real potential for long-term growth.

Richard B. Saltman is Professor of Health Policy and Management at the Emory University School of Public Health. He is cofounder of the European Observatory on Health Systems and Policies in Brussels and is currently head of the Atlanta hub. He has published 17 books and over 130 articles and book chapters on a wide variety of health policy topics, particularly on European health care systems. His new volume, Nordic Health Care Systems: Recent Reforms and Current Policy Challenges, co-edited with Jon Magnussen of Norway and Karsten Vrangbaek of Denmark, was just published by McGraw-Hill Education. RSALTMA@emory.edu; 404–727-8743.

Choice is one of the most powerful issues in the current debate over U.S. health care reform. Americans place great value on their individual ability to choose their own doctors, and they worry that existing employer-based insurance plans might be forcibly collapsed into a new public option (or cooperative) that would limit access to their current physicians or to certain types of specialists.

Since European health systems have been notably more successful than the U.S. in extending access and in constraining costs, it may be useful to examine their levels of physician choice. In practice, the amount of choice that European patients have depends on the country, whether the doctor is a primary care physician or a specialist, and whether the care is paid for by public funds (taxes or social insurance) or privately (private commercial insurance or out-of-pocket).

Primary care:

In countries with private general practitioners (including social insurance-funded systems like Germany and Netherlands as well as tax-funded systems like the United Kingdom, Denmark, and Norway), the citizen can choose his or her GP (sometimes with geographical restrictions, as in the Netherlands and the U.K.). GPs in the U.K. are known to be choosy about whom they take for new patients, however, and the patient’s choice of doctor also has to be approved by the regional office of the National Health Service, which is concerned about balancing the number of patients among GPs.

In the U.K., GP offices are now required to have night and/or weekend hours, with posted times when people can drop in without an appointment. Many offices have more than one GP (some are salaried employees), so it may be difficult to see “your” GP on any particular day. In the Netherlands, private GPs are required to establish cooperative agreements among their peers to provide night and weekend coverage.

In countries with publicly employed primary care physicians (Sweden, Finland, Spain, and Italy), the degree of choice is mixed. Sweden has started a movement (again) to have registration lists for primary care doctors inside the large health care centers where these doctors normally work. Individuals are allowed onto a physician’s list if there is room (there is a maximum number of patients allowed), however a patient may not be able to see that doctor on any given visit since Swedish physicians work 40-hour weeks with considerable educational and vacation leave.

Choice of primary care physician is more restricted in Finland and Spain, and it can depend on whether a visit is planned or not.

For acute care visits in Finland, Spain, and Italy, patients must see the primary care doctor on duty when they arrive (as with an HMO in the United States). In Finland, however, patients can use the separate social insurance to see any primary care doctor (including doctors who are publicly employed), with 20 percent of the fee paid by the social insurance. Patients in Finland can also see the occupational health physician at their place of work for free.

In Finland, there has been a longtime shortage of primary care doctors in the health centers (due to low pay). The problem has been dealt with in part by employing temporary doctors, especially from Estonia (attracted by what is for them is high pay).

Swedish primary health centers also have a longstanding problem with physician vacancies, and have been hiring Polish doctors to fill the gaps, particularly in rural areas. In both Finland and Sweden, people can schedule a planned visit with a particular primary care physician, but they may have to wait up to two weeks or more for the appointment.

Specialist care:

The degree of choice differs between countries with tax-funded insurance systems and those with social-funded insurance systems.

In tax funded countries (the U.K., the Nordic countries, Spain, and Italy), specialists are unionized public employees. For both outpatient clinic visits and planned elective inpatient procedures, patients have to accept whatever doctor is assigned by the clinic, including junior as well as senior doctors. As both Finnish and Swedish administrators like to say, “All our doctors are qualified – we trust our doctors.”

However, if patients pay privately in a public hospital (as is possible in the U.K. and Finland), they can choose their specialist. If patients go to one of the private hospitals (available in the U.K., Denmark, Sweden, Finland, Norway, Spain, and Italy), they can choose their specialist, even if the procedure is being paid for by public funds, and even if (as in Sweden) the specialist is usually a publicly employed M.D. who is doing procedures privately in his or her off-duty time.

In Germany and Austria, which are social insurance-funded countries where specialists are hospital employees, patients may be able to choose, but choice is not guaranteed. In Belgium and Netherlands, which are social insurance countries where specialists work in private group practices on contract to hospitals, most patients can choose their doctors. The exceptions are patients who are on public subsidy. e.g., indigent and/or elderly individuals.

What this brief survey suggests is that on the question of patient choice of physician (as elsewhere in health care) what counts are the details. While it is possible to have tax-funded and social health insurance-funded health care systems in which patients can select their own primary physician (e.g., the U.K., Netherlands, and Germany), such options may be substantially restricted by governmental regulation. Conversely, patients rarely have a choice of hospital specialists in planned elective or even outpatient clinic settings, regardless of how the system is funded.

Broadly speaking and with exceptions (where there are private GPs), there is considerable tension at present in European health systems between their prior existence as a uniform public service and growing demands from a more affluent population for more of an individual service. While different countries have progressed at different rates along this trajectory, there is a clear trend toward creating more personal service within these collectively financed health systems.

Richard B. Saltman is Professor of Health Policy and Management at the Emory University School of Public Health. He is cofounder of the European Observatory on Health Systems and Policies in Brussels and is currently head of the Atlanta hub He has published 16 books and over 130 articles and book chapters on a wide variety of health policy topics, particularly on the European health care systems. His new volume on Nordic Health Care Systems, co-edited with Jon Magnussen of Norway and Karsten Vrangbaek of Denmark, will be published later this month by McGraw-Hill Education.  RSALTMA@emory.edu; 404–727-8743.

The day I first read Tony Culyer’s typically incisive synopsis of NICE, I was trolling my search engine’s daily serving of NICE news and happened to take note of a short article from a regional newspaper in theU.K. The article described a local campaign that had succeeded in stopping the withdrawal of drugs from patients with pulmonary hypertension, an incurable lung condition.

As the article explained, the campaign had been in reaction to a recommendation by NICE, the government’s “drug watchdog,” that the National Health Service “stop the use of life-saving treatments and medication for the condition.” Sigh.

What caught my eye, however, was not the usual hyperbole, and even frank misrepresentation of NICE’s guidance that the average British man-on-the-street is now quite familiar with. It was the first two comments to the article that I thought captured much, not only about the role of NICE in the U.K., but even more about the public crucible into which the fluid metal of what we are now calling “comparative effectiveness” is about to be poured here in the United States.

Utdlass: “Why would anyone in their right mind wish to deny such drugs to people with a lung condition in the first place? Madness. It was probably all to do with money like it is when people with cancer are denied drugs to help prolong their life. Seems that there is always enough money to ensure that smacked up drug addicts get their methadone though. To sum up: Put yourself in a situation requiring free drugs and you’ve got it. Be unfortunate to suffer through no fault of your own and you’ll have to fight for your right to life saving drugs. What a Country eh?

Yorkshireguy: “Well said, Utdlass, I cannot agree with you more.”

What this short snippet demonstrates, I think, is how fundamentally messy are our moral intuitions about allocating limited health care resources. NICE, of course, is a manifestation of supreme hubris – that out of this mess, this smouldering vat of half-baked prejudices, selfishness, and denial, a wealthy country, with a populace guaranteed health care without concern for out-of-pocket costs, and with the fantastic world of medical innovations tossed at their feet daily through the media and the internet, can somehow create a political structure and process to help its society wrestle honestly with the question of how to care for its members as a community bound to each other with mercy and justice – and do it within limited resources. The nerve.

And, of course, the most amazing thing is that, 10 years on, NICE is still standing. In fact, as Tony Culyer describes clearly, if anything, NICE has proven so resilient and respected within the English system that it is being asked on almost a yearly basis to expand the scope of its activities and take on other challenges, such as making evidence-based recommendations for public health measures. Yes, NICE is in many ways thriving.

Always under attack from some component of the physician or patient community, and frequently at odds with nearly the entire manufacturer community, but, oddly, somehow stronger and respected by countries the world over for having weathered these storms for a decade, NICE looks like a winner. Which, of course, scares the living daylights out of many people in the U.S.

The sad thing about all the lessons that could be learned from NICE’s navigation of the scientific, political, and ethical minefield that all developed nations face is that most Americans will never hear anything about them.

All they will hear this summer and fall is that the English, after a long day spent killing off the weak and elderly, delight in passing their idle moments robbing all other patients of their “destiny.” And that a nefarious and faceless “Board” is their main tool in this devilish pastime.

What will it be for America? Your doctor or a board of government bureaucrats at your bedside? It’s just that simple.

And so NICE will join the long list of foreign ideas that will be projected as “un-American.” However, the only thing more surprising than NICE’s survival in England is that, despite everything that can and will be thrown at the idea, the U.S. is about to embark on a similar path.

Legislation following on to the economic stimulus package will almost certainly contain a structure and sustainable funding platform for a public experiment that will attempt to shine the light of inquiry into the recesses of the American health care system in order to find out what works best, when, and for whom. How will the American version likely to emerge in legislation this year compare to NICE? And what lessons from NICE are likely to help guide the fledgling American comparative effectiveness research “entity?”

As shorthand going forward, and with a soupcon of irony, I will call the U.S. entity the National Institute for Comparative Effectiveness Research (NICER).

First of all, it is quite clear that the fundamental role that NICE plays in the English health care system will not be the goal on this side of the pond. NICER will not be charged with making specific recommendations, either in the form of clinical guidelines or of recommendations for coverage or pricing by public and private payers.

Some stakeholders will push for NICER to do nothing more than disseminate technical reports, perhaps formatted for patients and clinicians, but largely devoid of any real judgments. The goal will be framed as “globalizing the evidence and localizing the decisions” but the real agenda will be to defang NICER reports to whatever extent possible.

More likely, however, is that NICER will develop a system of rating evidence on comparative effectiveness, much as the United States Preventive Services Task Force (USPSTF) has done for years for preventive services. A transparent rating system could go a long way toward making evidence reviews more actionable for patients and clinicians; it would also be helpful to payers seeking to support tiered copayments, evidence-based pricing strategies, and other novel value-based medical policies.

The other major aspect of NICE that will not be found in NICER is the use of a cost-effectiveness threshold as the dominant method of judging a health care intervention. Cost effectiveness, or even the possibility of some version of it, is the major reason why a $1.1 billion program for comparative effectiveness research became the target of such intense pressure within an economic stimulus package of many hundreds of billions.

Cost effectiveness as wielded by NICE is an on-off switch: new drugs or devices are either cost effective and covered in full, or they are not cost effective and not covered at all.

Debates over cost effectiveness as an element of a NICER in the U.S. have pitted, on one side, those who feel that a federal agency wielding cost-effectiveness data will ultimately be captured by the cost-saving agenda of the federal government, and ultimately use cost-effectiveness data as a single cut-point to deny coverage for expensive new interventions (even if coverage recommendations are not supposed to be allowed).

On the other side in this debate is a group of generally less vocal advocates, including health plans, some purchaser groups, and even one national physician organization, the American College of Physicians. To these stakeholders cost effectiveness need not be implemented as the dominant element in medical decisions.

Instead, as with clinical effectiveness, ratings could be developed to help clinicians and patients choose higher value options when the clinical effectiveness is equivalent; and, importantly, the additional price for very small or questionable clinical improvements could be considered in light of objective, independent evidence instead of solely through the lens of manufacturer advertising to patients and clinicians. In other words, cost-effectiveness information from NICER could help Americans better answer the question: “Is it worth it?”

Most experienced prognosticators currently believe that cost effectiveness is unlikely to survive the necessary horse trading that will occur as legislation to create NICER is cobbled together with a goal of (some) bipartisan support. This does not mean that it is impossible for there to be some arms’ length connection between NICER’s work on clinical effectiveness and some consideration of value, but the logistical barriers to making this work are considerable.

During the next several months we are likely to hear a lot about cost effectiveness from multiple perspectives. What is ironic is that, whether NICER incorporates cost effectiveness into its functions or not, the U.S. health care system will still have to sort out some way to handle the challenges of providing high quality care with limited health care resources.

NICE in England is not a relevant model in many ways for a NICER in the U.S., but later this year, perhaps when all the shouting dies down, maybe we’ll realize something: that we still have to figure out some way of elevating the public deliberation about caring and costs, that neither the market nor purely governmental approaches are going to suit our society; and that we could do a lot worse than mirror the courage that the English demonstrated 10 years ago when they realized they had to tackle it head on.

Steven Pearson, M.D., M.Sc. is founder and president of the Institute for Clinical and Economic Review (ICER), an academic group at Massachusetts General Hospital in Boston that focuses on health technology appraisal policy. He spent a year at NICE as a Senior Visiting Fellow on an Atlantic Fellowship in Public Policy, and then served as a special advisor at Medicare and as a senior fellow at America’s Health Insurance Plans. spearson@icer-review.org, 301–435-8717.

The American Recovery and Reinvestment Act of 2009 includes $1.1 billion for comparative effectiveness research – research that compares medical treatments and procedures to determine which ones are most effective.

Critics cry that comparative effectiveness is a code name for rationing or will inevitably lead to it. A Wall Street Journal editorial said “the comparative effectiveness outfit will start to ration care to control costs.” George Will declared that comparative effectiveness research “would dramatically advance government control – and rationing – of health care.” In print and online many other outlets have carried similar stories.

To support their “slippery slope” argument, the critics point to Britain’s National Institute for Health and Clinical Excellence (NICE), which uses comparative effectiveness and cost-effectiveness analysis to advise the British National Health Service on what should be provided through the service. But the critics are wrong: wrong about the sequence and wrong about the role of NICE. In fact, the British system is a case in point that demonstrates the difference between rationing and comparative effectiveness research.

Created in 1947, the British National Health Service (NHS) rationed care very effectively for more than 50 years before NICE was established, simply by setting a budget for the service each year and sticking to it. Because its budget is well controlled, the NHS has always recognized that it cannot do everything for everybody. In fact, health spending in Britain has grown faster since NICE was created than in any previous decade, the result of a deliberate policy by the Blair government.

What NICE does is help ensure that the money available to the NHS is spent effectively and fairly. NICE attempts to get the most health benefit possible from the NHS budget. One of its main goals is to counter disparities in access to care.

When NICE was created in 1999, decades of research had demonstrated persistent inequities in access to the best in medical care. Dr. Gillian Leng, a member of NICE’s Board and Deputy Chief Executive and Chief Operating Officer for NHS Evidence, described the situation this way: “While one provider was getting good results by using a state-of-the-art procedure in treating some diagnosis, the provider next door might be using an outdated, ineffective approach with less satisfactory results. It was important to develop some way to standardize treatment approaches at the highest levels among NHS providers in order to try to ensure uniformly good care. We had to eliminate what was sometimes referred to as the ‘health care lottery.’”

The health care lottery is an apt description of how care is distributed in the United States today, where geographical and socioeconomic inequities in access are even more acute than they were 10 years ago. The critics ignore the fact that care is already rationed here depending on whether patients have insurance, what type they have, whether they live in underserved areas, and whether it is profitable to serve them, as David Leonhardt pointed out recently in The New York Times.

Moreover, the criteria used for coverage decisions by American health plans, part D insurance carriers, and even Medicare and Medicaid are not transparent to anyone. Cost plays a role, but the public has no idea to what extent benefit and safety have been sacrificed to save money because costs, and even the prices paid for services, are never discussed.

Critics have focused on the fact that when NICE recommends against a treatment it invokes cost-effectiveness. But they have missed two more important facts.

First, as Anthony Culyer points out here, when NICE says yes, the NHS is obligated to provide that care to everyone in the country. Second, NICE is accountable to the public. Consumer groups, manufacturers, physician groups, and other stakeholders know exactly what evidence, assumptions, and other considerations led to a decision. Over time, this has led to a robust system of public comment, reconsideration and appeal as well as explicit consideration of equity and other values in decision-making.

Recently, for example, after issuing a preliminary finding that it was effective but not cost-effective, NICE approved lenalidomide for patients with multiple myeloma who had failed two or more other treatments. Critics of NICE point to the preliminary decision as “rationing,” but fail to mention how the final decision benefited patients as well as taxpayers.

For patients, NICE’s careful analysis helped define the subgroup most likely to benefit. The analysis showed that for many – those who have failed one previous treatment – it is uncertain whether lenalidomide is as effective as treatments that are already available.

NICE also pointed out that, within the fixed NHS health care budget, broader approval of the drug would have meant taking away access to other services that provide more health benefits for the money. The manufacturer, which conducted the cost-effectiveness analysis in the first place, acknowledged this point and agreed to a unique arrangement under which, for each patient, the NHS pays for the first two years of treatment and the manufacturer pays to continue treatment past that time.

In the U.S., where there is no fixed budget for health care, comparative effectiveness information cannot influence how much money goes to health care, but it can inform decisions by individual patients and physicians, affecting which tests and treatments people choose and which ones they do not. Not surprisingly, then, a December 2007 Congressional Budget Office report showed that comparative effectiveness will not cut spending by much.

Compared with NICE, the U.S. comparative effectiveness effort focuses less on cost and more on generating new evidence. At present, because of the lack of comparative studies, medical decisions are made in a cloud of uncertainty, a situation in which no one knows which tests and treatments are demonstrably better and safer than the alternatives.

For drugs and devices, for example, manufacturers conduct more research to meet the Food and Drug Administration’s regulations and less that answers patients’ and health professionals’ questions about what works best and is safest, and for whom. Few studies compare different kinds of treatments, such as drug versus nondrug alternatives, and fewer still seek to distinguish patients who have the greatest benefit and lowest risk of side effects from other patients who benefit less.

As Hal Sox, editor of the Annals of Internal Medicine, recently said in his keynote address to the American College of Physicians 2009 Internal Medicine meetings: “the public isn’t getting its money’s worth from our system of industry-sponsored clinical research. The public pays the costs of drug trials through higher drug prices but gets research that doesn’t tell us everything we need to know to make good decisions. We get more for our money with the NIH-sponsored trials that we support with our taxes. However, the NIH funds far fewer trials than industry.”

In fact, in the U.S. the attack on comparative effectiveness research is not really about rationing. It is about fear of the free flow of independent information about benefits, harms, and costs. Without rationing at all, publicly funded comparative effectiveness research could improve health care in the U.S. by producing and publicizing independent, comprehensive research about what works best for patients.

Mark Helfand, M.D., is editor-in-chief of the journal Medical Decision Making, a staff physician at the Portland V.A. Medical Center, and a professor of medicine at Oregon Health & Sciences University, where he directs the Oregon Evidence-based Practice Center. helfand@ohsu.edu, 503–494-4277. Louise Russell, PhD, is an economist and research professor in the Institute for Health and a professor in the Department of Economics at Rutgers University. She is an associate editor of the journal. lrussell@ifh.rutgers.edu, 732–932-6507.

Britain’s National Institute for Clinical Excellence (NICE) has drawn controversy for using cost-effectiveness information to help determine coverage for drugs and medical devices. Until recently, the United Kingdom was the only country that took cost into account, but other countries, including Austria, Brazil, Columbia, and Thailand, now pay close attention to NICE as they strive to control health care costs. We asked Anthony J. Culyer, PhD, chair of the Research and Development Committee of NICE, to discuss the agency’s strengths and address criticisms.

What is the role of technology assessment in the U.K. health care system?

Broadly speaking, the U.K. has two parallel but somewhat intertwined health care systems. One is financed through private insurance premiums under which insurees can receive reimbursed care either in private institutions or in public ones. The other, called the National Health Service (NHS), is financed through tax-premiums; care is received either in public institutions or private ones contracted to the NHS.

Both systems generally claim to offer only effective health care – interventions for which there is credible evidence that they work. While evidence is not itself a sufficient basis for decisions, there is considerable commitment to the idea of evidence-informed decision – making, and a good deal of evidence that is available comes from scientific studies. Both sectors take NICE’s advice very seriously.

The terrible legacy of thalidomide still casts its shadow. Before the release of thalidomide in the late 1950s, adequate tests had not been performed to assess its safety, with catastrophic results for the deformed children of women who had taken thalidomide during their pregnancies in order to combat morning sickness.

How does NICE fit into technology assessment?

Being by far the larger of the two parallel sectors, the NHS takes the lead in seeking to address the question of what works. NICE is the principal agency within the NHS for giving guidance about this. NICE is not a research organization. It is, however, a major consumer of research outputs.

NICE’s technology assessment procedures are clearly laid out, are publicly accessible, and were established and have been subsequently revised only after extensive discussion and consultation with all stakeholders, including industry. The general aim is to maximize the health benefits from the care the NHS provides – whether preventive, diagnostic, curative or palliative, and whether in primary, secondary or tertiary care.

The cost-effectiveness criterion NICE uses is that only technologies expected to generate a quality-adusted year of life at a cost less than a threshold of £20,000 to 30,000 (about $26,000 to $36,000) will be recommended. Technologies that do not prolong life but that enhance its quality (as, for example, in palliative care) are judged by the same effectiveness criterion. Costlier interventions need exceptional grounds for being recommended.

What kind of authority does NICE have?

NICE cannot ban anything. It issues guidance, in the form of both clinical and public health guidelines, and on the use of technologies like drugs and medical devices. The guidance specifies the technologies in question, their dosages and frequency of use, the stages of a disease at which their use is most appropriate, counter-indications, and the patient groups for which they are likely to be effective.

Local health care purchasers and providers must make any technology recommended by NICE available when it is required by a local physician. In this sense, NICE enables rather than commands – only physicians have powers to command.

To date NICE has focused on new technologies but, in response to intense parliamentary pressure, it is currently exploring the possibility of issuing “disinvestment” guidance, that is, recommendations that particular practices should be stopped or used more selectively.

What is the role of QALYs in decision-making?

NICE recommends the use of a version of the Quality-Adjusted Life-Year as its principal outcome measure (EQ-5D), partly to enable NICE advisory committees to make consistent comparisons between the many possible procedures that could be included in the “benefits basket” and partly to encourage researchers to use that outcome wherever appropriate. The QALY is not itself, a criterion. It is only the denominator of the incremental cost-effectiveness ratio.

The usual practice is to compare the QALY difference between two technologies with their cost difference, and if the cost difference divided by the QALY difference is less than the threshold ratio mentioned earlier, the most cost-effective technology is recommended. The higher a specific incremental cost-per-QALY sits in the threshold range, and certainly when it exceeds it, the greater the power of other factors needs to be to result in positive guidance.

In many cases, however, the QALY is not available or is an inadequate measure in a specific context. The presence of patients and caregivers on advisory committees is one way that the appropriateness of the QALY is assessed in each situation and for NICE to apply patient-informed other judgements in reaching its decisions.

The cost-per-QALY is at best a guide to the probable effectiveness of a procedure. It is an aid to judgment, not a determinant, always requiring the consideration of contextual factors.

Is NICE a threat to physicians’ freedom to practice? Is it a threat to industry?

NICE’s guidance to professionals is just that: guidance.

The general expectation is that most professionals will follow the finest advice and guidance that can be mustered to support their work. This seems the right approach to me — the best way to encourage best practice is to provide the best information.

With passage of time – and the likely creation of NICE look-alikes around the world – an important new determinant of research patterns in industry seems likely to emerge. For the first time, strong indications will exist about the types of research-based products entire systems are willing to pay for and which will therefore generate returns for innovators. If this generates, as it should, incentives to invent new products that are cost-effective, then that will be one significant strand in the universal striving for both better health and cost containment.

Are recent attacks on some NICE decisions evidence of some deep unrest?

This is hard to answer. Whereas industrial sponsors and patient organizations have specific concerns, NICE has to take a broader view, representing the interests of all patients.

It is inevitable that on occasion there will be clashes. It is also inevitable that the value judgments that determine, among other things, the value to be placed on small extensions of not very satisfactory life, are contestable. NICE needs to be responsive to the insured public’s views without becoming a slave to every energetic protest from a sectional interest.

There is plainly a political balancing act to be performed. It is worth remembering that a NICE failure to recommend a technology is not a ban – and local decision-makers and clinicians may choose differently. There remains, however, considerable public resistance to the significant differences in what is available according to where you live in what is regarded as a national service. The balance to be struck between local autonomy and national standards is a further inevitable point of tension.

Are any important reforms in the NICE program likely?

There is continuing pressure for NICE to speed up its decision process – coupled awkwardly with a conflicting imperative to make decisions in a consultative fashion. There is also pressure to extend NICE’s work into disinvestment guidance.

There are issues about how best to make decisions when the evidence is absent, weak, contested, or biased.

There are many issues surrounding NICE’s application of technology assessment to public health measures – especially those involving non-health care agencies such as schools and municipal authorities, and measures whose principal aim is greater equity in population health. NICE is making progress with the application of technology assessment in surgical procedures, but this has, to date, fallen short of full-blown cost-effectiveness studies, not least because of the frequently poor clinical evidence base.

Another concern is how best to incorporate matters of fairness into NICE processes. Should people with rare diseases get special consideration? What about children? Or those near death? What about those with a lifetime of deprivation and disease for whom the smallest improvement ought perhaps to count for more than similar gains received by more fortunate folks?

A further ongoing concern is the effectiveness of existing knowledge translation and exchange methods. While the provision of excellent information to professionals is of critical importance, nothing of value happens if those for whom it is developed have neither the time nor the inclination to take notice of it. It’s NICE work if you can get it! NICE is necessary – but scarcely sufficient.

A great feature of having a NICE is that these issues get posed in a public forum and can be addressed in the interests of the whole community and with the whole community’s participation.

Anthony J. Culyer, PhD, is the Ontario Research Chair in Health Policy & System Design at the University of Toronto and professor of economics at the University of York, England. Ajc17@york.ac.uk; 011‑1904-433762.

Comparative commentary about health care in Canada and the United States is more unusual in 2009 than it was during the struggle over the Clinton reform in 1993–4. The contemporary reform debate is, with the exception of the Wall Street Journal’s commentary, strikingly insular. There is hardly a mention of Germany, Canada, Australia, or the United Kingdom, in most articles on what reform strategies are substantively and politically appealing.

So, a look at Canada’s health care system can provide useful perspective on our somewhat provincial health reform debate. Canada has what amounts to 10 provincial health insurance plans that fund hospital and physician services with essentially no deductibles, co-insurance, or co-payments. Think of Blue Cross/Blue Shield plans of the early 1960s, with tax funding.

The road to Canadian Medicare – the name of Canada’s health care system – was extended in time: hospital coverage took place from 1957 to 1961 as the provinces gradually adopted the plan. Likewise, physician insurance came into play between 1967 and 1971.

Canadian Medicare’s basic structure has remained largely intact over the past three and half decades, but Canadian confidence in the program’s future dropped sharply during the mid-1990s as severe constraints on provincial budgets kept Canadian expenditures flat for at least three years. Today, there are constitutional challenges to Medicare’s health insurance monopoly on hospital and physician services in at least three provinces, all following the 2005 Supreme Court decision to permit limited private insurance coverage in Quebec for elective surgeries. In short, the role of private finance is at issue in Canada where it has long been illegal to offer private health insurance for publicly funded services.

How different this appears from the perspective of a health policy analyst looking north from the U.S. Many of my colleagues eye with envy the remarkable Canadian mode of financial medical care for all its citizens. With decades of comparative experience, the record is clear (to us). Canada has managed to arrange broad health insurance coverage for its entire population; to deliver, in general, quite decent care; and to pay considerably less (10 percent of gross national product, versus the U.S.’s 16 to17 percent) in the bargain.

Tell American labor or business leaders now that the U.S. has the best medical care arrangements in the world and you will get a cynical laugh or a pie in your eye. The U.S. spends more than any other nation on medical care.

Interestingly, no one would pick up the U.S. story from recent rounds of Canadian commentary about U.S. Medicare and the refrain of enthusiasm, particularly from physician groups, for American levels of spending and our speedy adoption of new technology. Canadians now regularly complain that too little is spent on the public health insurance system, not that the U.S. — or Switzerland or wherever — spends too much.

“Underfunding” has become a familiar slogan, reiterated without the slightest appreciation that it is common for any professional group to claim that spending more is better. A Canadian has a bad medical experience and the language of crisis erupts.

To many informed American observers, this reaction seems quite batty. Getting good value for money in medical care is a task never completely finished. But the idea that Canada faces a comparatively serious set of problems seems, from my perspective, myopic.

There is, I would argue, much confusion about the significance of managing medical care finances under public auspices and through public budgets. Some Canadians believe that everything would be better if only there were private financing — private augmentation, so to speak, of squeezed governmental budgets. The relevance of the U.S. experience is precisely that it offers an object lesson in the failure of privately based control on medical inflation.

For the past three decades, the U.S. has taken seriously the vaunted advantages of the private market model of medicine. Rightly or wrongly, the country has pursued a bewildering mix of private solutions – business coalitions at the local level, self-insurance by large firms, experiments in group practice, increases in patient cost-sharing (deductibles, co-insurance, co-payments), and all sorts of rearrangements of who can tell the doctor or the hospital what and what not to do.

The result has been twofold: a staggering growth of organizational innovations (from HMOs to PPOs and beyond) and total failure to restrain the relentless rise in American health expenditures. It is worth remembering that in 1970, the U.S. and Canada spent essentially the same proportion of GNP on medical care (roughly 7 percent). Thirty nine years later, the U.S. spends 50 percent more of national income than does Canada and, at the same time, leaves its patients with the highest out-of-pocket costs in the world.

The comparative portrait leaves the observer with both a sense of irony and questions unanswered. One example has to do with the connection between economic progress and social welfare programs.

Many Canadian business figures – like their counterparts elsewhere – regard generously funded social programs as an economic disadvantage in some sense. In the case of Canada’s Medicare at least, this is precisely backwards. Were the burden of Canada’s Medicare funding to shift partially from the government to private payers, the economic burden would increase because overall spending on medical care would increase.

Where cost control is concerned, Canada is similar to Europe generally and the Netherlands in particular, as discussed in previous posts here. Richard Saltman emphasized that structural features of Western European democracies help to account for their relative success in cost control as compared with the U.S. (He also noted that most countries are worried about their present levels of expenditure, quite apart from their comparative performance against the U.S. standard.) Hans Maarse emphasizes the same internal concern about costs in the Netherlands, particularly in the context of the contemporary economic crisis.

What links all the comparative experience, I would argue, is the central role played by concentrated public expenditure in explaining differential levels of cost growth. Canada, the U.K., Sweden, the Netherlands, Germany — all face ex ante budget questions about how much to spend on medical care. If medical care budgets rise faster than tax income, other programs have to suffer and/or taxes must be raised. This gives political heft to steering the health sector’s outlays.

No such steering mechanism exists in America’s medical world. We discover what we spend after the fact and much effort is made to shift costs from one source to another. That, I think, is the comparative lesson to draw about cost control in the U.S. in 2009.

Theodore Marmor, PhD, is Professor Emeritus of public policy and management and of political science at Yale School of Management. His books include The Politics of Medicare; Theodore.marmor@yale.edu, 203–376-7739.

It is commonplace to observe that European countries restrain the growth of health care expenditures more effectively than the United States. A quick glance at any data sequence from the Organization for Economic Cooperation and Development (OECD) will confirm that European systems have lower aggregate costs and often lower rates of growth. American commentators typically attribute the differences to tighter budgetary restrictions in European health systems, as well as stronger political will by national policymakers to enforce those restrictions.

Beyond the adoption of specific policies, however, if one compares both tax-funded and social health insurance funded European systems with the U.S. system, it is apparent that an equally essential element in European success at reducing expenditures is structural in nature. Looking at health systems across Europe, one can point to a range of institutional arrangements that, although they were introduced to address other issues, are often equally as important for reducing overall health system costs.

As an example, consider physician disciplinary systems. The British determine punishment for negligent physicians through a committee of the General Medical Council, while the Swedish have an impartial committee of physicians and patient representatives administered within the National Board of Health and Welfare. In each case, the decision to put this arrangement in place was taken in order to implement what was seen to be a fair procedure for dealing with patient complaints as well as to ensure the clinical and personal integrity of medical staff.

Yet one key consequence has been that most patients do not sue in court for damages, and thus specialist physicians do not feel the pressure to practice defensive medicine. British, Swedish, and other Western European health policymakers never use this term, nor do they consider the practice of defensive medicine a policy concern.

In Sweden, the premium for an individually-purchased malpractice insurance policy from Salus – for all physicians regardless of specialty — is 300 kronor ($40) per year. The point here is that the absence of this entire category of medical expense in both Sweden (whose health care costs were 9.1 percent of GDP in 2005) and in the U.K. (8.3 percent of GDP in 2005) is an unintended consequence of other, core structural arrangements.

Additional examples include:

• In the U.K., most health care funds come from the national government’s general revenues; therefore, health sector appropriations have to survive sharp competition from other national government departments, and are (or were, until the last Blair years) famously hard to increase.
• In Sweden, 70 percent of health sector funds are raised by taxes set by the same elected body – the county council – that owns and manages health service providers. This means that before senior management can decide to spend additional funds, they themselves have to be willing to raise taxes and then to defend those tax increases in the next county council election.
• In many European countries, the same administrative entity that pays hospitals also pays for primary care services. Thus savings at the hospital level can be reinvested into expanded primary care and preventive services, which in turn will likely help reduce future hospital expenditures (quite unlike the largest hospital funder in the U.S., Medicare).
• In Israel, which has a European-style social health insurance system, decisions about the new drugs and procedures to add to the service basket of its four private, nonprofit sickness funds are made by an appointed advisory council of 70 members. No new drug or procedure can be added unless there are adequate funds (raised by a national health tax) already available.

All these structural mechanisms have drawbacks as well as advantages. They increase the difficulty of keeping pace with medical innovation, and, in countries with tax-funded health care systems, they are in part to blame for waiting lists of varying lengths (up to one year in the worst case, the U.K.) for elective hospital procedures.

But they do restrain the type of runaway spending that has characterized the U.S. health care system for decades, and they play an important role in overall cost containment in European countries. (Details of the structural characteristics of European health systems are at the European Observatory.)

These structural constraints, to be sure, are not themselves sufficient. Nearly all European governments remain seriously concerned about their aggregate expenditure levels, especially as their numbers of elderly continue to increase.

As a result, these governments are taking additional steps to reduce unnecessary expenditures. They are, further, closely focused on the potential (and in some Central European countries, the reality) that the current economic slump will reduce overall health sector revenues. Thus these governments are still very much in the business of designing new policy measures to help make their health systems more efficient and effective.

The following list suggests some of the more interesting policy measures that restrain the growth of health sector costs across Europe.

1. Regulating private insurers
   • Germany: Premium rates by law cannot increase annually at a rate greater than in the average worker’s wages.
   • Switzerland: Tight regulatory control prohibits insurers from making a profit on the mandatory basic coverage, and federal government approval is required for all cost-related decisions, including building or renting new quarters.
2. Expanding Primary Care Services
   • U.K. and Finland: To encourage first contact curative as well as preventive care, these countries have no copayments on primary care visits.
   • U.K.: The elderly have no copayments for outpatient pharmaceuticals; this policy aims to encourage compliance and help keep them out of more expensive hospital care. Scotland and Wales, which run their own health services, have recently eliminated copayments for all patients.
   • Finland: General practitioners are paid up to twice as much as hospital specialists, making primary care work more attractive.
   • Denmark: GPs are paid extra for managing diabetes patients: an initial 7,500 Danish kroner (about $1,400) for signing up a new patient and 1,000 kroner (about $180) for providing an annual physical.
3. Supporting Home Care Services and Informal Caregivers
   • Germany: Gives cash payments to home care clients, which can be given to family members or friends who provide in-home care.
   • Sweden, Denmark, andNorway: Caregivers receive points in the public pension system toward their own retirement income for staying home to care for a family member.
   • Sweden: Provides free respite care, telephone advice lines, support groups, and training sessions for relatives and friends taking care of someone at home.
   • Netherlands: Free neighborhood walk-in centers, staffed by nurses, counsel elderly patients, give medication, check vital signs, and even have several beds where patients can be observed for several hours.

These policy measures are part of a widespread and consistent effort to give patients needed care in the least intensive and least expensive setting. In most cases, this means spending more public money on primary care or home care to reduce the demand for more expensive services, or , in the case of the elderly, to postpone the need for more expensive services as long as possible.

The benefits of these policy measures are strengthened by the major structural mechanisms noted earlier. Together, these factors help produce health care systems that are considerably less expensive than is the system in the U.S.

The policy concepts behind these measures are pursued here to a degree by leading-edge public (Veterans Administration) and private (Kaiser Permanente) providers. The central point about these measures from a European point of view, however, is that they are part of an official national government strategy: compliance is mandatory and each measure thus represents a systematic intervention to control expenditures in a country’s health sector.

The challenge to American policymakers is not just to develop ways to reconfigure European policy mechanisms for use in a pluralist federal structure with a far more diverse system of insurers and providers.

This change process will have to occur in an environment that blocks many standard European cost containment methods. It will also have to occur without the underlying legitimacy and trust that, for myriad historical, cultural, and social reasons, is generally granted many Western European Ministries of Health, but which is not part of the federal health policymaking context in the U.S.

More immediately, it is instructive to contrast current legislative efforts in Washington with the policy approach discussed by Ministers of Health and/or their senior staff from 27 European countries at a European Union Presidency meeting on Financial Sustainability in Health Systems, held in Prague on May 11 and 12. As expected, European policymakers discussed strategies for making their systems more effective and efficient.

Speakers cited the now famous dictum of Marc Danzon (head of the WHO Regional Office for Europe) that, in the current economic climate, “inefficiency is unethical.” Equally, ministers grappled with how to reduce publicly funded services in order to reflect higher costs for new procedures and drugs as well as reduced public revenues from the long-term economic slump.

During the same week in the U.S., some policy measures were being considered that lead in the same direction as the Europeans’ – for example, to strictly regulate private health insurers, as in Switzerland. But most Congressional activity revolved around competing proposals to vastly expand public sector health care costs, and to concomitantly raise taxes on businesses to pay for this expansion.

Thus, in the face of extended economic disarray, countries that spend from 7 percent to 10 percent of GDP on health care are seeking ways to reduce that amount to better balance public accounts and to free up capital for investment in the broader economy. Meanwhile in the U.S., which spends 16 percent of GDP on health care, national authorities are busily devising plans to add trillions more to public health sector expenditures, arguing that this is the only effective way to expand coverage.

It is hard not to contrast these two very different approaches and to conclude that European-style policy mechanisms alone will be inadequate to resolve the basic conflict of political ideology with structural realities that now characterizes health policymaking in the U.S.

Richard B. Saltman is Professor of Health Policy and Management at the Emory University School of Public Health. He is cofounder of the European Observatory on Health Systems and Policies in Brussels and is currently head of the Atlanta hub. He has published 16 books and over 130 articles and book chapters on a wide variety of health policy topics, particularly on the European health care systems. He has twice won the European Healthcare Management Association’s annual prize for the best publication in health policy and management in Europe.RSALTMA@emory.edu; 404–727-8743

In Keynesian terms health care can be understood as a macro-economic stabilizer: a financial crisis does not elicit a fall in the demand for health care and health care expenditures. Nevertheless, there is no question that the the present international economic crisis makes effective cost control in health care necessary more than ever.

A report of the Council for Public Health and Care (“Raad voor de Volksgezondheid en Zorg”) published in 2008 spelled out that health care in the Netherlands  takes between 9.2 and 13.5 percent of the gross domestic product, dependent on how the boundaries of health care are drawn. Over the period 1998 to 2006, health care expenditures grew by an average of 3.7 percent a year (compared with 6 percent now in the United States). Without taking the consequences of the financial crisis into account, the Council also estimated that 20 percent of the yearly economic growth in the Netherlands is spent on health care, a figure that is projected to increase over the coming 20 years.

Some of the most notable policy measures for cost control proposed by the Council were to choose more radical competition in health care, in particular by further increasing the financial responsibility of health insurers, extending the scope of price negotiations between insurers and health care providers, and enhancing labor productivity. Another proposal was to increase private payments for care of the elderly. In the view of the Council, competition has only been implemented halfway since it was given a stronger role by the government in 2006.

Clearly, the financial crisis reinforces the need for effective cost control. In a report called “Code Red,” published in 2009 and written at the request of the Minister of Health, Gupta Strategists predicted that, due to the finacial crisis, the fraction of health care of the GDP will grow from 12 percent in 2009 to almost 14 percent in 2014. Another alarming prediction was that, without effective cost control, the financial crsis might require a doubling of the premium each citizen must pay for compulsory health insurance between 2009 and 2014.

The government measures announced so far to tackle the crisis are not more than a drop in the ocean. Gupta Strategists were particularly skeptical about the capability of many hospitals to improve their efficiency. If they do not perform better, about 50 percent of hospitals are expected to be in serious financial trouble in the near future. This dramatic situation might require extra government funding to avoid bankruptcy.

The financial crisis also manifests itself at other levels in health care. For instance, a growing number of health care providers are reported to struggle with deficits. Furthermore, some hospitals have difficulty financing their capital investments because of the reluctance of the banking sector to provide them with the necessary capital.

The banking sector is increasingly concerned about the hospitals’ capacity to bear the costs of rent and depreciation in future. This is to largely due to a fundamental change in the regime of funding capital investments in 2009 as part of the government’s policy to introduce regulated competition in Dutch health care, described in Eurohealth and Health Affairs. Whereas in the pre-2006 reform period hospital loans to finance construction activities were guaranteed by the government provided they had been licensed, the new regime makes hospitals responsible for their own capital investments.

As a consequence, banks no longer automatically consider hospitals a safe haven to grant a loan. In other words, the current financial crisis turns out to be an unexpected (but temporary?) obstacle to the introduction of regulated competition. Interestingly, private investors are beginning to show an increased interest in investing in health care, presumably because they view it as a growth sector not subject to any cyclical fluctuation. The consequences of this development for future health care expenditures remain to be seen.

The impact of the financial crisis on health care is far from clear yet, but one thing is absolutely certain: there is an urgent need for bridging the gap between revenues and expenditures. In this respect, one may expect, among others changes, a substantial rise in health insurance premiums, an increase of the mandatory deductible in compulsory health insurance (now 150 euros a year), and copayments as well as new reductions in the benefit package of long-term care.

Furthermore, the government will certainly require “efficiency gains” from health care providers to justify expenditure cuts, for instance, by lowering their administrative and management costs or increasing their productivity. Cuts in the salaries of health care workers are no longer inconceivable.

The crisis is also likely to elicit renewed political conflicts on remuneration between the government and doctors. Over the last 15 years, these conflicts did not play a prominent role in Dutch healthcare policymaking, mainly because of rather generous remuneration schemes. However, the government’s policy to introduce regulated competition required a substantial revision of these schemes.

A recent report of the Netherlands Health Care Authority found that the average revenues of a general practitioner had risen by 50,000 euros to 238,000 euros in 2006, the first year the new remuneration scheme had been in place. The report suggested that general practitioners had significantly benefitted from the new scheme which involves, among others, a greater role for fee-for-service payment.

The Authority’s report evoked emotional reactions from general practitioners. Their national association immediately expressed its fundamental doubts about the validity of the conclusions. Its main argument was that nobody could draw any firm conclusion on the impact of the new remuneration scheme, since 2006 was a transitional year. Moreover, the Association argued that the government’s policy of substituting primary care for hospital care justified extra revenues for general practitioners.

A second reason to predict a hot political summer is that of a cost overrun in specialist care in 2008. Due to technical failures in the new remuneration scheme of self-employed specialists (paid fee-for-service) and the abolition in 2008 of the budget constraint to their revenues, which had been in place since the mid-1990s, specialists managed to increase their revenues on average by 25 procent in only one year! Some specialists, including aneasthesiologists, medical microbiologists, radiologists and pathologists, even doubled or tripled their revenue.

The Minister of Finance announced he would claim back the cost overrun, but the specialists are not willing to do so because they dispute the validity of the government’s spending figures. Furthermore, they argue that a ”contract is a contract.” They are willing to accept some revision of the scheme, but only from 2009 onward. However, such a revision will be anything but easy and can lead to new conflicts.

Interestingly, specialists were already under some political pressure because of a report published by the Organisation of Economic Development and Cooperation(OECD) in 2008. It found that specialists in the Netherlands were among the best paid doctors in the 14 countries studied. Based on 2004 data, their earnings amounted to an average of $290,000 compared to $236,000 for specialists in the U.S.

The most interesting question concerns the impact of the financial crisis on the government’s policy of a stepwise introduction of regulated competition. At first sight there are signs the government aims to continue its course, for instance, by further extending the scope of price competition in hospital care. Yet there is uncertainty about its future course.

The cost overruns, which are clearly associated with the introduction of competition, elicit growing skepticism about the effectiveness of regulated competition to control costs. That result may lead to a call for fixed budgets to curb the growth of health care expenditures. The general political support for delegating public tasks to the market also seems to be declining.

In conclusion, we are indeed heading into a volatile political summer to tackle the impact of the financial crisis on health care expenditures. Cost control will be again on top of the political agenda in health care policymaking.

Hans Maarse, PhD, is a professor in the Department of Health Organizations, Policy, and Economics at Maastricht University, Netherlands. He is the author of numerous articles on health policy and reform in the Netherlands and other countries. H.Maarse@BEOZ.unimaas.nl; +31 43388 1517/1727.