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