How to save $705 billion in health costs: Be like the Netherlands

Here’s one way America could cut $705 billion in health care costs: Act more like the Netherlands.

The Dutch are far from the most thrifty spenders when it comes to health care. In the Commonwealth Fund’s new comparison of 13 countries, the Netherlands is the second-highest spender as a percent of their economy (coming in, to no great surprise, right after the United States).

(The Commonwealth Fund) But if the United States dedicated the same percent of it’s economy to health care as the Dutch do, costs would drop by 41 percent.

And here’s some encouraging news: When you look at how the Dutch health care system works, it’s not actually a huge leap from how we’ll deliver care here in the United States when the big pieces of the Affordable Care Act come into effect.

The Netherlands inched slowly toward universal coverage; in the 1940s, it created entitlement programs that provided basic health care to about 68 percent of the population, mostly lower- and middle-income citizens.

In 2006, the Netherlands passed a sweeping health reform law that - much like the Affordable Care Act - requires citizens to purchase health insurance coverage from a private insurance company. How much a Dutch citizen pays for health insurance is tethered to his or her income; about two-thirds of people there receive some kind of subsidy from the government.

The Dutch aren’t especially aggressive in regulating health care prices when compared to other European countries. Hospitals, for example, get to set prices for about half of their services if they’re under a government determined cap. And the Netherlands has become increasingly hands off in price regulation in recent years. In 2005, for example, it stopped regulating prices for physical therapy.

But where they have gotten more aggressive on two other fronts: Risk selection and primary care.

As they implemented universal coverage, the Dutch put huge effort into ensuring that health plans were not cherry-picking healthy individuals with low health care costs. They’ve done so by, as Ezra has written previously, tracking health status with incredibly specificity, paying attention to individuals past hospital use and pharmacy records to get of sense of what they’ll spend in the future. Then, the Dutch government pays more to the insurance companies who take on the sicker individuals.

On primary care, the Dutch require each citizen to register with a general practitioner, who often ends up acting as “gatekeepers” to more expensive care.

“Insurers may provide their gatekeeping GPs with incentives to stimulate integrated and coordinated care, resulting in integrated care organizations that give a prime role to primary care,” a 2008 Health Affairs paper notes. Some large insurers are experimenting with some form of bonuses for, and risk sharing with, GPs. For instance, one major insurer offered GPs a bonus for prescribing generics.”

Gatekeeping isn’t always popular in health care; the HMOs that came to prominence in the 1990s lost customers in droves, who were sick of limited access to specialists. But that system doesn’t look to have an adverse impact on health care. Survival rates for cancer here and in Netherlands are comparable; the Dutch do even better than us when it comes to treating cervical cancer.

The Netherlands certainly isn’t doing the best at health care spending - if we got our per capita costs down to those of lowest-spender Japan, for example, we’d slash $1.25 trillion from our annual health costs. And it does not make a perfect comparison to the United States: When the country passed its universal coverage law its costs were already significantly lower than ours, as the country had passed cost-containment legislation in the 1970s.

There are definitely significant differences between us and the Dutch - and it’s not just our footwear choices. But as we move toward implementing a health insurance system that bears a strong resemblance to that of the Netherlands, the country does provide a more optimistic preview of where we might be headed.