What can we learn from Switzerland?

at 04:21 PM ET, 04/25/2011

Tyler Cowen notes that the Swiss health-care system has fairly high out-of-pocket costs, suggesting that the Swiss health-care system views its patients as consumers, and yet Paul Krugman, who has derided the idea that the consumer-driven model could work for health care, has praised the Swiss system in the past. But in trying to nail Krugman, I think Cowen misses the story in his own data: The example of the Swiss system shows a) that the consumer-driven model doesn’t work to control costs and b) the irrelevancy of the argument over whether individuals are consumers at all.

If viewing patients as consumers works, and the Swiss are the best at it, then you’d presumably expect to see some large advantages to the Swiss system when you compare it to other European health-care systems. But you don’t. In fact, the Swiss system is the second-most expensive in the world. They spend $3,000 less per capita than we do, but more than anyone else does. And they don’t have a reputation for better outcomes, either. That the two most expensive health-care systems in the world are also the two with the most cost sharing seems to be a point for single-payer systems, not a point against them.

But the whole argument over whether patients are really consumers or not is a bit misguided, because “consumer” isn’t really a good term for what we’re trying to get at. The real question we’re asking is, “Who can make the decisions that would reduce costs?” And both evidence and intuition suggests it’s doctors. As the old saying goes, the most expensive piece of equipment in the hospital is a doctor’s pen.

Patients don’t know enough, and are rarely brave enough, to say “no” to what a doctor says they need. That’s particularly true when they’re lying on a hospital gurney, but it’s also true when it comes to getting a test or scheduling a follow-up. The authoritative guy in the white coat says you need this, and he’s got decades of training and practice backing him up, and your health is at stake. You’re really going to argue? Or take a leap of faith based on something you read on WebMD?

That’s why the two policies that really seem to work for controlling health-care costs are 1) paying doctors and providers such that they make more money if they do less, as happens in the United Kingdom, rather than more money if they do more, as happens here, and 2) creating systems where doctors and providers have to negotiate with the government, and so they have less power than in systems where they negotiate with many different insurers, none of which has the power of a single government insurer. My hunch is that Switzerland’s costs are higher than a lot of European countries because the system uses many insurers, and that means providers have more leverage to raise costs than they do in single-payer systems, but lower than our costs because government still plays a central role in negotiating the costs of treatments, which isn’t as true here.

 
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