The first — to ensure equity — involved attaching a risk-adjusted payment to each individual, paid by a national social insurance pool, ensuring that the size of each person’s voucher would make him or her attractive to private insurers.
The second — to ensure competition on price and quality — was to allow people to band together in “collectives” (interest- or Internet-based) to negotiate with insurers over price and extra services (core benefits were fixed by law).
The third element — to ensure that private insurers served the public interest — was heavy regulation of insurers, including requirements that they take all applicants, even at the door of the hospital emergency room.
The Dutch undertook this radical reform because they understood that history had changed. Like other small European countries, they realized that global competition and the rise of Asia created a fundamental threat to their economic survival, and that welfare-state-style benefits were no longer viable.
Most senior Dutch policymakers are reasonably pleased with the new system. Cost increases have stabilized, and the risk-adjustment mechanism has resulted in private commercial insurers using billboard ads to woo sick patients: “Do you have diabetes? Get your insurance from us.” While there still are problems — only “listed illnesses” have additional risk-adjustment payments, and some people still haven’t enrolled — the Dutch argue that they have a balanced system of individual and collective responsibility that is sustainable for the next several decades.
Financial sustainability is at the center of health policy in many European countries today. A senior Norwegian health official, speaking of his country’s completely government-funded system, said recently at a public meeting that “our present system of government-funded health care is not sustainable.” This is an oil-producing nation that has no debt and is putting its substantial oil earnings into what is now a $400 billion sovereign wealth fund (for a population of only 5 million people) to meet future health and pension obligations.
For the United States, a key issue is trust — specifically willingness to trust the decisions of the federal government. Each side in the debate has been less than honest. Democrats made political hay by saying that the federal government cannot be trusted to raise the value of Medicare insurance vouchers as health-care costs increase, thus shifting more of the costs onto household budgets. They also argue that private insurers will raise rates and try to cheat the elderly on the services provided to them.
Yet Democrats established, in the Affordable Care Act of 2010, a 15-member panel — appointed by the president with no congressional participation or oversight — that they clearly trust to make decisions about potential reductions in Medicare services. Moreover, the law’s new insurance entitlement for uninsured people is itself a “premium support” program to help households with incomes of as much as 400 percent of the poverty level buy private commercial insurance — exactly what the Democrats claim the federal government cannot be trusted to do for those eligible for Medicare.
The Republicans commit the same rhetorical sin. They argue that it’s okay to trust the federal government to maintain the proposed Medicare vouchers at a reasonable level, especially for sick elderly people (who will get additional supplements), but that it’s not okay to trust the federal government to make rationing decisions through a presidentially appointed panel.
Both Democrats and Republicans distrust the federal government, but only when it comes to implementing the other party’s proposal.
As the European experience indicates, the world has changed since 1965, when Medicare was enacted. An effective policy to reduce the long-term drag of federal health entitlements on our economic competitiveness is badly needed and overdue. To get it right, however, it’s imperative that the debate focus on facts, not hyperbole.
Richard B. Saltman is professor of health policy and management at Emory University and a co-founder of the European Observatory on Health Systems and Policies in Brussels.
Clear Thinking about Medicare