We all know that all European countries have achieved universal coverage for their citizens by nationalizing healthcare, with the government serving as the only health insurer. We also know that the Canadian model of single-payer financing is used to create universal coverage across the European continent and, consequently, that healthcare costs in Europe are lower than those in the U.S.
We are all wrong.
I just returned from the World Economic Forum in Davos, Switzerland, where I discussed with people from a number of European countries exactly how they actually finance their healthcare. Everyone does have universal coverage, but almost no one uses the actual Canadian model. Austria, Belgium, Germany, Switzerland and the Netherlands all use mixed public-private models involving individual mandate laws (requiring citizens to buy coverage); public and private health plans that compete to sell health coverage to their customers; a guaranteed issue requirement that necessitates private health plans to sell a basic level of coverage to all people regardless of their health status; and very strong government subsidies to help low-income people buy their health insurance.
In Germany, the health plans (called sickness funds) have been in place since Chancellor Otto von Bismarck ruled the country more than a century ago. There are nearly 300 competing plans in Germany. There are roughly 30 competing health plans in the Netherlands. Everyone in the Netherlands also gets his or her care through one of those plans.
In France, the government provides a basic Medicare-like insurance plan for all citizens, and then 90% of the citizens buy supplemental coverage from several dozen competing mutualisms (mutual aid societies) and private insurers. Those plans look a lot like the private Medicare supplemental plans in the U.S.
So how do the European countries fund universal coverage? Payroll taxes are used extensively. In most European countries, there is a mandatory payroll deduction or income-linked contribution required of each worker to buy care. Those deductions seem to be largely in the 3% to 9% range for the ones I had an opportunity to identify. In several countries, the employer is also required to make a matching contribution in the same general range. In the Netherlands, employees pay 6.5% of their pretax income, plus a nominal annual fee, toward health insurance. Employers reimburse the income-based contribution.
In the U.S., typical employer costs run from 8% to 11% of total worker payrolls. Employee healthcare costs run in the 5% to 10% range for insured Americans. So many American workers spend a lower percentage of their pay for health insurance and directly related costs than many European workers. A number of countriesincluding Belgium, England, France and the Netherlandsalso offer private insurance plans that provide coverage for care not paid by the basic government plan.
Britain uses a mixed modelwith the National Health Service, or NHS, providing basic care for everyone. But its not the Canadian model. Primary-care physicians are paid by the government based on the number of patients in each doctors panel. A number of competing private health plans sell private market insurance coverage to British citizens who dont want to wait in queues for certain types and categories of hospital care or NHS-funded specialty care.
Only Canada uses the pure Canadian modelwith a single payer, no private insurance plans and all health insurance coverage paid solely from the general tax revenue of the country. It may be worth noting that per capita healthcare costs in Canada are now the fifth highest in the world, exceeded only by Luxembourg, Norway, Switzerland and the U.S.
I was told again in Davos that Canada, Cuba and North Korea hold the distinction of being the only three countries in the world where it is currently illegal for an individual patient to buy healthcare services directly from a doctor or hospital. The Canadian court system has been wrestling recently with the interesting constitutional issue of whether the restriction on people directly buying care might actually create an unlawful, dysfunctional and possibly unethical barrier to needed and constitutionally assured care for many Canadians. That issue has yet to be resolved. Canada might be changing.
In any case, instead of using the Canadian single-payer approach that most Americans thought was the usual and standard model, most of Europe seem to use various healthcare financing arrangements that more closely resemble the managed competition model outlined in the original Clinton health plan and now embodied in the individual mandate approaches being used in Massachusetts and being proposed by Gov. Arnold Schwarzenegger in California.
So what we Americans know about European healthcare probably needs to be reworked. We need to understand more clearly how the European countries have managed to use a combination of individual mandates, subsidized coverage and a mixed public-private model to create universal coverage in each of those countries.
Since we, hopefully, are finally looking hard at how to bring universal coverage to this country, we should probably learn some of these lessons sooner rather than later.