The Blog

Let's Go Dutch

8:00 AM, Aug 18, 2009 • By STANLEY GOLDFARB
Widget tooltip
Single Page Print Larger Text Smaller Text Alerts

Rationing may also take the form of limits on payments for medications. An example of the latter occurred in Germany and was reported in the British journal, Lancet: The German government under terms of the Bonus Penalty Ruling embedded in their health care system set daily rates for drugs used to treat high blood pressure, depression, migraines, prostate illnesses, and osteoporosis. This was viewed as reforming a component of the German system. Only 37 cents per day were allowed for drugs used to treat depression, migraines, and hypertension. The plan inevitably led to a big problem as the Lancet article went on to explain: Ambulatory care doctors in Germany were allowed to prescribe only a set daily dosage at a set daily rate. Incredibly, doctors prescribing over 10% above the set rate, were penalized and fined. A physician explained, "What is really wrong is that even doctors who are being very, very economical with their budget are being affected".

Having said all this, perhaps the most surprising development in European healthcare reforms is the Dutch plan that is the diametric opposite of HR 3200 and the Obama hoped-for single payer plan. In the Netherlands, the buzz words are "overcome the limitations of centrally run healthcare systems" and "managed competition". The approach is not greater and greater limits on care, it is to provide a competitive environment where incentives to achieve better and more efficient care can flourish. The history of this, as described on an official Dutch government website, is quite fascinating given our country's debate:

In the 1980s, it became clear that the Dutch health care system lacked incentives. On the supply side, the government was heavily involved in determining the price and volume of delivered health care services. This made the health care system both inflexible and fragmented. Diverse and separate funding systems prevented substitution of cheaper outpatient care for expensive institutional care. The government set spending ceilings for each part of the health care sector. Service capacity and prices were regulated centrally.

In the early 1990s, the government promoted efficiency through the introduction of market forces. In its role of orchestrator, the government reduced direct controls and increasingly left the running of the health care sector to sickness funds, private and public sector health insurers and care providers, opting for a system of managed competition. This competition applied primarily to the sickness funds that bought health care services on behalf of their members ('demand control').

Under the Health Insurance Act of 2006, the sickness insurance funds were abolished and Dutch citizens were required to purchase their health insurance from profit-making private health insurers, which prior to 2006 insured only the wealthiest third of the population. Private health insurers negotiate on behalf of their members with care providers such as hospitals, general practitioners and pharmacies the scale, quality and price of services charged their members. Consequently, the health insurers play a pivotal role in implementing the Health Insurance Act. Insured persons can now 'vote with their feet'. They may change their health insurer once a year if the premium is too high, or the quality of care, bought on their behalf, is too low. This incentivizes both health care providers and health insurers to be efficient in the delivery (providers) and purchase (insurers) of health care.

Therefore, the Dutch health care system has converted from a centrally controlled, inefficient, and increasingly expensive government run system to a decentralized, private insurance based, competitive system.

The president has been quoted as first supporting a single payer system before he was against it. The truth is that whatever system is put in place is only the first step if the experience of nearly continuous health care reform in Europe is a guide. Those who fear change because it may lead to circumstances they abhor should not have their fears dismissed based on what is in HR 3200 or any other bill put forward now. Whatever is put forth now will change in the future.