By Bradley Scharf, Chair and Professor of Political Science.
October 13, 2009
European health systems achieve notably better outcomes than the United
States on virtually every measure, including customer satisfaction, choice of
physicians, life expectancy, infant mortality and medically avoidable disability
and death. Yet they spend only about two-thirds of what the U.S. does, measured
as a share of national income.
To approach the lower levels of the best
performing countries, we would have to reduce our spending by one-third. How
might this be accomplished?
The best systems—France, Germany,
Netherlands, Sweden and Switzerland— vary greatly in organization, yet they
share seven important features: First, they mandate a single, comprehensive plan
of insurance benefits that covers virtually the entire population, with no
exclusions for pre-existing conditions, pre-authorization for procedures, or
annual and lifetime caps. If applied in the U.S., a uniform plan would eliminate
roughly two-thirds of the administrative costs for insurance companies plus
about three-fourths of the administrative costs of hospitals and physicians. It
would also eliminate tens of thousands of jobs for insurance company bureaucrats
and cover more than one-third of our cost-cutting goal.
Second, the best
systems shift the emphasis in healthcare delivery toward more efficient
prevention and early intervention. They remove barriers to preventive care,
providing insurance coverage for all citizens and by imposing very low co-pay
requirement or avoiding them altogether. They train a much larger share of
physicians in primary care. Most fee-for-service payments to physicians are
replaced by a salary or a compensation rate that reflects the number of people
on their service lists. Instead of earning more by providing more costly
services, physicians maximize their earnings by keeping their customers healthy
and by providing good service, timely exams and treatment to reduce health
This more inclusive and effective emphasis on prevention and early
intervention accounts for roughly one-fourth of the cost gap.
overall physicians’ incomes are notably lower than in the U.S. Specialists’
incomes are roughly in line with the incomes of primary care physicians, roughly
four times the median income for all working people. In the U.S., some
specialists earn seven to eight times the median income. Moderating physicians’
incomes could close the cost gap by as much as 15 percent.
pharmaceutical costs are lower because public and private nonprofit insurance
plans negotiate prices. Tax laws discourage spending for marketing. Several
countries prohibit advertising for prescription drugs. Lower drug costs account
for another 15 percent of the cost gap.
Fifth, most European systems curb
the use of expensive medical technology by limiting the capital expenditures of
hospitals and requiring stringent trials for diagnostic procedures. The cost
benefits may explain 6 percent of the cost gap.
Sixth, most European
countries are far ahead of the U.S. in introducing electronic medical records in
a single format on an interconnected network of all providers. And hospitals are
given greater responsibility for monitoring physicians. Consequently, European
systems have a lower rate of medical errors and spend less to remedy
Seventh, European systems minimize malpractice costs by
mandating best practices, processing claims in medical courts conducted by
medically trained judges. Adopting European practices might reduce our overall
cost gap by no more than 1.5 percent.
Imitating the best of the European
systems could reduce U.S. health spending by one-third and approach the levels
of the world’s best heath care systems, while achieving much better results for
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