American Healthcare: Worst Value in the Developed World? Part 2

American Healthcare:

Worst Value in the Developed World?

Part 2: How do other countries produce value?

John J. Dalton, FHFMASenior Advisor Emeritus

Disclaimer• The opinions expressed in this presentation and on the following slides are

solely those of the author based on nearly fifty years of involvement in healthcare as consumer, consultant, regulator, employer and hospital trustee. They do not necessarily reflect the views of BESLER Consulting, the St. Joseph’s Healthcare System or the Healthcare Financial Management Association, and neither organization guarantees the accuracy or reliability of the information provided herein.• Rather, the presenter hopes to stimulate debate and discourse directed

towards broadening America’s goals from “healthcare” to “health,” and reducing the value gap with the rest of the developed world.

How do others succeed in producing value?• France, Germany and the United Kingdom

have a combined population of 214.6 million and GDP of $9.1 trillion, roughly 2/3 of the U.S. population of 318.9 million and GDP of $18.6 trillion.• For an on-the-ground look at their different

approaches to universal health care, T. R. Reid’s 2009 book is an excellent read.• Let’s look at each of the three systems to

discern what lessons we can learn.

How do others succeed in producing value?Here’s how France, Germany and the United Kingdom compare with the United States.

Healthcare Spending and Key Health Indicators, France, Germany, UK and US

Healthcare % of GDP - 2013 (2)

Health Spending per Capita, 2011 (3) Country

Type of Universal Health Care (1)

Life Expectancy @ Birth, 2012 (4)

Infant Mortality Rate, 2012 (4)

Child Mortality Rate, 2012 (4)

10.9 $4,111 France Two-Tier 82 3 411.0 $4,495 Germany Insurance Mandate 81 3 48.5 $3,405 United Kingdom Single Payer 81 4 516.4 $8,508 United States None 79 6 7

1. Modern Healthcare, February 8, 2016, p. 342. OECD Health Statistics, 2015, FOCUS on Health Spending, July 20153. Commonwealth Fund, 2014, "Mirror, Mirror on the Wall: How the U.S. Health Care System Compares Internationallly"4. World Health Statistics, 2014, PART III, Global Health Indicators, WHO

France – Two Tier System• France’s system is based on private doctors treating patients

who buy health insurance to cover most of the cost.• Health insurance is purchased through work; employer and

worker split the cost; monthly premium is withheld from paycheck.• Everyone must belong to an insurance fund; government pays

the premium for the unemployed.• Patients are expected to pay at time of service, then get

reimbursed by their insurance fund for 75-80 percent of the fee.• Doctors make house calls and receive a higher payment for

doing so.

France – Two Tier System• The French can buy supplemental health insurance to cover their co-

pays and non-covered services; most do so.• All 14 sickness insurance funds are not-for-profit entities;

administrative costs are below five percent, thanks in part to the carte vitale.• Full interoperability since 1998.• Card contains owner’s complete medical history.• Doctor submits bill, fund must pay it.

France – Two Tier System• Patients have full freedom of choice; can see any

specialist anytime.• National Health Ministry negotiates with doctors,

hospitals and drug companies, then dictates what providers can charge for treatment and what price will be paid for prescriptions. • Roughly 77 percent of health expenditures are covered

by government-funded agencies.• The remainder are either patient payments or payments

from private supplemental insurance plans.

France – Two Tier SystemWhat are the downsides?• French physicians earn far less than their U.S.

peers, but enter practice unburdened by student loan debt.• Attempts at health care reform that limit freedom

of choice face voter resistance, and efforts to control payments to providers have resulted in doctors striking to preserve their incomes.• Although freedom of choice can be expensive, the

French outlive Americans by 3 years while spending less than half per capita on health care.

Lyon, 2014

Germany – the Insurance Mandate• The world’s first universal health care system

was the work of Otto von Bismarck, the “Iron Chancellor” who unified the German nation into central Europe’s industrial and military power.• He originated many programs that make up

the modern welfare state to gain working class support for unification.• The Sickness Insurance Law was enacted by

the Reichstag in 1883.

Germany – the Insurance Mandate• Medical insurance is mandatory with income-based

premiums averaging 15 percent of income paid jointly by employers and workers through payroll withholding.• Germans can choose from more than 100 private

insurance plans (Krankenkassen) that compete vigorously for business.• As not-for-profit enterprises, the funds exist to pay

medical bills, not to pay dividends to stockholders.• The plans must accept all applicants and pay any

claim submitted by a recognized doctor or hospital.

Germany – the Insurance Mandate• Coverage includes “guest workers,” legal or not; there is

a government buy-in for low income and unemployed.• Patients are free to choose any doctor or hospital.• Most German hospitals are either municipal or charity

operations; there are some for-profit chains.• The bulk of medical professionals are GPs working in

private clinics.• The sickness funds negotiate with the doctors’ union to

determine what procedures and treatments are covered in the national benefit package.

Germany – the Insurance Mandate• Patients never see a bill, but are subject

to a small co-pay.• Germany was ten years behind France in

achieving interoperability, implementing its digital health card in 2008.• As a result, administrative costs are much

lower than in the U.S., even with more than 100 insurance plans competing for subscribers.

Germany – the Insurance MandateWhat are the downsides?• Complete freedom of choice in a system with minimal

waiting times and high quality costs a lot of money, $4,451 per capita in 2011, compared with $4,118 in France and $3,405 in the UK.• Physicians earn less than their U.S. counterparts, but receive

a free medical education and are not burdened with student loan debt.• Under unrelenting pressure to moderate cost increases, the

government and sickness funds are squeezing providers.

1963 - Ich bin ein Berliner!

1987 - Mr. Gorbachev, tear down this wall!

United Kingdom – the Single Payer System• Later to the game than either France or

Germany, the British took a distinctly different approach to implementing universal health care.• The National Health Service (NHS) was created

by two opposites, Lord William Beveridge, a social reformer aristocrat raised in India, and Aneuryn (Nye) Bevan, a Welsh coal miner appointed in 1945 as Minister of Health by Labor Prime Minister Clement Attlee.

United Kingdom – the Single Payer System• The 1942 Beveridge Report promised free

healthcare to all, with payment coming from general taxation, not from medical fees or insurance companies.• Faced with strong opposition from the British

Medical Association and health insurance programs, Bevan crafted a compromise that allowed GPs to remain private operators and insurers to market policies to customers who chose not to use the NHS.

United Kingdom – the Single Payer System• Income and social security taxes are higher than

the U.S. in every income bracket, but result in a system with minimal paperwork and no billing.• The nationwide network of GPs are independent

practitioners paid on a capitation basis with a strong incentive to practice preventive medicine.• GPs make house calls and manage many

conditions in their “surgeries” that would be handled by specialists in the U.S.

United Kingdom – the Single Payer System• About 60 percent of British doctors are GPs,

compared with about 35 percent in the U.S., and they enjoy income levels comparable to U.S. PCPs.• Specialists are called “consultants” and cannot

see patients without a referral from a GP.• The National Institute for Health and Clinical

Excellence (NICE) determines the range of medications, tests and procedures that are covered.

United Kingdom – the Single Payer SystemWhat are the downsides?• The dreaded “Queue,” or waiting list for non-urgent or elective

procedures (e.g., hernia repair, varicose veins). However, in its “Health at a Glance, 2015,” the OECD noted that waiting times now are lower than in other OECD countries reporting data.• Consultants earn considerably less than their U.S. peers.• The NHS has been subject to tight budget constraints, inhibiting its

ability to address high risk factors like smoking, alcohol consumption and obesity that are above the OECD average.• Despite negative perceptions of “the National Health,” the British

deliver the best value for the money in the developed world.

How do others succeed in producing value?France, Germany and the U.K. take differing approaches, but have some

common themes:• Majority of physicians are private GPs with no student loan debt• Full interoperability and no denials keep administrative costs low• But their real “secret sauce” is a robust social services safety net to

deal with housing, nutrition and environmental issues!

How do others succeed in producing value?• The WHO defines health as “a state of complete

physical, mental and social well-being.”• In their well-researched 2013 book, Elizabeth Bradley

and Lauren Taylor make a compelling case that when social services spending is taken into account, the U.S. is not a high spender.• Social services spending includes public and private

spending on old age pension and support services for older adults, survivor’s benefits, disability and sickness cash benefits, family supports, employment programs and other social services that exclude health expenditures.

How do others succeed in producing value?France devotes fully 1/3 of its GDP to health care and social services spending; Germany 29%; the U.S. 25% and the United Kingdom 23%.

Their research found that countries with high health care spending relative to social service spending (like the U.S.) had significantly lower life expectancy and higher rates of infant mortality than did countries that favored social spending (like France, Germany and the UK).

How do others succeed in producing value?• With health and social services spending

consuming 25% of the US GDP, it’s unlikely that the federal government will step up social services funding. That said, where will leadership on this issue come from?• In the presenter’s opinion, it must come from

leaders of not-for-profit hospitals and health systems in order to achieve the Triple Aim.• That’s not without risk, since inpatient

admissions and ED visits will decline, sacrificed for the greater good of healthier communities.

$$

$$$$$

American Healthcare: Worst Value in the Developed World?

Contact Information:John J. Dalton, FHFMASenior Advisor EmeritusBESLER ConsultingEmail: [email protected]. No.: 732-310-8782