What can the U.S. Congress learn about health insurance from Switzerland, a small country with the population of New York City? A lot.
In 2017 U.S. News and World Report ranked Switzerland as the world’s overall “best country,” in part due to its “well developed public health system,” which the publication scored 9.3/10.” U.S. News gave America’s public health system 4.4.
The most recent World Health Organization data reveal that the life expectancy of a Swiss woman at birth is 85.3 years; in the U.S. it is only 81.6. And as of 2016, Swiss men have the highest life expectancy of any men in the world at 81.3 (it is 76.9 in America). According to the OECD, in 2016 current expenditures on health in the U.S. were estimated to account for 17.2% of GDP, while in Switzerland they were only 12.4%—significantly lower, but still the second-highest among OECD members.
Switzerland’s mandatory basic health insurance requirement guarantees everybody living in Switzerland “affordable access to good medical care.” Although rising health insurance costs are fueling a debate about whether Switzerland should move toward a single payer system, the Swiss model presents a novel competition-based private sector approach to health insurance that is worth consideration in the U.S.
Unlike many European countries, Switzerland has left a large portion of the health sector in private hands—there is no single payer insurance scheme. Nevertheless, there is a mandate that residents purchase basic coverage. The terms of this coverage are set by law; it includes most common ailments (including diabetes), and coverage is inexpensive for children. Basic coverage includes pre-existing conditions, most inpatient and outpatient treatment, as well as hospitalization in the general ward of a public hospital in one’s canton (the Swiss equivalent of a U.S. state) of residence.
Approximately 90 health insurers compete across the country to sell basic coverage. These organizations are not-for-profit, with surplus revenue going into their reserves. Each canton regulates important aspects of the program, setting prices for various procedures. Insurance premiums vary by canton, which is understandable given the social, cultural, and lifestyle differences in various regions. The same private insurers that sell basic coverage also compete to sell complementary or supplemental coverage—and this is for-profit.
To offset the fact that some people are healthier than others, Swiss residents are able to choose deductibles for basic coverage ranging from approximately $300 to $2,500 per person. Healthy people generally choose higher deductibles, which can reduce their premiums as much as 50%, and lower them when they grow older. Residents can change their insurer and deductible once a year. Once the deductible is reached, Swiss residents pay 10% of health care bills up to a limit of approximately $700 per year per adult and $350 per child. This discourages needless visits to the doctor.
The cost of basic coverage increases with age and is subject to cantonal approval. Insurance companies are obligated to accept individuals seeking basic coverage regardless of age or medical condition. Since everyone must have insurance—including the poor—the Swiss government provides subsidies to those of lesser means based on declared income and number of children.
One hallmark of the Swiss system is that there is considerable flexibility—even with respect to basic coverage. Swiss residents are able to select plans that allow them to choose their doctors, but can lower premiums by joining an HMO-type plan, or a plan that requires a telephone consultation or a visit to a generalist before consulting a specialist. Swiss residents are also able to purchase additional insurance (“complementary” or “supplemental” coverage) that covers a stay in a semi-private or private hospital room and in a private clinic, alternative medicine such as homeopathic treatment, and dental and orthodontic treatment. As noted above, this supplemental coverage is a for-profit sector and insurance offerings vary considerably.
Turning to funding, outpatient treatment is reimbursed by insurers, while both insurers and cantons fund inpatient treatment in cantonal (public) hospitals. The cost of various treatments in cantonal hospitals is fixed by each canton. Cantonal hospitals offer quality medical care. However, a parallel system of private and specialized clinics also exists and these clinics attract more affluent consumers, as well as Swiss residents who have purchased supplemental coverage.
Pharmaceuticals are a tricky sector for many insurance schemes, particularly in countries like the U.S. and Switzerland where the pharmaceutical industry spends a lot of money on research and development. A specialized agency of the Swiss government determines whether a given pharmaceutical must be reimbursed by insurance companies under the terms of the basic coverage, and the price of covered pharmaceuticals is fixed by the Swiss government based, in part, by reference to the price in other countries.
All women in Switzerland have maternity coverage (and men contribute to that system). Maternity coverage includes prenatal care and all costs associated with delivery of a child, a weeklong post-delivery stay in the hospital where mothers are taught how to take care of their babies, and post-natal visits to the mother’s home by a qualified midwife.
The Swiss health insurance scheme has other attributes that will attract various segments of the U.S. population. Judgments against doctors for malpractice are limited to reasonably foreseeable and demonstrable damages, thereby reducing insurance costs. The cantons and the Swiss government largely fund medical schools—meaning that tuition is almost negligible and doctors do not leave school deeply in debt and anxious to repay their loans. Lastly, companies generally do not offer employees basic coverage (except coverage for work-related accidents). Major employers, however, often negotiate group rates for complementary plans.
Health care expenditures are high in Switzerland compared to many other OECD countries, but as a percentage of GDP, sums expended are significantly less than in the U.S. While not all aspects of the Swiss system may be suitable for the U.S., Switzerland’s private sector, competition-based focus and its emphasis on quality care, children’s health care, maternity care, and universal coverage do offer valuable ideas worth exploration by the U.S. Congress.
Arthur Appleton is an adjunct professor at the Johns Hopkins University School of Advanced International Studies and a partner at Appleton Luff.
