National Health Care And Insurance Systems Research Paper

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All national governments have some policies regarding healthcare for their citizens. National Health Care Insurance Systems (NHC/I) are distinguished by two characteristics. First, the government sponsors or coordinates a system of healthcare service delivery or insurance. Second, this system aspires to guarantee the benefits of modern standards of medical care to all, or virtually all, citizens, and comes reasonably close to achieving that goal.

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Government public health measures such as sanitation are not NHC/I because they do not focus on individual medical services. National systems to provide subsets of care, or care to subsets of the population, such as primary care clinics for the poor, are not NHC/I because they do not provide the full range of modern medical care to virtually all citizens. In any given instance, also, there may be disagreements about whether the aspiration is achieved: for instance, whether ‘waiting lists’ mean that adequate care is not guaranteed. Certainly no system meets all possible demands. Each nation also will have its own definition of the necessary extent of medical benefits. Nevertheless, the definition here fits common and scholarly understandings.

All advanced industrial countries, save the USA, have NHC/I systems. A number of countries that are nearing that status, such as South Korea and Taiwan, have created systems that may be said to meet the standard. However, in many countries that have aspired to meet the standard, such as much of Latin America and the former Soviet bloc, healthcare systems fall sufficiently short that most observers would say the aspiration is not reality.

NHC/I systems are of interest to the social sciences because they are large portions of modern economies, with direct impact on every person’s life.

Care may be guaranteed, as in Germany, by providing insurance. The government will regulate or provide incentives to create healthcare providers, but the national system mainly reimburses individuals or pays directly for the cost of care provided from outside the system.

Alternately, as in the UK, the government may operate a care delivery system and guarantees access, with low or no fees, to that system. Normally, however, some providers (such as general practice physicians) will contract with, rather than be employed by, the system.

Although structured and supported by national governments, the key operating bodies in these systems rarely are units of that government. In Canada, each province acts as health insurer to its citizens, within the five principles of the Canada Health Act. In Germany, most individuals are insured through one of hundreds of sickness funds, nonprofit public law bodies. In Japan, one major fund is run by the national government, but most citizens are in funds sponsored by corporations for their employees, or by local governments. In Sweden, county governments manage delivery systems.

These approaches may be combined in varied ways. In Australia, state governments operate public hospitals, but the national government insures physician and other ambulatory services. In the Netherlands, sickness funds cover most medical expenses but government insurance covers ‘extraordinary’ costs such as long-term care.

1. Similarities

In spite of their differences, NHC/I systems tend to share fundamental attributes. Any national healthcare or insurance scheme is a system of shared savings, to which many people contribute so that, if any one happens to get sick, they will not have to rely on their own resources to pay for their medical bills. Hence, whether specifically a ‘care’ or ‘insurance’ system, all socialize risk, and so insure.

Except in Switzerland, most citizens are compelled to affiliate with some, usually a specific, insurer or delivery system. In Germany and the Netherlands, upper-income individuals are allowed to purchase private insurance; in Switzerland, three-quarters of citizens are not compelled to have insurance, but all have strong financial incentives to insure.

The systems uncouple access to care from ability to pay for it. The elderly, having far more expensive needs than the average, always pay less than their costs. A family with five children will pay no more than a childless couple with the same income. Highearners pay more than low-earners.

All systems remove or drastically reduce price constraints on consumption of healthcare services, so require alternate methods to allocate scarce resources. These methods are the object of intense political conflict.

Whether formally part of a nation’s ‘social security’ scheme or not, all these systems are part of a nation’s social protections. Healthcare, however, is always much more administratively difficult and contentious than systems such as pensions and unemployment compensation, because of the need to work with and/or regulate healthcare providers.

2. Coverage, Benefits, Equity

The scope of protection varies across countries. Basic hospital and physician services are always covered. Pharmaceutical benefits, however, are part of the core package in Germany and Japan but not in Canada. Coverage of dental and long-term care varies widely. Abortion is covered in some countries but not others.

All systems protect beneficiaries from excessive financial loss, but they vary as to the extent of costs that individuals may face, and the equality of potential burdens. In Canadian provinces, everyone has the same mandatory insurance for the basic benefit package, but some services, such as outpatient pharmaceuticals, are not covered for all citizens. In Germany, about a fifth of the population is not required to join the sickness funds, half of these have private insurance instead, and individual sickness funds have had different risk profiles, so some have had higher costs than others. In Germany and Canada, individuals face no or trivial charges for most covered care; in Japan and France, the basic insurance requires that they pay 20 or 30 percent of charges for many services.

All NHC/I systems provide more equal access to care than in the USA, and all provide a better guarantee than those same countries had before their systems were developed or completed. Nevertheless, no system creates equal access.

Access may vary for geographic reasons. Rural areas almost always have inferior hospital care. Capital cities and university centers tend to be advantaged. One of the arguments for a national healthcare, rather than insurance, system is that direct control of delivery should make redressing supply imbalances easier; but experience shows that promise is hard to keep.

Nor can the NHC/I scheme address all inequalities in resources. This is not simply a matter of finance: ‘the well-educated and assertive patient is best able to make a particular system work at some level of satisfaction’ (Rosenthal 1992). But monetary resources affect ability to pay cost sharing, to access national systems, and to obtain uncovered services.

The role of private insurance within each system significantly influences equity of access. Where private insurance is only allowed for uncovered services, as in Canada, it only affects access to those services. When private insurance pays for cost sharing in a NHI scheme, as in France, its holders will face fewer cost constraints than those without private insurance, and may consume more within the basic scheme. In Australia and the UK, people may buy private insurance for the same services covered by the national scheme. They do so to get access to private hospitals or ‘private’ beds in public hospitals, so as to ‘jump the queue’ for relatively elective procedures.

In short, NHC/I systems are meant to guarantee a social minimum, not equality of care. Each system has chosen, and may modify, a level of equity. All include a norm that applies to the great bulk of the population, some ‘safety valve’ by which a privileged minority can do better, and some shortages for the minority who face special barriers such as language and location.

3. Analytic Issues And Approaches

Many questions about the development and behavior of NHC/I systems are part of the study of the welfare state more broadly, or of the sociology, economics, and politics of medical care. Nevertheless, certain issues are peculiarly salient to the study of NHC/I systems. Any state’s effort to structure healthcare so as to provide a social minimum of care, at reasonable cost, with enough acquiescence from medical providers to have a functioning system, raises the following concerns:

Reasons for, and how to limit, growth in spending.

The effects of different ways of organizing the guarantee, such as insurance versus care systems, or national versus local government influence

Governance of the medical profession, given the state’s interest in equity and cost control. A related concern is how relations between the paying organizations and the medical profession affect the relationship between physicians and patients

Effects of NHC/I policies on health outcomes, with special interest in ‘health’ as opposed to ‘delivery of medical services.’

In addition to these particular concerns, the study of any phenomenon yields a literature on the origin, development, and internal dynamics of any given system or the phenomenon more broadly. This includes discussions of individual cases (e.g., Eckstein 1958, Stone 1980) or comparative studies (e.g., Glaser 1991, White 1995).

Social science’s contributions to answering such questions are mixed. Often there are too few observations relative to the number of variables to have convincing results. For instance, there are at least as many ways of organizing the guarantee as there are systems. Different analytical perspectives, such as the attitudes of economists and sociologists towards markets, also can lead to different conclusions.

Nevertheless, significant contributions include empirical work that documents social ills, dating back to the nineteenth Century. During the post-World War II period when most advanced industrial societies were completing their national guarantees, much of the study of NHC/I systems could be viewed as, in Richard Titmuss’ (1966) term, the study of ‘social administration.’ This meant application of the perspectives of various disciplines: sociology to explain the division of labor in medicine and its effects on administration and production; an eclectic economics to explain cost and efficiency trends; and public administration theory to organization issues.

More recent evolution of NHC/I systems has created a role for the social sciences in management and policy choice. Budgeting and policy debates create a demand for evaluation of the return on alternative social investments. These normally measure effects on the population as a whole, or particular groups. Therefore governments have encouraged the development of both health economics and health services research (HSR).

Studies that show medically unexplained variation across regions in rates of different procedures have been used to de-legitimize physicians’ claims to expertise. The economic and HSR perspectives more generally suggest that resources should be allocated not by professional assessment of individual patients’ needs, but in accordance with statistical studies of populations. The most prominent forms of social science analysis of NHC/I systems (or medical care in general) thus serve payers’ interests in challenging the medical profession’s control of resource allocation (Belkin 1998).

In resisting the population focus, medical providers are not simply representing their parochial interests. NHC/I systems offer protection at moments of fear and pain, especially relief from worry about paying the bills when simply getting well seems challenging enough. If medical procedures offer even minimal hope at a desperate time, then the case for NHC/I systems is that a politically decisive coalition does not want to live in a society that divides its citizens into those with hope and those without. From this perspective the emphasis on population averages, or even health outcomes, misrepresents the function of NHC/I systems.

4. Origins, Evolution, And Prospects

Economists tend to explain government involvement in healthcare finance and delivery as a response to ‘market failures’ (Arrow 1963). Yet it is not an example of government replacing the market, because much healthcare historically has been financed and provided by neither. European sickness funds are the descendants of guild sickness and burial expense arrangements, in which membership in a continuous economic community (not something that could be purchased) was the basis for shared protection. Workers without that basis formed ‘friendly societies.’ Religious orders organized and staffed hospitals, while physicians provided some services in these hospitals without charge. When government was involved, it was largely local government, particularly public hospitals in urban centers.

NHC/I systems were created as governments transformed and expanded these varied arrangements into ‘stable systems of social protection for their entire populations’ (Glaser 1997). Industrial workers were included first. The German Kaiser’s speech to the Reichstag on November 17, 1881, in which he proposed compulsory sickness insurance for urban workers, is conventionally viewed as the beginning of this development, but there were precedents of a sort within Prussia (Zollner 1982).

The Kaiser’s Chancellor, Otto von Bismarck, conceived health insurance as part of a package of social protections that would bind urban workers, who might otherwise be a revolutionary threat, to the state. NHC/I often was a reformist initiative, promoted by conservative forces interested in buttressing the developing capitalist economic order, while radical socialists viewed it as a palliative, not fundamental reform (Eckstein 1958).

While new funds had to be created to cover workers whose workplaces or crafts could not support insurance, the early mandatory systems were largely based on pre-existing funds. Thus workers were gathered into different risk pools, with varied income and cost profiles that meant insurance was more of a burden for some than others. Funds had substantial independence in their governance and operation.

NHC/I systems then expanded by bringing successive social groups into the mandatory framework. This took a very long time: in Germany, agricultural workers were not included until 1972. Retirees generally were not in the original arrangements, and their inclusion required special financing. Where some citizens have never been included in the mandatory scheme, as in Germany and the Netherlands, governments over time have subjected the remaining private insurance to extensive regulation, so as to minimize adverse selection between the sectors. Inclusion of the more resistant groups (farmers, white-collar employees) has often required some concessions about financial terms. At the same time, one of its purposes has been to include higher-income groups whose contributions could be used to help subsidize the remainder. Since the 1970s, rising costs per patient and economic change have made many employer or locality-based funds impractical, and the hundreds or thousands of funds in given countries have consolidated significantly. Hence there has been a continual evolution towards more aggregated pooling of risk.

Governments have also become more directly involved in managing the supply side of care. That is most evident in the national healthcare systems; indeed, the British opted for the National Health Service, rather than extending insurance, in large measure because it seemed that only state power could remedy shortages and maldistribution in the supply of physician and hospital services (Titmuss 1966, Eckstein 1958). Central control has been reduced by the historic role of municipal or state governments in hospital finance. Yet as local financing sources become less adequate to the costs of modern medicine, national governments, even in sickness fund systems, have increasingly used control of capital or regulation to allocate healthcare capacity.

When mandatory insurance covered only a portion of workers, and funds were substantially self-managed, funds in many countries sought to control costs by entering into selective contracts with providers—an approach nearly unanimously condemned, by physicians, as ‘contract medicine.’ As coverage was expanded, ‘closed panels were eliminated in all countries,’ in order to win acquiescence from physicians. ‘All national health insurance laws eventually guaranteed the subscriber’s free choice of primary doctor’ (Glaser 1991).

Except where coverage was not yet universal, as in Australia, cost control has dominated the policy agenda since the early 1970s. Where the system is financed from tax dollars, the argument has been that rising costs, by increasing public deficits, would depress economic growth. Where finance is mainly by payroll contributions (as in the sickness fund systems), the argument has been that these proportional charges on top of wages depress hiring, so create unemployment.

Governments therefore have taken an increasingly active role in cost control, even where the funds are technically independent (as in Germany). They have limited capital investment; created or encouraged standard fee schedules and restrained those fees; created measures to limit the quantity of services, or compensate with lower fees; imposed budgets on institutions whose total expenses could be capped, such as hospitals; and imposed new cost-sharing or even ‘de-listed’ a few services. These measures significantly slowed cost increases during the 1980s, but increasing economic pressures meant that, even where costs grew very little as a share of GDP, political pressure to restrain costs further remained intense.

As these measures have increased dissatisfaction within the medical profession, whose incomes are at stake, they also have been highly unpleasant for the regulators. The result in the 1990s has been three common initiatives, pursued to varying degrees in many countries.

The ‘outcomes movement’ seeks to save by providing only ‘appropriate’ care, on the theory that there is lots of unnecessary, inappropriate care. By requiring some oversight of the individual decisions of clinicians, however, even the hard-to-criticize emphasis on results poses political challenges. In an ideal world, the medical profession would eliminate such ‘waste’ through collective self-regulation, but such corporatist self-governance is difficult even in Germany.

‘Decentralization’ is touted as a way to save by adjusting capacity more closely to the ‘needs of the community,’ usually assumed to mean less hospital care and more ‘community-based care.’ But people in communities tend to like hospitals, and the mantra that ‘hospitals are expensive places’ so money could be saved by substitution, though an old chant, may often be false.

Finally, there have been many initiatives to use ‘market mechanisms’ of some sort—basically selective contracting—to control costs. There is little evidence that these have saved money, perhaps because they have not been allowed to operate in ways that would threaten the underlying socialization of risk and costs that is fundamental to NHC/I systems (Saltman 1995).

These three reform approaches contradict earlier trends. Decentralization and selective contracting, in particular, might ultimately threaten the risk-pooling that is the basis for NHC/I systems. Are these common reform proposals part of a broader trend that threatens survival of the NHC/I systems? Perhaps, but there have been countervailing trends, such as the elimination of barriers that segregated lower-income Germans into more expensive funds, in the 1990s. Perhaps the much-touted reform trends are just failed stratagems by governments to control costs but avoid blame. If so, NHC/I systems are likely to continue to evolve in unique ways in each country, but remain basic aspects of virtually all advanced industrial societies.


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