Jim de Bree: Should Obamacare go Dutch?

From an economic perspective, health care is a dysfunctional industry. Health care is a unique industry in several respects. The preponderance of costs is concentrated in a small portion of the population – those who are very sick. When someone suffers a serious illness, the costs of treating a person are typically beyond what that person can afford. Thus, we need to find a way to equitably spread those costs across society. Our system has many stakeholders besides the patient. We have providers, insurance companies and pharmaceutical companies. Except for the patient, the other stakeholders seek to entrench their vested interests – which are frequently profit-motivated. Thirty-five years ago, providers were able to charge high fees and pass them on to insurance companies. The insurance companies passed the costs along in the form of higher premiums. Since most of the medical insurance premiums were borne by employers, the employers at some point finally balked. This resulted in a fundamental disruption to the economics of health-care funding, culminating with the passage of the Affordable Care Act (“ACA”) in 2010. As its name implies, the ACA was intended to make health care more affordable and available to everyone. Unfortunately, special interests, principally the insurance industry, prevailed and the ACA, to date, has not accomplished its objective of affordability. Since the ACA’s passage, health care costs have increased faster than wages. The U.S. continues to be the global high-cost-provider of health care, and health care comprised 17.5 percent of our economy in 2015. We are seeing a consolidation of stakeholders as providers, insurers, pharmacies, etc. seek to be more efficient and profitable through economies of scale. It seems as though the only stakeholders who are left behind are the patient and the party who is paying for the medical services (which typically is the patient or his employer). When I was in Holland last month, I had lunch with one of my cousins. He has cancer and has been a major consumer of health-care services. I had presumed that the Dutch had a single-payer health-care system that is managed by the government. Boy, was I wrong. Holland revised its health-care system in 2006, adopting an approach that is not too dissimilar from that of the ACA. The Dutch system is like a regulated utility in which the government makes the rules, appropriately balancing the interests of the stakeholders. The Dutch health-care system is considered one of the best in Europe, yet it comprises only 9 percent of Holland’s economy. Except for disabled people, every person in Holland over the age of 18 is required to purchase basic health-care insurance from a private insurer at a cost of about $165 per month. Failure to do so results in the imposition of a punitive tax on the individual. If the person is employed, the employer pays a tax for each employee that is based on the employee’s income. Participants in this arrangement are effectively in an HMO sponsored by their insurance company. Premiums of the unemployed and children are subsidized by the government. All medical expenses except for dental and physical therapy are covered. A PPO-type arrangement is available for those who desire it. According to my cousin, this additional coverage costs an additional $100 per month, which typically includes dental, physical therapy and private hospital rooms. The Dutch government negotiates the price of pharmaceutical products. According to The Free Library analysis of the Dutch health-care system, since the new system was implemented in 2006 the price of many drugs has dropped by as much as 40 percent. Compare this with our Medicare system, where the cost of drugs is MSRP. In Holland, hospital and practitioner pricing is determined by a formulaic approach based on quality of care metrics. Hospitals have to function efficiently to meet these metrics. Insurance companies have to accept anyone, irrespective of their age, health, pre-existing conditions, etc. If a particular insurance company has a disproportionately high share of sick people, the government makes actuarially based payments out of the employer taxes collected to compensate for the increased costs. Clearly, the Dutch have been able to control costs more effectively than we have, but then their laws were not subject to the special-interest lobbying to which the ACA was subjected. Getting back to my cousin, who lives in The Hague. He is very happy with the medical services he receives but was not happy with his oncologist. He had no trouble finding a leading oncologist in Utrecht (about 25 miles from his house), who now treats him. Donald Trump and the Republicans have promised to repeal the ACA and replace it with “something better.” It appears that they would do well to consider the Dutch approach. Jim de Bree is a Valencia resident. The Free Library analysis of the Dutch health-care system: www.thefreelibrary.com/The+Dutch+health+care+system%3a+possible+model+for+America%3f-a0189868805