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Ted Marmor

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North American Fads, Fallacies, and Foolishness in Healthcare Reform

Posted: 06/03/11 09:00 AM ET

A curious development has emerged in right wing versions of 'medicare' reform in both Canada and the United States: the embrace of European models of public health care financing and delivery.

Who would have thought the Fraser Institute would celebrate the universal health insurance mandates of Switzerland and the Netherlands or call for Canada to embrace the cost-sharing and "regulated competition" between private and public insurers in Germany, France, and other EU nations?

Who would have imagined that the Republican leaders in the House of Representatives would laud the Swiss and Dutch reforms as well.

Though Canada's medicare is structurally similar if much broader than the U.S. program, conservative pundits make quite similar arguments about European reform models, but say nothing to or about each other.

Instead, one finds faddish embrace of an imagined European model, fallacious claims about the wonders of their supposed regulated competition, and foolish arguments about how patient cost-sharing will bring costless cost control.

The Fraser Institute's senior fellow Nadeem Esmail, for example, explained in late April that Canada's three political parties were "drinking the same Kool-aid" in ignoring that more money for medicare "has little to do with how much money we spend", but a lot to do with medicare's lack of patient cost sharing.

In the same month, the Republican Party's take on the U.S. version of medicare (for retirees and the disabled) was quite similar. Congressman Paul Ryan of Wisconsin forcefully argued that the U.S. cannot afford Medicare's current structure of common benefits, contending that a competitive market for health insurance is required for fiscal sustainability.

Both conservatives claimed European models supported their views, citing supposed Swiss and Dutch success with regulated competition among private insurers. But both the diagnoses and the remedies turn out to be ideologically driven, bolstered by mythical portraits of European experience and factually flawed claims about the wonders of patient cost-sharing.

The common fallacious assumption is that Europe shares a set of policies that can serve as models of more efficient, effective, and fairer health care financing and delivery. Sweden, Switzerland, France, Germany, and the Netherlands are supposedly free of waiting lists, use patient cost-sharing to constrain medical inflation, perform better on health measures, and permit parallel private financing and provision in ways barred in Canada.

In the United States, Representative Ryan, along with pundits in the Heritage Foundation and the Wall Street Journal, earnestly commend the universal health insurance arrangements of Switzerland and the Netherlands for their programs where citizens are required to buy health insurance (with some subsidies) from private health insurers competing for their business. In all these claims, the central premise is that having citizens acting as consumers (of insurance products or healthcare services) is the right approach to righting the wrongs of both North American medicare programs.

Yet none of these assumptions can be defended with reliable evidence. Take, for example, the contention that regulated competition among health insurers restrains medical inflation through consumer pressures. Switzerland (since 1996) and Holland (since 2006) are the two nations that tried this form of universal health insurance. Neither had the celebratory experience attributed to them by the North American pundits.

Rather, both experienced rapid expansion in their outlays for medical care as well as substantial increases in the administrative costs of providing and regulating health insurance. For example, Switzerland became the second most expensive medical care system in the world in the wake of its 1996 reforms.

The complexities of varying subsidies in the Dutch case, to take another illustration, prompted an increase of more than 500 tax officials after 2006. Regulated competition is a faddish notion, with its market language appealing to those already persuaded that market allocation always trumps programs administered like Medicare. Such views rest on ideological conviction, not evidence, though few North Americans will know the truth because of the propaganda crossing the Atlantic that is in turn amplified.

The contemporary promotion of competitive reform proposals suffers from another and more profound problem: its faith in patient cost-sharing either when buying insurance or at the time of using medical care. This faith is akin to religious belief, sustained by repetition and misleading analogies.

So, for instance, a Microeconomics textbook (by Katz and Rosen) states generally that "if bread were free, a huge quantity of bread would be demanded... and the price system [rations the bread such that] everyone who is willing to pay the price gets the good and everyone who is not, does not." If you substitute health care for bread in this example you have the case for making patients---and insurance buyers--pay, or, in the language of the marketplace, have "skin in the game."

Since the 1970s, a number of economists have favored making the insured the agents of cost control by having their purchase of health insurance sensitive to price. The idea is simple: the more generous the coverage, the more the insured pays. The fact that no industrial democracy in the world relies on such policies for their demonstrated restraint on medical spending is an empirical fact that does not dampen the idea's promotion.

The case against patient cost-sharing at the time of service is even stronger. No industrial democracy depends on cost-sharing policy as a primary tool for cost control and for good reason. (Their role in western European health programs is in fact quite modest). Deductibles inhibit access to preventive and other beneficial medical care. Co-insurance also redistributes the costs of healthcare in ways that more seriously harm chronically ill and low-income patients. These distributional effects are precisely what medicare in both Canada and the United States was originally designed to avoid. North America would be better off without these health care zombies from an illusory Europe.

Theodore Marmor is the author of Fads, Fallacies, and Foolishness in Medicare Care Management and Policy (2009) and Professor Emeritus of Political Science and Public Policy at Yale University. He is also an expert advisor with EvidenceNetwork.ca, a comprehensive and non-partisan online resource designed to help journalists covering health policy issues in Canada.