International Health Care Systems
By Chris Slaybaugh
In the Public Interest, January 2021
The United States is the only industrialized country that does not have Universal Health Coverage (UHC) for all citizens. While the Affordable Care Act (ACA) was a step in the direction of universal coverage, 1 in 10 Americans still lack coverage.[1] This article provides a brief comparison of the American system versus those of six countries with universal coverage.
Universal Health Coverage, Single Payer, and Socialized Medicine
Often used interchangeably, UHC, Single Payer, and Socialized Medicine are distinct terms. The World Health Organization defines UHC such “that all people and communities can use the promotive, preventive, curative, rehabilitative and palliative health services they need, of sufficient quality to be effective, while also ensuring that the use of these services does not expose the user to financial hardship.”[2]
In short, UHC guarantees essential health care that is:
- Universally accessible,
- high quality, and
- affordable.
In single payer systems, government pays for medical care and restricts alternative payment mechanisms for covered services. Few single payer systems exist, with Canada and Taiwan being the only two countries with true universal single payer, and Traditional Medicare an example within the US.[3]
None of these systems are socialized medicine, in which government owns or directly employs health care providers. While not single payer, the UK has a socialized system, as does the US through the Veterans Health Administration (VA), which directly owns hospitals and employs doctors and nurses.[4]
Universal Health Coverage Around the World
If most countries do not have universal single payer or socialized medicine, what do they have? Other systems fall in one of two broad categories:
- Insurance Mandates—All citizens must purchase private or public insurance. Usually includes standard minimum coverage, subsidies for low income individuals, and forbids underwriting and for-profit insurance. Examples include Germany, Japan, the Netherlands, and Switzerland.
- Hybrid Systems—Combine elements of single payer and insurance mandates. Provides a standard set of care for all citizens, with options to supplement with private insurance. Examples include Australia, France, Singapore, Sweden, and the UK.
The Commonwealth Fund regularly publishes an excellent summary of national health care systems. The most recent report from June 2020 examines 20 countries. The following draws heavily from these reports, and I highly recommend reading them for a more detailed treatment.[5]
Single Payer Systems
Canada
The Canadian health care system is administered by the provinces with partial federal funding. Providers offering services covered by the government program generally are not permitted to receive any private payment for those services. Physician, diagnostic, and hospital care are fully paid and balance billing is not permitted. Specialists are not allowed to privately see patients for publicly insured services—all covered care must go through the public system.
Each province’s plan must be publicly administered, comprehensive, universal, portable across provinces, and accessible (e.g., no user fees). Many Canadians have supplement plans from for-profit insurers that cover vision, dental, prescription drugs, rehab, home health, and private hospital rooms.
General practitioners act as gatekeepers, with specialists receiving reduced reimbursement for treating patients without referral. Hospitals are a mix of publicly owned and private not-for-profit organizations that operate under annual global budgets negotiated with the government.
As of 2017, total health spend in Canada was 11.5 percent of GDP with 70 percent of funding coming from public sources. Costs for services are managed through global budgets, fee schedules, drug formularies, and regulation of introductory prices for newly patented medicine. Utilization is suppressed by restricting the supply of physicians and nurses through quotas for student admissions and by restricting investments in new capital and technology.
Taiwan
National Health Insurance (NHI) is compulsory. Benefits are uniform and comprehensive, covering hospital and physician care, prescriptions, and other services. Private insurance may not be used to purchase or more quickly receive covered services, but can pay for non-covered and enhanced services (such as private inpatient rooms).
Funding for NHI is split between government, employers, and the insured, with a typical employee paying 30 percent of the premium and low-income paying nothing.[6] The insured also pay copays and coinsurance with these costs limited for disadvantaged populations and certain diseases/conditions.
Almost all physicians are specialists (only 5 percent family medicine), practice in private clinics, and are paid fee-for-service. Historically there has been no gatekeeper in place and physician utilization is high relative to other countries. Hospital-based physicians are salaried employees and eligible for productivity-based bonuses. Most hospitals are privately-run and are non-profit by law. Global budgets are set for both physicians and hospitals, who compete for patients and their budget share. Extra revenue comes from providing non-NHI covered services and from copays and coinsurance.
Taiwan has a very low-cost system, with 6.4 percent of GDP in total health spend in 2017. Administrative costs are just over 1 percent. Costs are managed through global budgets, with average annual growth under 4 percent. To combat high utilization, additional copays have been introduced for seeking care without a referral. Capacity is constrained—there are fewer physicians and CT and MRI machines in Taiwan than other countries, though waiting lines are essentially non-existent. Every participant has a mandatory electronic card that tracks personal health information. Aggregate utilization statistics guide planning and budgeting, while individual high utilizers receive follow-up from government representatives.
Insurance Mandate Systems
Germany
Most Germans are required to purchase insurance from 109 not-for-profit “Sickness Funds” regulated within the Statutory Health Insurance system (SHI). Self-employed and high-income employees can choose to opt out of SHI and purchase Private Health Insurance (PHI) from 41 non-profit and for-profit insurers.
Premium contributions for SHI are 14.6 percent of capped wages, shared equally between employer and employee. Contributions are pooled and distributed to the funds on a risk-adjusted basis. SHI covers physician and preventive care, hospital, mental health, dental, vision, physical therapy and rehab, prescription drugs, medical equipment, hospice and palliative care, and sick leave. Children have no cost sharing, which is capped at 2 percent of income for adults.
About 11 percent of Germans opt for PHI, which is especially attractive to young, high income people who can get more services for less premium. Participants pay a risk-adjusted premium for themselves and dependents, with risk assessed at entry and contracts then good for life. The government regulates rate increases. PHI can also be purchased on a supplemental basis for uncovered services, better amenities, and cost-sharing.
SHI participating physicians are required to join regional associations to contract reimbursement rates with the funds. Physicians have caps on patients and services provided per patient, but can supplement their income with services paid out of pocket. Standard plans have no gatekeeper, but managed care products may include gatekeepers. Half of all hospitals are publicly owned, with the rest a mix of for-profit and non-profit. Hospitals and physicians are permitted to see both SHI and PHI patients.
Health care spend in Germany was 11.5 percent of GDP in 2017, with 74 percent from public programs. Costs are contained primarily through emphasizing quality and efficiency, with hospital payments tied to quality and reduced payments for “low-value” services. Sickness funds compete on their ability to negotiate with integrated care networks and pharmaceutical rebates.
Switzerland
The Federal Health Insurance Act is administered by 26 individual cantons financed by tax revenues, Mandatory Health Insurance (MHI) premiums, and social insurance contributions. Voluntary Health Insurance (VHI) is for-profit medically underwritten insurance available for non-covered services and improved hospital amenities.
MHI is mandatory and purchased by residents from competing nonprofit insurers on cantonal exchanges with subsidies for low income people. Premiums are redistributed between insurers on a risk-adjusted basis. MHI covers physician and hospital care, some preventive services, physical therapy/rehab, and mental health. The standard model offers free choice of doctor with a required deductible, but about 2/3 choose an alternative that restricts choice in exchange for lower cost sharing.
Providers accepting MHI are not allowed to balance bill patients above the fee schedule. Half of hospital reimbursement comes from insurance, with the rest coming from canton subsidies and offering non-covered services.
Health care spending in Switzerland is second only to the US, at 12.2 percent of GDP in 2017 with 62.8 percent coming from public financing. Nine cost-control measures were introduced in 2019, with additional measures for cost transparency and coordinated care anticipated in 2020.
The Hybrid Systems
England
Universal coverage is provided for all residents, generally without cost sharing, by the National Health Service (NHS), which pays for preventive care, hospital care, physician services, some dental and vision, mental health, palliative care, some long-term care, rehab, and home care. Specific coverage is determined at the local level by one of 191 Clinical Commissioning Groups (CCGs). It is not a true single payer system, as 10.5 percent of the population purchase private insurance to pay for more rapid access to care covered by NHS, especially for elective hospital procedures.
Funding for NHS comes mostly from general taxes and dedicated payroll taxes, with additional funds from copays and services paid by private patients to NHS providers. Dentistry and outpatient/prescription drugs are subject to copays, but waivers for children, seniors, the sick, and certain conditions result in nearly 90 percent of prescriptions being dispensed for no charge.
General practitioners (GPs) serve as gatekeepers. Most GPs are private contractors, while almost all specialists are salaried employees of NHS hospitals. Registration with a local general practice is required, but due to capacity issues, choice is limited. Publicly owned NHS hospitals contract payment with the CCGs. Private hospitals provide non-covered services and NHS subcontracts care with unacceptably long waits to them. Private hospital reimbursements are unregulated and ineligible for public subsidies.
Total health care spend in England was 9.8 percent of GDP in 2016, with 79.4 percent made up of public funding. Costs are contained with a nationwide global budget that is allocated to the CCGs. Despite growth in spending rising from 1.2 percent above inflation to 2.7 percent in recent years, reimbursements continue to be inadequate. Providers were running a US$6.1 billion annual deficit as of 2018, which is straining quality and resulting in long wait times for care.
Singapore
Singapore’s National Health Plan focuses on pairing individual responsibility with affordable care through the “3 Ms”—Medisave, MediShield Life, and Medifund.
- Medisave—Mandatory interest-bearing savings account with tax exempt employee and employer contributions.
- MediShield Life—Automatically enrolled catastrophic insurance with premiums paid from Medisave accounts. Subsidies are based on income and age. Primary and preventive care, dental and vision, prescription drugs, and mental health are not covered.
- Medifund—Supplemental program for the poor that covers medical treatments based on ability to pay.
Supplemental private insurance exists through Integrated Shield Plans, which can be purchased with Medisave funds, and for-profit plans that do not integrate with MediShield Life.
Four out of five hospitals are public and subsidized. Public hospitals have four tiers of amenities. Subsidies aren’t available for the highest tier, which offers private rooms and other perks, nor for private hospitals which offer faster service and greater amenities than public hospitals. Most primary care is private, with some subsidized public clinics available. There is no gatekeeper for specialty care.
Total health care spend was 4.47 percent of GDP in 2016, of which 59 percent was private spending, including out-of-pocket costs and employer health benefits. Costs are controlled primarily by encouraging market competition, with government involvement to help keep costs low. The government regulates supply of public hospitals and prices for services within those hospitals. Private providers must keep prices in line if they want to compete. Public hospitals operate with an annual budget of patient subsidies. Utilization is managed with significant copays, deductibles, and restrictions on using Medisave and MediShield for certain services to discourage unnecessary treatment. The Ministry of Health publishes prices and utilization numbers for common hospital services and procedures to allow for easy comparison. Drugs, medical supplies, equipment, and IT are purchased at a national level for better pricing.
The American System
The United States
The United States has several sometimes-overlapping systems and is the only developed country where coverage is not compulsory, with employment often determining a person’s coverage. As of 2018, 91.5 percent of Americans had health insurance, with 55.1 percent covered through an employer, 10.8 percent through direct purchase, 17.8 percent through Medicare, 11.9 percent through Medicaid, and 3.6 percent through the military.[7] Individuals may have multiple sources of coverage (e.g., “dual eligibles” who are enrolled in both Medicare and Medicaid).
Employer-based insurance is not directly subsidized but receives a “hidden” subsidy due to premiums being tax exempt,[8] estimated to be worth US$273 billion in 2019. This exemption is not available for insurance purchased in the individual market, though ACA plans are subsidized for low and middle incomes. The ACA also eliminated most forms of medical underwriting while prohibiting denial of coverage for preexisting conditions.
Medicare provides coverage for seniors and those with qualifying conditions and disabilities, with funding from payroll taxes, premiums, and general tax revenues. Private supplemental insurance and heavily subsidized full-replacement Medicare Advantage plans are also available.
Medicaid is an insurance program for the poor administered by the states and funded with federal and state general revenues. Eligibility for Medicaid was significantly expanded under the ACA for states that chose to participate.
The Veterans Health Administration (VA) provides care for nearly nine million veterans annually. The system is an example of socialized medicine, with 1,700 hospitals, outpatient clinics, counseling centers, and long-term care facilities owned directly by the federal government and most providers employed by the government. Due to a severe limitation in resources, Congress has directed that priority in treatment is given to veterans most in need, with those having significant disabilities at the top of the list. Active and retired military are covered under a combination of the Military Health System and TRICARE.
Approximately one-third of doctors in the US are primary care, the rest are specialists. Fifty-seven percent of hospitals are non-profit, 25 percent are for-profit, and 19 percent are government-owned.
The United States spends far more on health care than any other country. In 2017, total spend was 17.9 percent of GDP, US$3.5 trillion dollars, for an average of US$10,739 per person[9]. Of this, 45 percent came from public sources, 20 percent from private businesses, and 28 percent from household spending.
Conclusion
There is no perfect health care system. The US boasts some of the best doctors and hospitals in the world, for those who can afford them. Even those skeptical that medical costs cause most bankruptcies still concede that they are a significant contributing factor.[10]
In the rest of the developed world, medical costs driving bankruptcy is rare. There are trade-offs, of course. Patients in England and Canada often face far longer wait times for “elective” care. Providers are paid better in the US, which drives up the cost of health care, but also attracts talent and prevents protests for higher pay seen in other countries. Many Americans are philosophically opposed to government bureaucrats investigating excessive utilization as in Taiwan (though an identical function is performed by our private insurers) or of the government directly owning and employing most providers as in the UK.
Single payer models and socialized medicine are unpalatable for many Americans. But countries such as Germany, Switzerland, and Singapore have shown that it is possible to achieve universal coverage through a combination of public funding, employer participation, and personal responsibility, while maintaining a robustly competitive marketplace of insurers and health care providers. If the US chooses to make universal coverage its goal, these models offer much that could be borrowed to achieve that goal.
Statements of fact and opinions expressed herein are those of the individual authors and are not necessarily those of the Society of Actuaries or the respective authors’ employers.
Chris Slaybaugh, FSA, MAAA, is a consulting actuary for Axene Health Partners. He can be contacted at chris.slaybaugh@axenehp.com.