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Reforming the health care system: the universal dilemma. Reinhardt UE(1). Author information: (1)Department of Economics, Princeton University. This Article.
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The features or policy choices of a particular foreign health care system were not infrequently misrepresented. Usually, it was due to sloppy study design or conclusions that were based on superficial information. Occasionally, the ideological prejudices of the investigators prevailed, and they were often compounded by deliberate disinformation handed down by the system s being studied. The current interest in the United States in foreign health care systems receives extra impetus and focus from the political momentum that health care gained during the presidential election campaign.

This was also the case in previous elections. Health care systems in the member states of the Organization for Economic Cooperation and Development OECD present interesting case studies for the United States, but analysts must take into account the facts that foreign health care systems are, on average, not well documented, extremely complex, and driven by local cultural and socioeconomic dynamics.

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Health care issues in Europe are very controversial, and health care reforms tend to become bogged down in compromises. Health care is even more in the forefront of the political debate and election campaigns in Europe than it is in the United States. There is a certain irony in the fact that health policy options copied from the United States are under severe attack in The Netherlands, Spain, Poland, and in particular the United Kingdom.

The reforms of the mids were an integral part—and, indeed, were the cornerstone—of the cradle-to-grave welfare state. The main goal was to provide universal, equitable, and free access to all health care resources. Two models prevailed: 1 the gradual merging of existing health. There was, with hindsight, a surprising degree of confidence in science and technology and in social engineering.

Any medical encounter, or medical technology for that matter, was considered effective unless proven otherwise. Past and future improvements in health and survival were claimed to be the exclusive results of medical care. There was a strong conviction, and it was one of the tenets of Lord Beveridge's blueprint for the National Health Service in the United Kingdom, that enabling early access to hospital care would reduce the onset of irreversible and costly disease. It was predicted and believed that this would eventually lead to a substantial reduction in health expenditures in the near future.

The health resources development effort that started in the mids was aimed at reducing shortages in the supply and geographic distributions of hospitals and physicians.

7.3 A pathway to reforming health care

In retrospect, it is remarkable how consensus existed among health authorities, politicians, organized medicine, the World Health Organization, the media, and the public in viewing the hospital as ultimately becoming the sole and central provider of total health care for the community. By the beginning of the s, confidence in the post-World War II health policies and options evaporated. A new wave of reforms gathered momentum. Expenditures on health care had risen beyond affordable levels, and despite this, the impact of health care on survival seemed negligible or even perverse, with an alarming decrease in the life expectancies of middle-aged males.

Eventually, unwavering faith in medical technology was replaced by doubts and apprehension. Medical encounters and medical technology were considered ineffective unless proven otherwise. The vaunted savings of free access had not materialized. On the contrary, a surplus of inappropriately utilized manpower and hospital resources had developed and fueled overutilization and cost escalation. The health reforms during the mids paid substantial lip service to the potential of health promotion and disease prevention.

Yet, in operational terms, the reforms e.

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Tiered and regionalized comprehensive health care systems were advocated as replacements for the unrelated solo providers of the past. Containing the supply, demand, and prices of health care became an important, complex, and expensive regulatory activity for governments. With limited understanding of the dynamics of health economics and the virtual absence of the sophisticated health data and management information systems, important policy instruments like need-based planning, global budgeting, target budgeting, incentive-based physician payment systems, and various forms of cost-sharing were introduced.

A third wave of major health reforms started toward the end of the s. This time, however, the reforms were not limited only to Western Europe.

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In the West, governments were primarily struggling with the coverage-versus-cost issue, a dilemma resulting from previous health policies, and with persistent inefficiencies and inequalities in their health care systems. Eastern European countries, on the contrary, were entirely abandoning their failed health care systems. Previously often paraded as showcases of rational planning and capable of providing comprehensive, accessible, and equitable health care services, Eastern European health services were found wanting.


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They tended to be obsolete, inappropriately equipped, and staffed by an oversupply of poorly trained and demoralized health professionals. Alarming mortality and morbidity patterns surfaced, denouncing previously rosy official statistics. Current health reforms in Germany, Ireland, The Netherlands, and the United Kingdom are more comprehensive than those in other European countries.

Reform in the Federal Republic of Germany was over-shadowed by reunification, which involved the reintroduction of sickness funds and negotiated delivery of care in the former German Democratic Republic East Germany. To accommodate for this important return to the past, discussions in the Federal Republic of Germany to rationalize the deployment of sickness funds were shelved. In Belgium, France, Spain, The Netherlands, and the United Kingdom, the reforms reflect a lengthy and convoluted process of negotiation. Governments, in confrontation with shifting alliances of various interest groups and opposition parties, eventually manage to reconcile policy proposals and instruments that are often diametrically opposed.

A majority of countries have basically opted for strengthening government regulation. They introduced various, sometimes operationally complicated, economic disincentives to control inappropriate health care utilization. Specific management measures and sophisticated management information systems that can be used to improve efficiency, including mechanisms to assess and ensure the quality of care, receive more attention than they did in previous reforms. Already the related increases in management costs are drawing static.

Enthoven, with greater reliance on market forces and competition in the health care system. In both countries, a regulatory and financing framework will continue to function as an umbrella to safeguard equity, quality, and affordability. In Spain, the Abril Committee evaluating the Spanish health care system in view of reforms met great resistance from Parliament regarding its proposals for privatization. There are numerous similarities among these countries as they evaluate their health care systems with an eye toward the next century.

The aging of the population, which is outrunning earlier forecasts, raises the specter of an unbearable burden of illness and disability that could eventually bankrupt the social security budgets. Yet, long-term forecasts of the OECD predict that there is no special cause for alarm for the rest of the twentieth century, provided that the utilization patterns of elderly individuals would not grow significantly during this decade. Important shifts can be witnessed with respect to the key concepts of social policy in Europe.

The social safety net constructed during the golden s is in need of repair. Inequalities in access to care and regarding important health indicators have hardly been touched in four decades of the welfare state. More targeted programs are now being introduced. Sickness compensation programs, which have been abused in several countries, are tightened and linked to occupational health programs.


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The emphasis on self-responsibility of patients is meant to decrease the indiscriminate use of health care resources against a background of self-neglect. Likewise, physician-induced regional variations in health care services utilization is straining resource allocation decisions. Increasingly, universal access and total coverage are being reduced and defined as a basic entitlement of services, with cost-effectiveness becoming an important litmus test for coverage of drugs, procedures, and health technology.

Reforming America’s Healthcare System Through Choice and Competition

Cost-sharing and required complementary insurance are additional mechanisms for containing basic entitlements. Containing the public deficit is the new priority to which health, education, and other programs of the welfare state must contribute. On the contrary, it is going to be a costly business to reconvert and reintegrate the military into the civilian labor force. The drive for reduced public debts has gained new momentum since the Treaty on European Union that the Summit of the European Community reached in December in Maastricht, The Netherlands.

The entry of member states into the European Monetary Union, scheduled for , will be limited to those countries that have managed the formidable task of reducing their budget deficits to 3 percent of their gross national product GNP. During the general elections in the United Kingdom, this 3 percent target pitted Tories the Conservative Party against the Labour Party in angry exchanges over their respective health budget calculations and over the broader question of whether taxes in the United Kingdom would be lowered or raised.

The governments of Belgium and The Netherlands have issued new, lower caps on their health care budgets in their attempts to reach the requirements for Monetary Union. At that time, prevention and health promotion were perceived as cost-saving substitutes for medical care. Since then, the fixation on prevention as a means of cost containment has faded.

The attention on prevention in current reforms recognizes the opportunity costs of screening and life-style programs. The increase in medical costs that disease prevention programs tend to generate in their wake is increasingly acknowledged. The cost-effectiveness of prevention programs is no longer taken for granted and is increasingly subjected to randomized clinical trials, often retargeted, and occasionally even subjected to moratoria. Efforts to curb bed capacity and the average length of stay in short-term, acute-care hospitals have been accompanied by genuine promotion of primary care and the mushrooming of a variety of day-care facilities, for example, ambulatory surgery, dialysis, and radiotherapy.

In a number of countries, reductions in the number of beds in acute-care hospitals were financially compensated for or rewarded by expanding the numbers. Various innovative community-care and home-care programs developed, with the Scandinavian countries having the strongest tradition in institutionalizing elderly individuals, reversing the trend toward home care.

One of the most fundamental developments changing the landscape of health care delivery in Europe is the gradual but ongoing consolidation of various types of multiunit organizations and networks in a quest for efficiency. A variety of configurations are being established. The Government will need to ensure the co-operation and compliance of insurers and doctors in the implementation of these arrangements.

While the Commission supports the retention of safety net arrangements, there is scope to ensure they assist those in greatest need. The Medicare Safety Nets provide financial assistance for out of hospital medical services. There are two distinct safety nets in operation:. The extended safety net is not meeting its objectives. The Commission considers safety nets should be targeted to protect the truly disadvantaged and not directed towards people who can afford to make an appropriate contribution to the cost of their health care.

However, the Concessional Extended Medicare Safety Net threshold should be maintained at the existing levels. The Medicare Benefits Schedule is large and complicated. In its current form it is pages long with items ranging from medical, nursing and allied health services to pathology and imaging services.

There would be merit in a review or ongoing reviews of the schedule to identify and remove ineffective items. Almost half of all Australians have private health insurance and as long as there are appropriate incentives in place the industry could play a constructive role in driving efficiency in the health care sector. Health insurers whose members receive the best and most efficient health care should win more business. Likewise, their operating model is more likely to succeed if they are able to deliver health care that keeps their members out of hospital.

If the health funds are to drive greater efficiency they will need to change from passive players into genuine health care partners that support their members to navigate the health system and assist them to better manage chronic conditions. This transformation will require changes to the rules that govern the private health insurance industry including risk equalisation and price setting arrangements.

Risk equalisation is a scheme that supports community rating effectively a cross subsidy arrangement , whereby individual users cannot be made to pay more for private health insurance based on age or illness. To ensure particular funds do not struggle financially because they have to insure larger numbers of unhealthy members, claims are redistributed around the industry to equalise the risk.

This is, in effect, a reinsurance scheme.