December 15, 2017 Katharina Janus

New on the Health Affairs Blog: Rethinking Health Care Delivery: What European And United States Health Care Systems Can Learn From One Another

By Katharina Janus and Etienne Minvielle

2017 was an election year in two major European countries: in Germany, Angela Merkel was elected for the third time in September; and in France, Emmanuel Macron took office in May. It is too early to tell whether these elections will lead to significant reforms in health care in these countries.

Unlike the United States, where abolishing Obamacare was a key pillar of the new president’s pre-election platform and a big focus of his first year in office, Germany and France seem to agree that they would, in general, like to keep the systems they have. After all, they perform relatively well in terms of outcomes, life expectancy, and other critical indicators in comparison to resources consumed as a percentage of GDP. President Macron said he stands for “une Europe qui protège”—a Europe that protects its values while addressing everyday challenges and the large-scale disruption of globalization. This protection—in the sense of keeping established frameworks while learning from each other—might describe the French-German axis at its best. Both systems are based on old cultures and established values that permit nearly universal coverage at much lower costs than those of the United States health care systems while achieving equal or better outcomes. What can we learn nevertheless from each other across the pond, taking the newly established European axis as one unit and the evolving United States system as the example from a new world.

Silver Surfers Who Turn Into A Tsunami

France, Germany, and the United States are facing some of the same issues: demographic shifts paired with the rise of chronic disease and medical advances that, while raising costs, also make the impossible possible. Historically, the nations’ population pyramids have taken on the classical “pear shape,” with large segments of younger and middle-aged individuals contributing to the care and support of a smaller population of older people. But this will soon turn into a nicely shaped “potato”, where the remaining workforce will have to generate resources for retirees, children, and other non-working parts of the population.

In the European context, the idea of solidarity is kept alive. In general, people can afford to retire, receive healthcare benefits, and guaranteed pensions while poverty rates at old age are low (in comparison to the United States). To be sure, this picture might change and governments might have to kick in some money to fund rising costs of care (or decide to ration—which is contradictory to the right of free choice described below). Yet, such a change is not explicitly addressed in any European efforts at health care reform. Cutting back pensions and/or social benefits is a no-go at least in Germany. This social spending or rather redistribution of income is generally considered to be an investment in a strong middle class. And a strong middle class represents the main pillar of a European society and its political system. This picture looks differently in the United States.

Solidarity, “Health Care For All”, And (Almost) “The Same Services For All”

Many European health care systems go back to the idea of Bismarck (roughly 150 years ago) that when individuals’ incomes and ability to pay for care are unequal, we carry a social responsibility as citizens to redistribute resources. Under this redistribution, administered by the government, the rich pay for the poor, smaller families pay for larger families, and the younger pay for the older. Most Europeans willingly accept this notion—it is deeply ingrained in their culture. What is more, Europeans accept that we have to kick in some money, from time to time, to prevent the failure of an important market—such as the health care market— that has not found its own equilibrium. On the other hand, large parts of the United States society have elected leaders who favor a smaller government and believe that market forces require only limited regulation. Instead of fearing market failure, these leaders seem to relish a Darwinian view of health care markets where only the wealthy have true access and wide choice in the care they receive.

Free Choice—No “Gated Health Care Community”

A major right of both French and German health care systems is the right to choose your doctor freely and have those services he or she deems necessary covered with co-pays that are as little as €10 in Germany and more nuanced in France where a visit without referral to any specialist might reduce reimbursement rates to 30% of total costs, but is covered with referral. How can Europe afford this luxury of free choice and (nearly) full coverage?

The first answer is to look at prices: If you compare services in Europe with those in the United States, you will realize that prices for regular lab, x-ray, and doctor visits are a fraction of what they amount to in the United States. As in many other markets, high costs are attributable in part to medical inflation and supplier-induced demand which are aggravated by price effects in the United States.

Second, European medicine does not have the same level of provider dominance as the United States where clinicians, making all diagnostic and treatment decisions, have the greatest influence on costs. In European systems, governmental regulation frequently caps expenses. This does not mean that services are declined, but deficits for sicker populations are settled among insurances under a regulated mandate. In response, United States health care executives have embraced the idea that, to paraphrase Oscar Wilde, if you wish to limit you have to define. Developing closed networks to keep costs in check, the United States system has essentially rationed access while requiring additional resources to manage and coordinate these networks.

On the bride side, this management awareness in the United States has facilitated advances in population health management and created a better mindset for actually managing care in pathways across sectors. More broadly this approach has led to many accomplishments: aligning incentives, a focus on performance management, cross-sectoral patient flows (within the defined network though) and the related, and necessary IT implementation that creates connectivity in many role-model United States health care systems. These capabilities are less advanced in Europe—due to the historical separation of sectors and regions that impact the exchange of patient data in general.

The Comparative Paradox

And here lies the cross-pond health care system paradox: European systems—like Germany and France—pursue a strictly regulated ideological framework that is based on solidarity, equality, and social responsibility but once people have been socialized into this framework they can eat à la carte—choosing to utilize care freely and as much as they want. The United States represents the opposite: a free market system as a framework in which participants can (or cannot, due to limited financial resources) choose freely from the “prix fixe formule” (as one says in France). In this scenario, one can buy insurance at various levels, pay co-pays and deductibles, eventually having to find help to understand all these options, and then once they are “in”—though not necessarily fully covered—they must live with limited choices in a gated system.

What can we learn from each other? This question puts Europe in a much better position because, even though the United States might benefit from learnings from Europe at a macro-level (including those social care reforms that improve living conditions and are known to reduce health care costs as a consequence), these ideas are unlikely to find fertile ground in the United States where ideology makes many policymakers less receptive to such lessons. Europe in turn can learn a lot from the United States system on a micro level—how to manage populations and connect sectors. Nobody really coordinates or manages care in many European systems, so there is room for improvement. As a caveat, one might say that the European systems work well and one should never change a system that is already running well. That may not continue to be the case, however, when the population pyramid’s “pear” turns into a “potato” and the silver tsunami hits the shore.

Crisis Management

Although the deep impact of demographics is not openly discussed in European health care systems, they must nevertheless prepare for the changes to come. The United States has—over the last 40 years—developed management capacity to confront similar challenges. To be sure, one could ask whether medical care is provided or rather managed nowadays, taking into account that the medical workforce has grown marginally whereas medical administrators have increased by more than 3000%. In addition, wages for managers in United States health care are a multiple of those in Europe (it’s the prices again!). In Germany, administrative costs in the statutory system are below 10% and non-medical professions, including consultants and others, represent less than 15% of the workforce in health care. It remains to be evaluated whether a further investment in health care management contributes to better outcomes as a result of coordinated care pathways. And the assessment to what extent these outcomes are “better” than with less management will most likely lie in the eye of the beholder. Opportunities to learn exist and it will help us to address common challenges before crisis unfolds. As any consumption of menu items, cross-national learnings should also be consumed with moderation.

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