INTRODUCTION
The financing and organization of medical care throughout the developed world spans a broad spectrum. In most countries, the preponderance of medical care is financed or delivered (or both) in the public sector; in others, like the United States, most people both pay for and receive their care through private institutions.
In this chapter, we describe the health care systems of four nations: Germany, Canada, the United Kingdom, and Japan. Each of these nations resides at a different point on the international health care continuum. Examining their diverse systems may aid us in our search for an improved health care system for the United States.
Recall from Chapter 2 the four varieties of health care financing: out-of-pocket payments, individual private insurance, employment-based private insurance, and government financing. Germany, Canada, the United Kingdom, and Japan emphasize the last two modes of payment. Germany finances medical care through government-mandated, employment-based private insurance, though German private insurance is a world apart from that found in the United States. Canada and the United Kingdom feature government-financed systems. Japan’s financing falls between the German method of financing and the government model of Canada and the United Kingdom. Regarding the delivery of medical care, the German, Japanese, and Canadian systems are predominantly private, while the United Kingdom’s is largely public.
Although these four nations demonstrate great differences in their manner of financing and organizing medical care, in one respect they are identical: They all provide universal health care coverage, thereby guaranteeing to their populations financial access to medical services.
GERMANY
Hans Deutsch is a bank teller living in Germany. He and his family receive health insurance through a sickness fund that insures other employees and their families at his bank and at other workplaces in his city. When Hans went to work at the bank, he was required by law to join the sickness fund selected by his employer. The bank contributes 7.3% of Hans’s salary to the sickness fund, and 8.2% is withheld from Hans’s paycheck and sent to the fund. Hans’s sickness fund collects the same 15.5% employer–employee contribution for all its members.
Germany was the first nation to enact compulsory health insurance legislation. Its pioneering law of 1883 required certain employers and employees to make payments to existing voluntary sickness funds, which would pay for the covered employees’ medical care. Initially, only industrial wage earners with incomes less than $500 per year were included; the eligible population was extended in later years.
Eighty-six percent of Germans now receive their health insurance through the mandatory sickness funds, with 11% covered by voluntary insurance plans (Fig. 14-1). The remaining 3% are covered under special programs (Commonwealth Fund, 2015). Some sickness funds are organized by geographic area, some by employer or occupation, and some are nationally based (Busse & Blumel, 2014).
In 2011, the proportion of earnings going to a sickness fund was set at 15.5%, with employers paying 47% and employees 53% of that amount. These contributions formerly went directly to the sickness funds, which are nonprofit, closely regulated entities that lie somewhere between the private and public sectors. Since 2009, employee and employer contributions are collected by a government-run health fund, which then distributes the money to health funds based on a risk-adjusted (more for older and sicker people) amount per insured person (Busse & Blumel, 2014). The number of sickness funds is shrinking, down from 1,000 to less than 131 in 2014. The funds are not allowed to exclude people because of illness, or to raise contribution rates according to age or medical condition; that is, they may not use experience rating. The funds are required to cover a broad range of benefits, including hospital and physician services, prescription drugs, and dental, preventive, and maternity care (Commonwealth Fund, 2015).
Hans’s father, Peter Deutsch, is retired from his job as a machinist in a steel plant. When he worked, his family received health insurance through a sickness fund set up for employees of the steel company. The fund was run by a board, half of whose members represented employees and the other half the employer. On retirement, Peter’s family continued its coverage through the same sickness fund with no change in benefits. The sickness fund continues to pay approximately 60% of his family’s health care costs (subsidized by the contributions of active workers and the employer), with 40% paid from Peter’s retirement pension fund.
Hans has a cousin, Georg, who formerly worked for a gas station in Hans’s city, but is now unemployed. Georg remained in his sickness fund after losing his job. His contribution to the fund is paid by the government. Hans’s best friend at the bank was diagnosed with lymphoma and became permanently disabled and unable to work. He remained in the sickness fund, with his contribution paid by the government.
Upon retiring from or losing a job, people and their families retain membership in their sickness funds. Health insurance in Germany, as in the United States, is employment based, but German health insurance, unlike in the United States, must continue to cover its members whether or not they change jobs or stop working for any reason.
Hans’s Uncle Karl is an assistant vice president at the bank. Because he earns more than 49,500 Euros per year, he is not required to join a sickness fund, but can opt to purchase private health insurance. Many higher-paid employees choose a sickness fund; they are not required to join the fund selected by the employer for lower-paid workers but can join one of 15 national “substitute” funds.
Eleven percent of Germans, with incomes more than 53,550 Euros per year (2014), choose voluntary private insurance. Private insurers pay higher fees to physicians than do sickness funds, often allowing their policyholders to receive preferential treatment.
In summary, Germany finances health care through a merged social insurance and public assistance structure (see Chapters 2 and 15 for discussion of these concepts), such that no distinctions are made between employed people who contribute to their health insurance, and unemployed people, whose contribution is made by the government.
Hans Deutsch develops chest pain while walking, and it worries him. He does not have a physician, and a friend recommends a general practitioner (GP), Dr. Helmut Arzt. Because Hans is free to see any ambulatory care physician he chooses, he indeed visits Dr. Arzt, who diagnoses angina pectoris—coronary artery disease. Dr. Arzt prescribes some medications and a low-fat diet, but the pain persists. One morning, Hans awakens with severe, suffocating chest pain. He calls Dr. Arzt, who orders an ambulance to take Hans to a nearby hospital. Hans is admitted for a heart attack and is cared for by Dr. Edgar Hertz, a cardiologist. Dr. Arzt does not visit Hans in the hospital. Upon discharge, Dr. Hertz sends a report to Dr. Arzt, who then resumes Hans’s medical care. Hans never receives a bill.
German medicine maintains a separation of ambulatory care physicians and hospital-based physicians. Most ambulatory care physicians are prohibited from treating patients in hospitals, and most hospital-based physicians do not have private offices for treating outpatients. People often have their own primary care physician (PCP) but are allowed to make appointments to see ambulatory care specialists without referral from the primary care physician. Almost half of Germany’s ambulatory physicians are generalists, compared with 33% in the United States. The German system tends to use a dispersed model of medical care organization (see Chapter 5), with little coordination between ambulatory care physicians and hospitals.
Dr. Arzt was used to billing his regional association of physicians and receiving a fee for each patient visit and for each procedure done during the visit. In 1986, he was shocked to find that spending caps had been placed on the total ambulatory physician budget. If in the first quarter of the year, the physicians in his regional association billed for more patient services than expected, each fee would be proportionately reduced during the next quarter. If the volume of services continued to increase, fees would drop again in the third and fourth quarters of the year. Dr. Arzt discussed the situation with his friend Dr. Hertz, but Dr. Hertz, as a hospital physician, received a salary and was not affected by the spending cap.
Ambulatory care physicians are required to join their regional physicians’ association. Rather than paying physicians directly, sickness funds pay a global sum each year to the physicians’ association in their region, which in turn pays physicians on the basis of a detailed fee schedule. These sums have been based on the number of patients cared for by the physicians in each regional association, but in 2007, a risk-adjustment factor was introduced that increases payments for populations with greater health problems. Physicians’ associations, in an attempt to stay within their global budgets, can reduce fees if the volume of services delivered by their physicians is too high. Sickness funds pay hospitals on a basis similar to the diagnosis-related groups used in the United States Medicare program. Included within this payment is the salary of hospital-based physicians—essentially a form of the episode-based bundled payment method that Medicare in the United States is now beginning to implement (see Chapter 4) (Commonwealth Fund, 2015).
The 1977 German Cost Containment Act created a body called Concerted Action, made up of representatives of the nation’s health providers, sickness funds, employers, unions, and different levels of government. Concerted Action is convened twice each year, and every spring, it sets guidelines for physician fees, hospital rates, and the prices of pharmaceuticals and other supplies. Based on these guidelines, negotiations are conducted at state, regional, and local levels between the sickness funds in a region, the regional physicians’ association, and the hospitals to set physician fees and hospital rates that reflect Concerted Action guidelines. Since 1986, not only have physician fees been controlled, but as described in the above vignette about Dr. Arzt, the total amount of money flowing to physicians has been capped. As a result of these efforts, Germany’s health expenditures as a percentage of the gross domestic product actually fell between 1985 and 1991 from 8.7% to 8.5%.
In 1991, however, German health care costs resumed an upward surge, paving the way for a 1993 cost-control law restricting the growth of sickness fund budgets. However, Germany’s health care expenditures as a percent of GDP have continued to rise, from 8.3% in 1990 to 11.3% in 2012. Germany has not fully solved the problem of rising health care expenditures.
CANADA
The Maple family owns a small grocery store in Outer Snowshoe, a tiny Canadian town. Grandfather Maple has a heart condition for which he sees Dr. Rebecca North, his family physician, regularly. The rest of the family is healthy and goes to Dr. North for minor problems and preventive care, including children’s immunizations. Neither as employers nor as health consumers do the Maples worry about health insurance. They receive a plastic card from their provincial government and show the card when they visit Dr. North.
The Maples do worry about taxes. The federal personal income tax, the goods and services tax, and the various provincial taxes take almost 40% of the family’s income. But the Maples would never let anyone take away their health insurance system.
In 1947, the province of Saskatchewan initiated the first publicly financed universal hospital insurance program in North America. Other provinces followed suit, and in 1957, the Canadian government passed the Hospital Insurance Act, which was fully implemented by 1961. Hospital, but not physician, services were covered. In 1963, Saskatchewan again took the lead and enacted a medical insurance plan for physician services. The Canadian federal government passed universal medical insurance in 1966. The Canada Health Act of 1984 enumerates the responsibilities of the federal and provincial governments in providing universal health care (Health Canada, 2013).
Canada has a tax-financed, public, single-payer health care system. In each Canadian province, the single payer is the provincial government (Fig. 14-2), with funding of the provincial programs coming from both federal and provincial tax revenues. During the 1970s, federal taxes financed 50% of health services, but the federal share has since declined and in 2014 constituted 21% of provincial health program expenditures (Commonwealth Fund, 2015). Provincial taxes vary in type from province to province and include income taxes, payroll taxes, and sales taxes. Some provinces, for example, British Columbia and Alberta, charge a health care premium—essentially an earmarked tax—to finance a portion of their health budgets.
Unlike Germany, Canada has severed the link between employment and health insurance. Wealthy or poor, employed or jobless, retired or younger than 18, every Canadian receives the same health insurance. No Canadian would even imagine that leaving, changing, retiring from, or losing a job has anything to do with health insurance. In Canada, no distinction is made between the two public financing mechanisms of social insurance (in which only those who contribute receive benefits) and public assistance (in which people receive benefits based on need rather than on having contributed). Everyone contributes through the tax structure and everyone receives benefits.
The benefits provided by Canadian provinces are broad, including hospital, physician, and ancillary services. Provincial plans also pay for outpatient drugs, although the scope of drug coverage varies across provinces with most limiting public coverage to the elderly and low income populations. Most provinces also provide long-term care benefits.
The Canadian health care system is unique in its prohibition of private health insurance for coverage of services included in the provincial health plans. Hospitals and physicians that receive payments from the provincial health plans are not allowed to bill private insurers for such services, thereby avoiding the preferential treatment of privately insured patients that occurs in many health care systems. Canadians can purchase private health insurance policies for gaps in provincial health plan coverage, such as pharmaceutical benefits for working adults or for such amenities as private hospital rooms.
Grandfather Maple has had intermittent sensations of palpitations in his chest for a few weeks. He calls Dr. North, who tells him to come right over. An electrocardiogram reveals rapid atrial fibrillation, an abnormal heart rhythm. Because Mr. Maple is tolerating the rapid rhythm, Dr. North starts treatment with metoprolol and aspirin in the office to gradually slow his heart rate, tells him to return the next day, and writes out a referral slip to see Dr. Jonathan Hartwell, a cardiologist in a nearby small city.
Dr. Hartwell arranges a stress echocardiogram at the local hospital to evaluate Mr. Maple’s arrhythmia, finds evidence of coronary ischemia, and explains to Mr. Maple that his coronary arteries are narrowed. He recommends a coronary angiogram and possible coronary artery bypass surgery. Because Mr. Maple’s condition is not urgent, Dr. Hartwell arranges for his patient to be placed on the waiting list at the University Hospital in the provincial capital 50 miles away. One month later, Mr. Maple awakens at 2 AM in a cold sweat, gasping for breath. His daughter calls Dr. North, who urgently sends for an ambulance to transport Mr. Maple to the University Hospital. There Mr. Maple is admitted to the coronary care unit, his condition is stabilized, and he undergoes emergency coronary artery bypass surgery the next day. Ten days later, Mr. Maple returns home, complaining of pain in his incision but otherwise feeling well.
Approximately half of Canadian physicians are family physicians (contrasted with the United States, where only 33% of physicians are generalists). Canadians have free choice of physician. As a rule, Canadians see their family physician for routine medical problems and visit specialists only through referral by the family physician. Specialists are allowed to see patients without referrals, but only receive the higher specialist fee if they specify the referring primary care physician in their billing; for that reason, most specialists will not see patients without a referral. Unlike the European model of separation between ambulatory and hospital physicians, Canadian family physicians are allowed to care for their patients in hospitals. Because of the close scientific interchange between Canada and the United States, the practice of Canadian medicine is similar to that in the United States; the differences lie in the financing system and the far greater use of primary care physicians. The treatment of Mr. Maple’s heart condition is not significantly different from what would occur in the United States, with the exception that high-tech procedures such as cardiac surgery and magnetic resonance imaging (MRI) scans are regionalized in a limited number of facilities and performed far less frequently than in the United States. In 2011, Canada had 8.5 MRI scanners per million inhabitants compared with 31.5 in the United States. Canada performed 212 coronary revascularization procedures per 100,000 population in 2011 compared with 272 in the United States (OECD, 2013). Canadians on average wait longer for elective operations than do insured people in the United States and have slightly more difficulty accessing primary care physicians (Schoen et al., 2010). For example, in 2011, half of patients in Canada scheduled for elective hip replacement received their operations within 13 weeks while 10% waited more than 34 weeks (Canadian Institute for Health Information, 2012).
Canada’s universal insurance program has created a fairer system for distributing health services. Canadians are much less likely than their counterparts in the United States to report experiencing financial barriers to medical care (Schoen et al., 2010). Low-income Canadians receive almost the same amount of medical services as Canadians from higher-income groups, whereas in the United States higher-income groups receive more health services than lower-income groups (Sanmartin et al., 2006
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