by Frank Thomas and John Lawrence
Preface
Health care reform has taken the typical, divisive political football path. The Senate has thrown out the House’s approved public option and now we have cries that health care is "dead" after Scott Brown’s victory in Massachusetts. Should the House contest the Senate’s much watered-down version and insist on some form of public option, it would very likely be defeated. For the Democrats no longer have a filibuster-proof majority of 60 votes in the Senate – and Republicans and Democrats are endemically unable to constructively work together on practically anything. Since Nancy Pelosi has said the House won't simply accept the Senate bill "as-is," thereby passing it into law, all the excruciating negotiations and parliamentary maneuvering consuming thousands of hours of Congressional time will have been for naught … and the result could possibly be NO health care reform at all.
This would mean health insurance corporations with their myriad of non-standard policies will continue to discriminate based on pre-existing conditions and to discontinue policies or raise premiums of those unfortunate enough to get sick. The Senate bill – imperfect as it is in containing costs and offering standard quality coverage as a public option – is still a step in the right direction.
The US has been consummately slow to learn from other countries that have systematically adopted policies that contain health care spending and enhance value. We have chosen to compare in detail the US and Holland’s privatized health care systems based on a family of four. It’s a picture of diametrically opposite results. On a macroeconomic look, total health care spending in Holland is 10.2% of GDP vs 17% for the US or $4,400 per capita in Holland vs. $7,800 per capita in the US. Further, although the US has the highest health insurance costs in the world, it ranks 37th in terms of outcomes. On a microeconomic look, both countries offer health care via private insurers (Holland’s private insurance companies are tightly regulated whereas the US' are not), but, Holland’s basic universal plan results in more services to the insured for far less cost than the average US employer-sponsored plan.
While the final edict on US health care insurance reform is unclear at this time, the following study shows that it is possible in a fully privatized system to achieve quality care at a reasonable cost.
OVERVIEW: TOTAL AVG. HEALTH CARE COST FOR A FAMILY OF FOUR - HOLLAND vs. U.S., 2009-2010
1€ = $1.50 (Excluding Dental for Adults/Children) |
Standard Dutch Basic Plan |
Non-Standard |
I. Premium: No Upgrades |
$3,174 |
Data Not Available |
|
|
|
II. Premium: + Ave. Upgrades |
$4,050 |
$13,375 |
--Plus Deductible |
$5145 (a) |
$14,375 (b) |
--Plus Coinsurance |
-- |
$16,530 (c) |
--Plus Taxes (d) |
+$1,768 |
00 |
=Total System & Family of Four Cost Before Employer’s Contribution |
|
|
----------------------------------------------------------------------------------------------
IV. Premium: (Before Employer's Contribution) --Minus Employer’s Premium Share Contribution (e) |
- $1,587 |
- $9,860 |
= Net Family of Four Cost After Employer Contribution |
$5,326 |
$6670 |
Source: US data published by Kaiser Foundation in 2009
(a) Includes $1,095 own risk/deductible for 2 adults
(b) Includes $1,000 deductible for 2 adults
(c) Includes $2,155 for coinsurance for 2 adults
(d) +$1,768 Dutch taxes; No US federal or state taxes assumed
(e) 50% for Dutch employer; ±70% for US employer
NOTE:
US Plan figures from Kaiser 2009 study are an average of hundreds of non-standard plans. We have added a provision for coinsurance of $2,155. Copays, cost sharing or reimbursement limits on certain claims, and/or much higher deductibles are other typical features of US Plans. Also, many US Plans don’t offer 100% benefit coverage as does the Dutch Plan. The Dutch Plan has no coinsurance. Copays for doctor visits are netted against the own risk/deductible sum.
John Lawrence and I have given a detailed cost comparison below for a family of four under the Dutch Basic universal health care plan for all excluding and including upgrades compared to an average US health care plan including upgrades. Both plans are Family-Employer based plans. US data is from exhaustive Kaiser Foundation 2009 study . Dutch data is based on publisized 2010 prices and terms of one of the major health care insurance firms. Prices and terms differ less than +-6% among competing Dutch firms largely as result of standard comprehensive definition of benefits. Dutch health care providers compete most on quality and service under a system of regulated competition where government has final oversight and control of prices and costs.
This Overview puts all the data in a “Big Picture”perspective. Figures for both plans exclude Dental except dental for children under 18 is standand under the Dutch Basic plan.
Key observations are:
• The average US family plan total cost is $16,530 or 2.4 times (240% of) more expensive than the Dutch Basic family plan total cost of $6,913.
• The Dutch Basic plan comprises a standard comprehensive benefits package everyone purchases; the US plan is an average of a myriad of different plans all with non-standard benefit coverages.
• The Dutch Basic plan’s maximum own risk/deductible is $1,095 vs. very broad range of US plan family deductibles of $1,000 to over $4,000.
• The Dutch Basic plan provides 100% benefit coverage. US plans generally require coinsurance/cost sharing to reach 100% coverages.
• The Dutch Basic plan has a 50% employer premium sharing of $1,587 plus 50% sharing of 7.2% risk-equalization tax or $1,620 for a total employer contribution of $3,207. This compares to a gigantic employer contribution of $9,860 under average US plan. US employers' contribution is 3 times (300% of) the Dutch employers' contribution.
• Medical procedures and prescription drug costs and prices under the Dutch plan are uniform throughout country compared to extremely wide cost/price variations within and between states under US family plans.
• Following are startling differences in 1999-2009 average annual increases in family-employer health care premiums:
|
|
The |
Family Premium Today (There are $876 ave. Upgrades to Dutch Basic plan; US plan includes ave. Upgrades but exact figure is unknown) |
$13,375 |
$3,174 Basic Plan $4,050 with Upgrades |
1999-2009 Ave. Increase |
8.9% |
2.9% |
1999-2009 Ave. Inflation Rate |
2.8% |
2.1% |
______________________________________________________________________________________
NOTE: Dutch Basic plan deductibles are standard. For a family of four they range from 0 to a maximum of $1,500. The $3,174. Dutch Premium assumes a $600. family deductible for a monthly Premium of $264.50, including Dental for children under 18.
______________________________________________________________________________________
Since 1999, US family premiums increased almost 4 times the average inflation rate while Dutch family premiums increased at a rate only slightly above a much lower inflation rate.
• The Dutch private regulated competition system gets costs/premiums at affordable levels by a standard comprehensive benefits package required for all 16.5 million citizens and residents. This gives economies of scale and uniform treatment transparency facilitating market competition, assessment and comparison of best and worst care practices by health providers. The new competition-based system is working as intended, albeit with manageable glips here and there, to provide universal coverage while safeguarding and controlling costs and quality.
• About 90% of Basic plan insurance is offered by 6 insurers, thereby providing a well-balanced actuarial risk pool of age/income/healthiness groups within a +-2.5 million average client base per insurer. Costs, prices and quality care provisions are a government oversight responsibility. A competition regulator checks for abuse of dominant market positions and creation of cartels. An insurance regulator makes sure all Basic policies have identical coverage rules so no one is disadvantaged by his or her choice of insurer.
The extremely high US Employer Contribution share of $9,860 to a Family-Employer health insurance Premium average cost of $13,375 (74% contribution according to Kaiser study) may explain why Middle-Class wages have risen a miniscule +- 12% the last 31 years! Employers are apparently treating their high health care payment Contribution as a Wage Benefit, substututing for a normal wage increase. This is all caused, of course, by the outrageously high cost of health care insurance compared to other advanced nations like Holland.
_________________________________________________________________________________________
Frank Thomas and I have done a considerable amount of research comparing the health care systems in the US and in the Netherlands. There is also an excellent video on the "New Dutch Health Care System".
There is an excellent Frontline documentary comparing the health care systems of different countries called "Sick Around the World." You can view it here. Also there is Robert Greenwald's documentary, "Diagnosis:NOW!"
With the seemingly endless process of getting a health care reform bill passed in the US, one might wonder if this is the best way to implement what should be the world's best health care insurance system. Or is it going to be an inevitable mish mash of compromises resulting in a Rube Goldberg hodge podge of gargantuan proportions. Will it be a rational design that will contain costs and guarantee health care to every citizen regardless of pre-existing conditions or will it be a jerry-built jumble of concessions to the health insurance lobby.
The fact that it is taking so long to put something together and that the bill as presently constituted is about 2000 pages long bespeaks the fact that it is a bill that, rather than addressing the problem in a rational manner with input from other countries that do have successful health care systems, this bill, if it succeeds in becoming law at all, will do not much more than end some of the egregious practices of the health insurance industry. Obama's approach of conceding to the health insurance corporations at the outset set the stage for a watered down version of health care insurance rather than a robust version. And the health insurance lobby has only taken the process downhill from there. The circuitous route taken by the US House of Representatives and the US Senate calls into question the very legitimacy of the US political process - governing by lobbyists - instead of governing in the best interests of the people. The political process has been corrupted by money and hijacked by corporate interests.
The defeat of the public option has for all intents and purposes put an end to the cost containment provisions that might have been and given the health insurance lobby a sweet victory that insures its profits will continue to soar and the average American's out of pocket expenses will continue to skyrocket. All that would have been necessary is to extend Medicare to everyone regardless of age. This is a bill that could have been written on one page! But instead it is a bill buffeted and pressured from every direction, advertised to the American people by a whole host of special interest groups and beat into the ground by politicians who have no interests other than to defeat Obama and to do the bidding of their corporate sponsors. Is this any way to run a country?
Fortunately, other countries such as the Netherlands have instituted rational cost effective health care systems that are run in the interests of their citizens and not in the interests of corporations whose only motive is profit. Although health insurance in the Netherlands is provided solely by private corporations, their role is carefully circumscribed in such a way that the public interest is mainly served. Although private corporations play a role in the system, they don't define the system in their interests. Instead the Dutch political process defines the system and they do it with a minimum of buffeting and pressure from lobbyists and private corporate interests. And they continue to refine and reform their system in the best interests of the people with the passage of time. Other countries do this as well. While different countries have different approaches, all seem capable of reducing costs and providing better outcomes. While the US spends more on its health care system than any other country, it is ranked 37th in terms of outcomes.
Approximately 45,000 people die in the US due to a lack of health insurance every year, and more than a million people go bankrupt per year because of medical bills, 60% of them having health insurance in effect. While other countries consider health care a right, the US considers it something bought and sold in the marketplace. And the US political process, far from operating in the best interests of the average American, instead operates in the best interests of corporate America which buys and sells US politicians albeit (for the most part) in a completely legal way. The law itself is used to support what would be considered corruption in many other countries.
The US average family's health insurance premium is up 131% since 1999.
The average cost of a family policy offered by employers was $13,375 this year, up 5% from 2008, the Kaiser Family Foundation and the Health Research & Educational Trust survey found. By comparison, wages rose 3% over that period, the study said.
The new numbers underscore warnings by President Obama about the growing cost of health insurance and were embraced by Democratic lawmakers who are pushing for legislation to change the nation's health care system. "The trends are crushing millions of businesses and American families," Senate Majority Leader Harry Reid of Nevada said.
The annual survey of more than 2,000 companies also found that 40% of small-business employees enrolled in individual health plans pay annual deductibles of $1,000 or more. That's almost twice the number who paid that much in 2007.
Drew Altman, president of the Kaiser foundation, said it is the combination of higher health care costs along with the recession and other rising prices that "creates the pain level."
Those who oppose Democratic versions of the health care legislation, such as Senate Minority Leader Mitch McConnell of Kentucky, agree that the rising cost of insurance has become a hardship on families and businesses. The two parties disagree on how to address the problem.
"It's a significant issue for our members," said Jeri Kubicki with the National Association of Manufacturers. "They want to continue to offer this benefit. At the same time, it's a daunting task to try to control costs."
Since 1999, health insurance premiums for families rose 131%, the report found, far more than the general rate of inflation, which increased 28% over the same period. Overall, health care in the United States is expected to cost $2.6 trillion this year, or 17% of the nation's economy, according to the non-partisan Congressional Budget Office.
Following is Frank Thomas' recent study on health care insurance rates in the Netherlands. That will be followed by my further comparative analysis of health insurance rates in the US. The following are Recently Published Universal Standard Health Insurance Rates for a Family of Four Living in the Netherlands in 2010. Private health insurance companies are expected to offer plans conforming to these rates which are set by the government.
I. DUTCH BASIC HEALTH CARE PLAN: COST DETAILS
Minimum Own Risk Required For a Couple: ($247.50 x 2) = $495.00 yearly. Minimum Own Risk is like a basic deductible which is independent of insurance plan. Then there are additional deductibles dependent on which insurance plan is chosen.
Employer and employee also split a 7.2% tax on wages up to a maximum of $45,000. which goes into an equalization fund which is used to compensate insurance companies for high risk insurees. It is also used to pay insurance premiums for poor people who can't afford to pay. In addition there is a 9.35% tax to the employee on the 50% of the total premium that the employer pays. To simplify the discussion, the following tables exclude these tax consequences to the employee and instead assume that the employee pays the employer's share of the premium with the result that the figures for employee health insurance costs come out about the same. Later we will do a more exact computation.
Here is the simplified computation of health insurance costs for a family of 4 (Including 2 Children Under 18 Years of Age):
Optional Deductibles (Per Insured) |
Monthly Premium |
Maximum Yearly Cost |
$00.00 |
$289.50 |
$3,969.00 |
$150.00 |
$277.00 |
$4,119.00 |
$300.00 |
$264.50 |
$4,269.00 |
$600.00 |
$239.50 |
$4,569.00 |
$750.00 |
$227.00 |
$4,719.00 |
Star Upgrades |
Monthly Premium |
Maximum Yearly Cost |
1 Star (basic) |
$30.75 |
$369.00 |
2 Star |
$43.25 |
$519.00 |
3 Star |
$73.00 |
$876.00 |
4 Star |
$129.00 |
$1,548.00 |
Dental Coverage |
Monthly Premium |
Maximum Yearly Cost |
1 Star (basic) |
$40.25 |
$483.00 |
2 Star |
$53.50 |
$642.00 |
3 Star |
$90.50 |
$1,086.00 |
4 Star |
$135.75 |
$1,629.00 |
Total Maximum Cost: Based on $300 Deductible/ Upgrades/Dental:
Now we compute the total maximum yearly cost for a family of 4 based on a $300. deductible, no dental coverage for the couple, but does include dental for children under 18. The Basic Plan Total Maximum Cost of $4,269 = $264.50 Premium for 2 x 12 months plus Own Risk ($495) and assumed Deductible of $300 x 2 = $4,269.
Here's the Summary:
Basic Plan $4,269.00
1 Star Upgrade $5,121.00
2 Star Upgrade $5,430.00
3 Star Upgrade $6,231.00
4 Star Upgrade $7,446.00
II. ADDITIVE TAXES
(1) 3.6% tax or employee’s 50% share of 7.2% government equalization pool tax on income capped at $45,000 = $1,620.
(2) 9.35% maximum wage tax on 50% share of employee’s annual premium paid by the employer (12 x $132.25 x 2) or .50 x $3,174 x .0935 = $148 or total additive annual taxes = $1,768.
These additive taxes are offset by very low wage tax rates of 1.8% on income up to +- $25,000 rising to 9.35% on income between $25,001 and capped at +- 45,000. Overall Dutch tax rates are in high 30-40% range on income up to $45,000, but most of the 30-40% tax rates apply to social-net benefits such as health care and Social Security pension (AOW).
Further, the 7.2% equalization pool tax is used to compensate insurers for documented “high risk” Basic Plan applicants (who cannot be rejected for any reason by insurers) and to subsidize low-income people or those with little or no income.
III. GRAND TOTAL MAXIMUM SYSTEM HEALTH CARE COSTS FOR A FAMILY OF FOUR INCLUDING TAXES
BASIC PLAN MAXIMUM: = $3,174 plus Own Risk/Deductible of $1,095 = $4,269
$4,269 plus Taxes of $1,768 = $6,037 (Excludes Upgrades/Dental)
1 Star plus 1 Star Dental: $5,121 + $1,768 = $6,889 = 14.3%
2 Star plus 2 Star Dental: $5,430 + $1.768 = $7,198 = 15.0%
3 Star plus 3 Star Dental: $6,231 + $1,768 = $7,999 = 16.7%
4 Star plus 4 Star Dental: $7,446 + $1,768 = $9,214 = 19.2%
IV. GRAND TOTAL MAXIMUM SYSTEM HEALTH CARE COSTS FOR A FAMILY OF FOUR EXCLUDING EMPLOYER-PAID SHARE OF PREMIUM ($1,587)
BASIC PLAN MAXIMUM: = $6,037 minus $1,587 = $4,450 = 9.3% of Ave. Per Capita Income of $48,000
1 Star plus 1 Star Dental: $5,302 = 11.0%
2 Star plus 2 Star Dental: $5,611 = 11.7%
3 Star plus 3 Star Dental: $6,412 = 13.3%
4 Star plus 4 Star Dental: $7,627 = 15.9%
As one final observation, the following sums up Employer average health care contributions that reduce Employee costs, assuming capped income level of $45,000.
(1) Employer is not legally required 50% share of Employee's Basic Plan premium = .50 x $264.50 x 12 months = $1,587 for a family of four.
(2) Employer's legally required 50% share of the 7.2% government tax for the equalization pool = 3.6% x $45,000 = $1,620.00.
So Employer´s total benefit and obligated contributions average about $3207. assuming a family income of $45,000. and $300. deductible for a basic plan with no upgrades.
KEY ADDENDUM:
I. Health Care Funding:
The new Dutch universal health care system uses a combination of government regulated competition and an equaliztion pool of funds. The latter covers high risk clients and those who cannot afford all or part of the Basic plan’s monthly insurance premium. The aim of the equalization pool is to prevent insurers from using pre-existing medical conditions in determining selection and/or insurance coverage terms for clients.
Insurers must provide at least one Basic health insurance plan that meets a Government set standard minimum-level benefit coverage. Insurance firms compete on premium price. Each insured is responsible for an own-risk, out-of-pocket cost of $247.50. Deductible options are fixed for Basic plan ranging from $150 to maximum of $750 per insured. All residents are mandated by law to purchase the standard benefit coverage from an insurance firm of their choice.
The equalization pool is run by a government regulating authority which collects a government wage-based health care tax of 7.2% shared 50-50 between employer and employee based on an income cap of +-$45,000.
Insurance firms receive funds from the equalization pool to help cover unusual costs of government mandated coverage.For example: high-risk individuals get more from the pool; low-income persons have their health care partially to wholly paid from the pool; dental care for children under 18 is paid wholly from the equalization pool.
The three funding sources for the Dutch universal standard health care system can thus be summarized as follows:
A. 50% comes from: Employer’s 50% share of employee’s monthly insurance premium plus Employer’s 3.6% health care tax on employee’s gross income up to +-$45,000 in 2010.
B. 45% comes from: Employee’s 50% share of monthly insurance premium. The full individual premium ranges from $144.75 (assuming no deductible) to $113.50 (assuming maximum annual deductible of $750 is agreed to by the insured for 2010).
C. 5% comes from: Government’s 3.6% health care tax on employee gross income up to +-$45,000. that, as noted in A. above, is shared 50-50 between the employee and employer. These health care tax receipts go to the equalization pool.
II. Summary of Key Standard Benefits Coverage
Here’s an overview of standard key benefits 100% covered under the Dutch private insurer, regulated-competition universal Basic health care plan.
1. medical care, e.g., astma, accident injuries, cardiovascular, illnesses,cancer, non-chronic pulmonary obstructive blockages, diabetes, kidney dialysis, hearing/ear/surgery, jaw surgery, mechanical breathing, organ transplants, physiotherapy, psoriasis, thrombosis, tumor tests and treatments, etc.
2. hospitalization
3. prenatal screening, maternity care, child delivery, midwives, in vitro fertilization
4. prescription drugs
5. general practioners, specialists, ‘second opinion’
6. medical aids, Xrays
7. dietary advice
8. ambulance, patient transport services
10. nursing care
11. dental care for children under 18
12. oral hygiene
13. paramedical care such as remedial therapy, speech therapy/dyslexia, physiotherapy
16. curative psychiatric care, clinical psychologist, psychotherapist, hospitalization in a psychiatric hospital or ward in a general hospital or mental institution for a short period.
17. above coverages, among others, generally apply for health incidents (e.g. heart failure, injuries,etc.) possibly occuring outside Holland.
It must be added that health care taxes, including for lengthy to permanent illnesses and/or disability and taxes for Social Security are offset by very low wage rates on income up to a capped amount of +-45,000.
In addition, any medical procedures or drug prescriptions not covered by an insured’s Basic standard universal plan are tax deductible.
HEALTH CARE COST FOR AN AMERICAN FAMILY OF FOUR
The average cost of a family policy offered by employers was $13,375 for 2009, up 5% from 2008 and up 131% over the last decade, a period in which inflation rose only 28%., the Kaiser Family Foundation and the Health Research & Educational Trust survey found. Of that $3515 was the worker contribution and $9860 was the employer contribution. And one estimate says that if costs continue on their current trajectory, premiums will go up another 166% in the decade ahead. And this is just for the premiums. It doesn't count deductibles, copays and coinsurance.
The annual survey of more than 2,000 companies also found that 40% of small-business employees enrolled in individual health plans pay annual deductibles of $1,000 or more.That's almost twice the number who paid that much in 2007.
Figuring the deductible into the equation and assuming only one deductible per family, the average family would be paying a total of $4515. yearly plus coinsurance and copays with an upward cost trajectory. Then there's this:
Forty percent of employers surveyed said they are likely to increase the amount their workers pay out of pocket for doctor visits. Almost as many said they are likely to raise annual deductibles and the amount workers pay for prescription drugs.
Nine percent said they plan to tighten eligibility for health benefits; 8 percent said they plan to drop coverage entirely. Forty-one percent of employers said they are "somewhat" or "very" likely to increase the amount employees pay in premiums -- though that would not necessarily mean employees would pay a higher percentage of the premiums. Employers could simply be passing along the same share of the overall increase that they are doing this year…
A major business lobby weighed in Tuesday, saying that if current trends continue, annual health-care costs for employers will rise 166 percent over the next decade -- to $28,530 per employee.
Using the total cost of health care in the Netherlands as $7657. (employer's and employee's contributions) and the total cost in the US as $14,375. plus coinsurance and copays, it is easy to see that health care costs in the US are over twice as high as in the Netherlands.