Become informed and defend your freedoms.  This is a website for citizens by an independent citizen.

in 2009 there is no bigger issue

Swiss Health Care: The Good, the Bad and the Ugly

By:  John Goodman, NCPA, Oct 19, 2009

I have often wondered why we don’t hear more about the Swiss health care system — especially by folks on the left.  After all, just about every study of the topic finds the Swiss system to be the most egalitarian in the whole world.

During the debate over Hillary Care, the White House flirted with Germany and France. Michael Moore bounced from Canada to France to England and even Cuba in his movie, SiCKO.  A recent documentary praising national health insurance focused on Taiwan.  The Physicians for a National Health Program has been perpetually fixated on Canada (the only “single payer” system in the world, other than North Korea).  The Commonwealth Fund is continually judging European systems superior to our own.  But no one on the left ever mentions Switzerland.

Until now. A front page article in The New York Times the other day extolled the virtue of Swiss health care. Even Paul Krugman had good words to say about it. On the right, Regi Herzlinger has been a consistent champion.  Gary Becker and Richard Posner have weighed in with positive assessments.

SSo what do we think about all this? Here’s the good, the bad and the ugly.

The Good. Swiss health care is predominantly private.   Individuals are required to buy insurance and almost all of them do.  Private companies compete to provide insurance, and there are subsidies for lower income buyers.   The insurance is individually owned, personal and portable. In my opinion, this system stands head and shoulders above other European systems of national health insurance.

In comparison to the US system, a feature of Swiss health care that I like (but that is rarely mentioned) is that the Swiss tend to join a health plan and stay in it for many years.  This long-term relationship with an insurer encourages a long-term relationship with doctors, which is important for continuity of care.

The Bad.  Despite competition, choice, private ownership and portability, the Swiss system is still very bureaucratic – perhaps as much as or more so than our own.  It has mandated benefits, price controls on providers and other regulations that make it hard for entrepreneurs to solve problems in the way we often talk about at this blog.  Linda Gorman has provided an excellent summary of some of these problems in a piece we posted a few months ago.

The Ugly.  Although long-term insurance relationships are the norm, the Swiss have been moving in the direction of managed competition, which encourages people to switch health plans.  As I have written before, when plans are forced to charge community-rated premiums, no one ever faces a real price, pays a real price, or receives a real price.  Under managed competition, everyone’s incentives are perverse.

OOn the buyer side, people have an incentive to under insure when they are healthy and over insure when they are sick.  On the seller side, health plans have an incentive to over provide to the healthy (on whom they make a profit) and under provide to the sick (on whom they incur losses).  The more competitive the market, the worse these perverse outcomes will be.