Learning from International Health Care Systems

KAREN DAVIS: Well, their administrative costs are a lot lower than ours. They run about 5 percent of the premium going for administrative overhead in Switzerland for all the companies selling the basic coverage are required to be non-profit. But they can still make a decent return even with 5 percent. By contrast in the U.S., 15 percent of our premium is going for profits and administrative overhead. So they have learned how to have efficient, lean operations. And that is what we should be aiming for here.

RAY SUAREZ: But if they manage to lower the cost for treatment to an individual patient or a pool of 10,000 or 100,000 patients, do they walk away with a little bit more money at the end of the year?

KAREN DAVIS: In general, they wouldn't benefit -- they would benefit from having selected contracts with certain providers that give them a discount or certain kinds of treatments that might improve a nurse explaining to a patient with chronic condition. That is particularly true in Germany where they have a disease-management program with nurses really working for the insurance company, but sitting in the doctor's office and working with patients, for example, with diabetes.

So, yes, they do benefit. And they are very excited about these new approaches to trying to control chronic conditions and very pleased that they are getting good results.

RAY SUAREZ: Well, T.R. Reid, you visited Germany, where insurance companies have been part of the plan since the days of Bismarck. And Jim writes from Cudahy, Wisconsin: "Under other countries' universal health care, if insurance companies must take people with pre-existing conditions, cannot drop sick people and must pay promptly for covered treatments, how do they make a profit?"

T.R. REID: Well, in most countries, they don't make a profit. In fact, in many countries, German and Switzerland included, if an insurance company ends up the year with a profit -- they call it a surplus -- they have to redistribute that to other companies that lost money that year, so that they are really not working for profit. They are motivated to compete for a couple of reasons. For one thing, as Karen said, they offer other lines. They offer Medigap insurance or the same company sells life insurance. If they do a good job on the non-profit basic health insurance, they think that will bring in customers for their for-profit lines.

And the other thing is that executives tend to get paid more if they have more customers. The bigger your plan, the bigger the executives pay. And so they compete to get more people for that reason.

KAREN DAVIS: Ray, if I could jump in there.

RAY SUAREZ: Sure.

KAREN DAVIS: The Netherlands have something called a risk equalization fund, so if one insurance plan gets sicker people, they get extra payments from that fund and if one plan gets healthier patients, they contribute to that fund. So that is one of the ways in which all of the plans have a motivation to provide good care even for very sick people rather than trying to avoid them, which often happens in the U.S.

RAY SUAREZ: This is to either of you from Dr. Randolph Sanders from New Braunfels, Texas: "Are there any data showing what percentage of U.S. insurance incomes goes to pay CEO salaries and stockholders and how this compares with other developed nations with robust private insurance industries?"

KAREN DAVIS: This is Karen --

T.R. REID: There is data. I mean, they report to the Securities and Exchange Commission in pretty good detail. Their profits -- that is, the amount they pay investors -- run in the range of 4 to 5, 6 percent depending how good a year they had. And then their administrative cost, which would include those salaries for executives. As Karen said, they report 15 to 22 percent depending on the company and the quarter. And the pay is pretty high. If you look at the really big insurance companies, a CEO there makes between 5 million and $20 million a year.

KAREN DAVIS: Just to put that in perspective, if we had the same proportion of our health-care dollar going for insurance administrative overhead and profits as countries like the Netherlands, Switzerland and Germany, we would save 50 to $60 billion a year. So those are mixed private-public systems that manage to avoid spending the high expenses that we spend.

RAY SUAREZ: Marilyn --

T.R. REID: And Ray, I can't resist mentioning the famous platinum parachute given to William McGuire, the former chairman of United Health insurance company when he left the company, the goodbye package -- are you ready for this -- $1.1 billion. So that is a pretty lucrative line of work.

RAY SUAREZ: Well, he must have, you know, worked some late hours and some weekends.

T.R. REID: (Chuckles.) Exactly.

RAY SUAREZ: To earn $1 billion, you know. We are talking about real money there. That is serious. On primary care, Bruce Kessler asks: "Would the primary care crisis in the U.S. constrain efforts to provide universal health care? How will this limit efforts to reduce the cost of medical care?"

And it is my understanding, Karen Davis, that few American physicians or a relative few American physicians go into primary care. And so there are not enough GPs as we need as a country of 306 million people.

KAREN DAVIS: Absolutely. The U.S. has as many physicians per capita as other countries. The difference is more of our physicians specialize or sub-specialize, so many of the health reform proposals that Congress is preparing do begin to rectify that. They make increases in primary care services and they also put funds aside for some loan replacement programs where people can pay off their medical school debt.

RAY SUAREZ: And Tom, Fred writes from Somers, New York: "How does income for physicians compare in these other countries?" And you wrote about that at some length.

T.R. REID: Yeah. Every country I went to, I asked the doctor, how much do you make? And you know what, every doctor in every country said not as much as I would make in the U.S. They all know that. Some of them -- the doctor I spent some time with in France, he and his wife were in a practice together and they made $60,000 a year each, $120,000. That is pretty small potatoes for a pair of doctors in America.

A Japanese doctor,  think my Japanese doctor made in the range of 100 to $110,000 a year. My German doctor made 110 to $120,000 a year, family practitioner. So nobody is being paid at the levels of American docs. But then, most of them went to medical school either for free or very cheap. And their malpractice premiums are almost zilch.

RAY SUAREZ: So Karen Davis, if those are contributing factors, for instance, no debt that you are paying into your mid-30s or late-30s and that kind of thing, how do you reel that back in the United States? How do you change the equation a little bit, so that the decisions young doctors make aren't conditioned by the fact that they are already six figures in debt the day they get their diploma?

KAREN DAVIS: Well, we see that debt does enter into their calculations about becoming a specialist, where they can make maybe 300, $500,000 in a few years' time compared with primary care, where in the U.S., they might make about 180 to $200,000 a year.

So first of all, I think we do have to change what we pay. When we pay very well for doing a test, doing a procedure, doing a surgery, even if it only takes 20 minutes and pay very little for a doctor really spending time with a patient and examining them and listening to them and learning about their symptoms, we are going to continue to have this imbalance. We have to do that.

But I think to get some immediate relief, we need to look at some loan repayment programs for this medical school debt, maybe some repayment for every year that they agree to practice in primary care, in an area that has the shortage of doctors.

T.R. REID: Well, Ray, every country has to come up with a mechanism to compensate patients who are injured by doctors or hospitals. It happens in every country. No other country relies on the tort malpractice system as the main way to do that. They have government agencies that take a look. In Germany, they have visiting doctors who go and visit a doctor in the same specialty in another part of the country to review claims from injured patients.

And patients do get settlements in those countries. Here is the thing. Quite often, a settlement in a malpractice case involves lifetime medical care. And in the United States, that is a very, very expensive proposition. In Britain, if somebody is awarded lifetime medical care, it was free anyway. It wasn't going to cost anything. In France, Japan, you know, Taiwan, those countries, lifetime care is just vastly cheaper than in the United States. So even when they have a case or a judgment, the judgment tends to be much lower than in the U.S.

RAY SUAREZ: But what about the assumption embedded in Dr. Altone’s question that the malpractice system is the most important driver of high health-care costs in the U.S.? Karen Davis, does that assertion stand up to scrutiny?

KAREN DAVIS: Well, President Obama says that we need to do something about medical malpractice as part of health reform. The Congressional Budget Office just recently issued a study estimating that defensive medicine and malpractice costs add about $50 billion a year to our health-care system.

RAY SUAREZ: But what percentage of that is that of the whole?

KAREN DAVIS: You know, we are spending $2.6 trillion, so the figures are that it is pretty small. That doesn't mean we shouldn't address it. New Zealand, for example, has a no-fault medical malpractice system, so that might be one of the approaches that we might test out here in the United States.

But the important thing is really to improve patient safety and reduce medical errors. And that means we have to move much more aggressively toward information systems that make it easy for doctors to do the right thing at the right time to the right patient. And we lag behind other countries in the adoption of those kinds of systems.

RAY SUAREZ: Tom, go ahead. I am sorry. I cut you off.

T.R. REID: You know, we do have some experimentation right here in the United States on controlling malpractice judgments because some states have put in pretty strict limits, Texas and Wyoming, for example. And guess what? Health-care costs in those states rise just as fast or, in some cases, faster than the average in other states after they put in the limits.

So I don't -- it might be a good idea to relieve doctors of this fear, of this burden of malpractice cases. But most people seem to agree. It is not going to be a big cost saver to do that.

RAY SUAREZ: Phil writes from Centreville, Massachusetts: "How do countries in Europe handle medical research? Have they been successful at developing breakthrough medical procedures and drug therapies under their system? How do they fund the research? What percentage of total medical expenditures go to research?"

And Karen Davis, when people cite the United States as having one of the best health-care systems in the world, it is usually that kind of thing, innovation, that they fall back on when they are talking about it.

KAREN DAVIS: Well, I think we have a lot to be proud of with regard to cutting-edge medical research, development of new pharmaceutical products and surgical procedures. But we are not the only ones making those advances. Certainly, a number of the major advances have come out of the U.K., France, Switzerland, Japan. So they all have systems of both public and private funding for medical research and development of new cutting-edge drugs.

RAY SUAREZ: Tom, when you compare national systems, is that where the United States shines in the sort of futuristic stuff?

T.R. REID: I think we shine in the training of our docs and nurses. Our lab equipment is fantastic. But man, I strongly reject this notion that you have to pay through the nose to get good medical research. We have good medical research. But other countries with much lower cost structures do just as well. In fact, I argue in the book that cost controls overseas drive innovation.

I just recently had an MRI scan of my neck here in Denver, $1234. Exactly the same procedure in Japan cost me $105. You know why? Because the government said we are going to pay you less. And their researchers had to find devices and mechanisms to make the same diagnostic technique for one-twelfth the price. So I argue -- I think it is absolutely clear that cost controls drive innovation in other countries.

RAY SUAREZ: So you were paying in part for the practice's machine, right?

T.R. REID: Yeah, yeah, it was a lab. But, I mean, I went to a lab in Japan, too. And the price they are allowed to charge is 105 bucks. What happened is once the government started cracking down on the cost of these scans in Japan because the Japanese have twice as many MRIs as we do. It was a big expense for them. Then the scan makers like Hitachi and Toshiba were required to produce cheaper machines that could do the same basically, not exactly, but basically the same diagnosis at a much lower level.

And the Japanese have really been leaders in getting these diagnostic techniques at a much lower price than we have because they are forced to by government cost control. So this argument we hear in America, we have got to pay through the nose or we won't have good research. Boy, I reject that. Other countries with lower cost structures have good research, too.

RAY SUAREZ: Jake writes from Stanford, California: "How big a role does tobacco and lung cancer play in the overall scheme of health-care expenses in the U.S. and in other countries in the world? Is curbing tobacco usage essential to bringing costs back under control?" Karen Davis?

KAREN DAVIS: Well, absolutely, we need to do a better job with helping people live healthier lifestyles. The truth of the matter, though, is we have a lower smoking rate than European countries and lower for men than in countries like Japan. So we got the message sooner back in the 1970s, early 1980s. And our smoking rate looks pretty good compared with other countries. We still need to do better. And certainly increases in tobacco taxes are one deterrent effect.

But where the U.S. has a major problem is rapid increase in obesity. We have higher rates of diabetes than other countries, although unfortunately, other countries are starting to follow the U.S. in this regard. But we really should be mounting some major efforts to combat childhood obesity, particularly, and make schools, for example, and communities healthier places to eat and live.

Paul writes: "I am an Australian writing from Australia. I note that whenever health-care systems are being compared, Australia isn't mentioned. Don't we rank with the Netherlands and Sweden when comparisons are being done?"

We get very few letters, I have to say, from people who are living abroad or have lived abroad complaining about the quality of care they got in other places in the world. But is it hard to do international comparisons? It is apples to apples or is it apples to oranges that we are trying to do when we take two very different systems, cultures, ideas about access and entitlement and try to compare them to each other?

KAREN DAVIS: Well, it does take careful work to make sure you are comparing similar things. The Commonwealth Fund does support annual surveys in now about 11 countries. Every 3 years, we survey physicians. For example, in 2006, we asked doctors in Australia, can your patients get in to see you on nights and weekends? And about 80 percent of Australian doctors said absolutely.

In the U.S., only 40 percent of doctors said they had any arrangement for taking care of their patients after hours or on weekends. And we find the same thing in our general population survey when we asked people, do they have problems getting an appointment the same day or do they have to wait maybe six or seven days to get in to see their doctor?

RAY SUAREZ: Tom Reid?

T.R. REID: Well, I think the Commonwealth Fund's comparative studies are the gold standard. All economists around the world rely on them. I think you can get very good comparative studies. For one thing, on payment schemes, we have got every payment scheme there is in the world. If you are a veteran, that is the British scheme, government-paid health care. If you are over 65, well, then that is a system like we heard in Taiwan, Australia and Canada, private doctors and public payers. We have got them all.

So I think the comparison of the payment system is pretty straightforward. And I think Karen's group has just done marvelous work in comparing quality of care and medical outcomes. Everybody in the world uses them. So yeah, I am pretty confident on the comparative data. I think we have good numbers.

RAY SUAREZ: A lot of the questions that we got when the Netherlands series ran on the NewsHour had to do with the fact that they felt the comparisons were invalid because the Netherlands is so much smaller. Can you compare small country systems with big country systems, Karen, and find out something that is worth knowing?

KAREN DAVIS: Well, certainly, the U.S. with 300 million people has a lot of heterogeneity and differences across those geographic areas. But even in a country like Denmark that has 5 to 6 million people, I think, well, that is the size of an average state in the U.S. So if they can do it in Denmark, why can't we do it at least in each state? And we may, in end, turn toward more of a state-based solution. Certainly Canada has put more reliance on provinces. What all these countries do is to have a national standard and national financing.

RAY SUAREZ: Does the homogeneity or the perceived homogeneity of a place like the Netherlands make a comparison invalid? I mean, there are some differences. The Netherlands is a little bit grayer than the United States. The median age is older. It is not as much a place that is home to racial and ethnic minorities in high-poverty areas. But it is changing and it is getting more like the U.S. in that regard, but from a much lower base.

KAREN DAVIS: Well, there are 16 million people in the Netherlands. And as you say, their age distribution is going to be about what ours is going to be in 10 or 20 years. So they have already experienced a lot of aging of the population. And yet if you look at what they spend, they spend half of what we spend per capita. They spend about $3400 a person. We spend almost $7,000 a person.

So I don't think the issue of population, heterogeneity, age, size is really what is at work here. It is really a willingness for government to show leadership, to have some type of system of covering people, to have some kind of setting of the rules the way they do in the Netherlands to make markets work in the public interest.

RAY SUAREZ: Tom, what about the comparative work you did? Did you find that countries that really are not home to big slums or large pockets of really deep poverty with all the underlying health challenge that that can bring is an easier place to treat and provide care for when you compare it to a place like the United States with much broader extremes of wealth and poverty?

T.R. REID: Yeah, I think I agree with Karen on that. I hear that question a lot. And frankly, I am not sure of the answer. But a lot of countries with more and more diverse populations still manage to cover everybody at a reasonable cost. I mean, the Netherlands has taken in a million Muslims from Africa and Asia in the last 10 years. I mean, it is becoming a diverse country. Japan is a much more diverse country, 130 million people. And Britain, I think, was a strikingly diverse population and has lots of slums in Britain, as bad as ours, and yet they cover everybody and spend half as much as we do. And their health outcomes are, I think, slightly better than ours.

So is homogeneity the answer? I don't think that is an explanation. But I have got to say I hear that question a lot.