insurance systems
Richard B. Saltman and Hans F.W. Dubois
Introduction
The cultural core of social health insurance (SHI) is deeply rooted in the societies which first spawned it. Germany is often considered to be the source of this approach to health insurance, as it was the first western European country to codify existing voluntary structures into mandatory state-supervised legislation in 1883. The history of SHI in Europe, however, as well as its animating principle of social solidarity, extends considerably earlier than 1883 and more widely than Germany. In many respects, the history of SHI and of its particular concept of solidarity is the history of the evolving social development of western Europe, starting with medieval guilds in the late Middle Ages through to the structuring of the modern European welfare state in the aftermath of World War II. Precisely the fact that the current configuration of institutions and the social values that undergird them are the result of such a long historical process can help explain the degree of stability of existing SHI institutions as well as the difficulty policy-makers confront in seeking to modify those institutions. As both historians and sociologists recognize, it takes generations to build up a
‘way of life’, and wise political actors rarely seek to disrupt those long-standing patterns.
This chapter examines two key elements in the base or ‘society’ level of the four-part pyramid framework presented in Chapter 1. First, it briefly reviews the history of SHI across western Europe, highlighting the central structural lineants that led to present-day arrangements in the eight studied countries.
Subsequently, the chapter probes more closely into what many commentators consider to be the core cultural value that both generates and is generated by
SHI, namely social solidarity, examining in particular its different historical and cultural roots in the eight countries. The chapter concludes with a brief con-sideration of the implications of this historical and social base for policy-makers as they seek to address current challenges.
A brief history of SHI in western Europe
The present system of nearly universal SHI in Western Europe is the culmination of a 700-year historical process. Over that period, the number of individuals covered has grown from a small number of workers in particular trades to (depending on the national variant) all residents or at least all residents whose earnings are below a rather high threshold. Equally as important, the central concept of this form of social insurance also has changed, evolving from wage replacement and a death benefit into payment for and/or the provision of out-patient physician services, inout-patient hospital care and pharmaceuticals. Lastly, the administrative character of SHI has shifted over time, having begun as vol-untary worker cooperatives but from 1883 in Germany and subsequently throughout the twentieth century (from 1941 in the Netherlands to 1996 in Switzerland) taking on a state-mandated legislative character. All three types of change demonstrate that the present configuration reflects an extended devel-opmental process and the deep roots of the current institutional structure in the social fabric of these countries.
The initial phase of this historical process involved small groups of workers in the late medieval period, who created mutual assistance associations under the auspices of their craft guild. The first recorded guild funds date back to the 1300s (Veraghtert and Widdershoven 2002). These funds generally covered only guild members, with overall coverage restricted to less than 5 per cent of the total population. All others were dependent on charitable and/or religious organiza-tions for care. This precedent of basing health coverage on occupation became a core tenet of the social insurance model in German-speaking countries and Sweden (Abel-Smith 1988).
It was not until the late eighteenth century that the state began to take on an active role in the provision of health services. Two important trends helped shape the European health sector’s future. One was in the Nordic Region, where district physicians in Sweden were given royal commissions contingent on their willingness to see indigent patients without payment (Serner 1980;
Hjortsberg and Ghatnekar 2001). Similar policies were followed in the then Swedish colony of Finland, as well as in Norway (Furuholmen and Magnussen 2000; Järvelin 2002). This is the first known effort by a state to provide health services to the poor. The second, parallel trend was more indirect but, in retro-spect, nearly as important. This was the continual effort by various newly con-solidating states to break the economic power of the guilds (Abel-Smith 1988).
This culminated in one of the first acts of the French Revolution when on 4 August 1789 guilds were abolished with the objective of creating a more liberal labour market, as well as increasing social equality (Veraghtert and Wid-dershoven 2002). Guilds were similarly prohibited in the Netherlands in 1798 (Veraghtert and Widdershoven 2002) and in Denmark in 1861 (Abel-Smith 22 Social Health Insurance Systems
1988). With the banning of the guilds, their health insurance function con-tinued as independent (and politically unprotected) mutual assistance societies, thus setting the stage for the process of consolidating state legislative control that commenced in 1883.
Once the guilds disappeared, there was an extended period in which vari-ous collective not-for-profit as well as private for-profit attempts were made to organize the provision of health insurance. These civil society efforts pro-duced mixed results, varying by country and by historical and/or cultural situation. In the Netherlands, for example, private commercial insurers tried to establish a market for health insurance, with unsatisfactory results (Hoga-rth 1963). In the late 1800s, voluntary health insurance societies grew up administered by the insured themselves or occasionally by industrial firms or by charitable foundations (Abel-Smith 1988). Similarly, voluntary health insurance emerged during this period in the Nordic countries (Hogarth 1963) and, for more middle-class individuals, in France (Saint-Jours 1983). In Swit-zerland, voluntary insurance appeared in response to the ‘bad reputation’
that private commercial insurers acquired, linked in part to their high-pressure door-to-door salesmen (Maurer 1983). In Israel, the first voluntary sickness fund was established by a small group of agricultural workers in 1911. Later on, in 1920, this fund was taken over by the National Labor Union. (Carrin and James 2004). The diversity of organizational format, members covered and services provided among voluntary health insurance systems is captured in a description of the United Kingdom during the early twentieth century:
The largest category of health insurers involved ‘friendly societies’ which provided cash benefits for the sick, treatment by contracted general practi-tioners, and drugs. Later, some dental and ophthalmic benefits were added by some societies. Other insurers included trade union clubs, slate clubs or tontines (clubs which distributed any annual surplus among the members), works clubs (based on the factory), and provident dispensaries which were subsidized by charitable funds. There were also some medical aid societies run on similar lines by commercial life insurance companies (Green 1985), but they were in the minority. Membership grew to include not only the mass of wage earners but small shopkeepers and a substantial proportion of the middle classes.
(Abel-Smith 1988:689) There were, of course, exceptions to this new pattern. In Germany, for example, the guilds and their health insurance funds were largely maintained (Veraghtert and Widdershoven 2002). Moreover, the emerging state supervisory role was presaged in Austria in its 1859 Industrial Code (Hofmarcher and Rack 2001), and by state replacement of private philanthropy in substantial parts of the Netherlands and Belgium (Veraghtert and Widdershoven 2002).
The modern era in SHI was ushered in by Bismarck in 1883. Worried about rising political pressure from Marxist-influenced labour unions and consumed by his desire to build a powerful German state, Bismarck seized upon the idea of retaining independent occupation-based sick funds but placing their activities under state tutelage. The resulting legislation established both the legal and The historical and social base 23
social foundation for sickness funds not just for Germany but for much of western Europe as well. Indeed, Austria followed suit in 1887/8 (Hofmarcher and Rack 2001), and in 1892, the Danish government adopted a variant plan that gave subsidies to existing voluntary funds so that those who were already ill would be admitted (Abel-Smith 1988; Vallgarda et al. 2001). Belgium adopted similar legislation, establishing state subsidies for sickness funds in 1894 (Veraghtert and Widdershoven 2002). In Switzerland, although an 1899 refer-endum to adopt a German-style model was rejected, a 1911 law required volun-tary funds that accepted federal subsidies to register and abide by state-imposed regulations (Minder et al. 2000). In the United Kingdom, Lloyd George success-fully passed a health insurance act in the same year.
This process continued after the conclusion of World War I, when France – confronted by existing health insurance in the re-acquired region of Alsace-Lorraine – passed a compulsory health insurance law in 1920 which was not implemented until ten years later (Saint-Jours 1983; Sandier et al. 2004).
One of the last northern European countries to adopt compulsory health insur-ance legislation was the Netherlands which, in 1941 under German occupation (Den Exter et al. 2002) passed legislation that was retained after the end of World War II in 1945.
This period of growing state activity was characterized by rising rates of popu-lation coverage. The legispopu-lation passed during this period not only established the principle of state supervision and regulation of sick funds, but also required certain segments of the population (typically various groups of workers) to obtain coverage – hence the application of the term ‘compulsory’. However, rates of coverage still fell substantially short of universal. Depending upon the country, a number of steps were required after 1945 to complete the process of covering all regular workers below a fixed income threshold, their dependants, and also the unemployed and pensioners. This process extended through 1996 in Switzerland.
In the largely agricultural southern European countries, where the industrial revolution began much later than in northern Europe, the first major sickness funds were created by enterprises in the new industrial sector. Levels of coverage in southern European countries like Spain and Portugal lagged behind during the period of dictatorship, in part due to sluggish economic growth, but in the late twentieth century, these rates were parallel with the rest of Europe (see Figure 2.1). In Portugal, for example, in the first half of the twentieth century, coverage was limited to industrial workers, with other sectors of the workforce added through extensions of coverage in 1959, 1965, 1971 and 1978 (Benges and Dias 2003). In Spain, coverage was extended substantially by the 1967 Basic Social Security Act (Rico 2000).
In western Europe, in the post-World War II period, a substantial number of countries moved from an SHI system to a fully tax-based system. The first wave, from 1948 to 1973, included the United Kingdom, Denmark and Fin-land, while from 1978 to 1986 a second, post-dictatorship (except for Italy) wave followed in southern Europe from 1978 to 1986 in Italy, Portugal, Greece and Spain (see Table 2.1). Moreover, during the latter half of the post-WW II period, the French system increased the proportion of tax-based funding, in 1992 Luxembourg’s government proposed the abolition of sickness funds 24 Social Health Insurance Systems
(unsuccessfully) (Kerr 1999), and in Israel 1995 legislation replaced premiums paid directly to the sick fund with a progressive national health tax (Rosen 2003).
This process of increasing state power over health insurance, however, is less apparent in the traditionally SHI heart of western Europe. In Austria, Belgium, Germany and the Netherlands, there is still strong attachment to the SHI model, and, as reviewed in Chapter 3, state power is typically exercised with considerable caution. Indeed, as noted in the political challenges discussed in Chapter 1, there is substantial concern in these countries over what is seen as the growing encroachment of state authority in the traditionally self-regulatory Figure 2.1 Key extension public coverage 1960–2002
Note: countries with more than 90 per cent coverage since 1960 are excluded (Denmark, Nor-way, Sweden and the UK). For the Netherlands the population coverage ratios are weighted averages of share of the population covered by the health insurance funds (public) and the whole population covered by AWBZ. The weights are the shares in total costs of the costs covered by health insurance funds and AWBZ. For the social protection ratio, the shares of public finance (government, social security payments and AWBZ) in total expenditure are pre-sented. For Israel the data for 1961–4, 1966–9, 1976–80 and 1982–90 were extrapolated from the available data.
Sources: OECD (2003) and, for Israel, Ben Nun (1999).
The historical and social base 25
aspects of the SHI system. These concerns are magnified by the degree to which SHI systems have, since World War II, become enmeshed in a wider, bureaucrat-ized welfare state structure. While there is keen awareness that a new approach to the broad structure of social welfare has become essential (Esping-Andersen 2002; Vandenbroucke 2002), there are strong reservations about applying these reforms to SHI. One key concern, as befits SHI’s long history, is that state-instituted changes could damage the well-articulated role of civil society, replacing pluralism and participation with a rigid state bureaucracy that is in need of reform when it comes to other welfare state services. This same concern also was raised, conversely, about state efforts during the 1990s in countries like Germany and the Netherlands to introduce seemingly opposite, liberalizing, measures to create more market-like relationships inside SHI systems, particu-larly between the sickness funds. As the second section of this chapter suggests, concerns about the growing role of both market and/or state reflect worries that these changes may damage the existing configuration of social solidarity built up over centuries on the civil side of society.
Table 2.1 Funding of health care systems Predominantly SHI-based
Predominantly tax-based
Year of major legislative change from a role for SHI to a predominantly tax-based system
Austria X
Belgium X
Denmark X 1973
Finland X 1972*
France X
Germany (Federal Republic until 1990)
X
Greece X 1983
Ireland X 1970*
Israel X
Italy X 1978
Luxembourg X
Netherlands X
Norway X 1967
Portugal X 1979
Spain X 1986
Sweden X 1970*
Switzerland X
United Kingdom X 1946
* SHI never played a significant role and/or the date indicated marks a break-point where the central state took increased financial responsibility to provide more extended coverage and the role of the tax-based system was substantially increased.
Sources: European Observatory on Health Care Systems’ Health Care Systems in Transition reports; Pinto and Oliveira (2001); Guillén (2002); Department of Health and Children of Ireland (2003).
26 Social Health Insurance Systems
The resilience of solidarity
The concept of solidarity provides the core animating principle of SHI systems.
Its long historical evolution in Europe parallels that of social insurance gener-ally, running from late-medieval guilds through nineteenth-century mutual aid societies up to the late twentieth-century welfare state. Moreover, despite the political upheavals in western Europe in the first half of the twentieth century – some argue because of those upheavals and in particular World War II – solidar-ity remains the dominant political principle that defines key elements of national and now European Union social policy (Hinrichs 1995; Stone 1995;
Altenstetter 1999; Bayertz 1999; Gevers et al. 2000; Gilbert 2000; Houtepen and Ter Meulen 2000b). Even in Germany, where fascism during the 1930s played a role in the evolution of corporatist and self-regulatory relationships (Moran 1999; Veraghtert and Widdershoven 2002), the resulting pattern was both stable across subsequent governmental regimes and strongly resembled arrangements that emerged in other western European SHI systems. As a normative value, the principle of solidarity has been and remains a core tenet of the dominant Christian religion (both Catholic and Protestant); of Marxian socialism; of the modern trade union movement; and of both ancient and renascent nationalist sentiment. In the eyes of western European commentators and policy-makers, it is simultaneously inconceivable and incomprehensible to discuss the concept of SHI without basing it in broad societal support for the concept of solidarity.
Solidarity has been defined as ‘a sense of non-calculating co-operation based on identification with a common cause’ (Houtepen and Ter Meulen 2000a: 334).
The individual is viewed as ‘embedded in social contexts’ rather than as an independent agent, and thus solidarity is not a characteristic of particular indi-viduals but instead reflects ‘a specific type of association among people’. This understanding is consistent with a predominantly German idealist philo-sophical understanding of the relationship between the individual and the soci-ety: that individuals obtain their freedom in and through the social group, mak-ing mutual relationships a ‘precondition’ for individual development and free-dom. Similarly, as Chinitz et al. point out in Chapter 6, the degree of solidarity that inheres within a particular population can be viewed as an important com-ponent of ‘civil society’, of collective resources that serve as a mediating struc-ture between state and market, and which build social cohesion. More con-cretely, solidarity in the health sector is sometimes presented as ‘operational-izing social justice’; that is, as putting physical flesh on the abstract philo-sophical belief that all individuals should be treated equally. Solidarity in this view grows organically out of the natural needs and behaviours of communities – it is not an artificial construction that is externally imposed by decree upon an individual or a community. It sits at the centre of the ‘way of life’, of the social understanding of SHI systems discussed in Chapter 1.
The ‘communities of mutual recognition’ (Houtepen and Ter Meulen 2000b) that embody solidarity typically follow a pattern that starts with an individual’s immediate surroundings and then grows slowly outward, moving from personal to communal to occupational and finally to national in character. Initially, soli-darity extended from the family to small local groups built around face-to-face relationships and close interaction: guilds, churches, and, later on, union locals The historical and social base 27
and political movements. By the late nineteenth century, the need for sustain-able funding instigated a fundamental shift from voluntary and local to manda-tory and national participation, under the aegis of the state. Although this represented a major change in the organizing agent, it was understood by most citizens as simply a way to achieve the same objectives but by a different means (Houtepen and Ter Meulen 2000a). This was evidenced by the degree to which, regarding health insurance, the new welfare state entities retained both the institutions and procedures of the former voluntary model. In practice, how-ever, this change involved a fundamental shift in how the need for care was conceptualized in these western European countries. It was ‘lifted out of the context of mutual recognition’ among local groupings and relocated as a ‘gen-eral right’ to be guaranteed and financed by the coercive power of government (Houtepen and Ter Meulen 2000b). This evolution explains the key structural shift by which solidarity came to be absorbed by and represented in the institu-tions of the welfare state. Of course, as noted in Chapter 1, solidarity in this welfare state form also exists in countries where health care is directly funded from publicly collected taxes (e.g. United Kingdom and Nordic countries).
Indeed, many of the peculiarities that restrict achieving full solidarity in SHI countries are not present in tax-funded systems, such that, while solidarity is widely discussed within SHI systems, it is in practice more completely achieved – at least in a formal financial sense – within the universal tax-funded systems.
Exactly who comprises a solidaristic ‘community of mutual recognition’ can vary quite considerably across historical periods and within countries. Bayertz (1999) developed a set of four somewhat conflicting types of groups to which, at various times, the attribute of solidarity has been ascribed:
Exactly who comprises a solidaristic ‘community of mutual recognition’ can vary quite considerably across historical periods and within countries. Bayertz (1999) developed a set of four somewhat conflicting types of groups to which, at various times, the attribute of solidarity has been ascribed: