8 World Health • SOth Year, No. 5, September-October 1997
Balancing fairness and financial benefits in health care reform
Mikko A. Vienonen
A
s the reform of health care systems progresses, countries are searching for a balance between the financial benefits of a competitive health care market, and the need for fairness in sharing the burden of treatment costs.For the past two decades, health policy reforms have been driven to a large extent by the rising cost of care. The ageing of populations, associated with higher levels of chronic disease and disability, the availability of costly new treatments and technologies, and higher public expectations have contributed to the rise in health-related spending.
People are demanding better quality and more efficiency in the health services. They want more treatment choices, and a greater voice in decisions made about the health system.
In many countries, including Belgium, Germany, Israel, the Netherlands and Switzerland, politi-
Does competition between insurers lead to better health care? Can solidarity be combined with competition?
cians have sought to bring about market reform by introducing com- petition among health insurers. However, governments have been cautious about this, as they are reluctant to introduce measures which might undermine their "soli- darity" systems. In such systems, the healthy subsidize the sick, the young subsidize the old, and the rich subsi- dize the poor, so that essential health services are provided to the whole population. This was the underlying principle of Chancellor Bismarck's insurance system in Germany 120 years ago.
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People ore increasingly demanding more treatment choices and a greater voice in decisions about health. Drawing by Falke Nordlinder ©
The objectives of health care financing reform in Western European countries have varied. In some cases the main aim has been to provide universal access to insur- ance by opening enrolment to all citizens. In others risk-redistribution systems have been introduced to make coverage of the elderly and the sick more equitable for insurance companies.
The aim of stimulating competi- tion among health insurers is to make the systems more efficient. But competition among insurers works against the sharing of financial risks and burdens, since it puts pressure on insurers to seek the lowest possi- ble risk. This is a common problem for many European governments.
In Germany, a risk adjustment formula introduced in 1994 factored in age, income, sex, and such ele- ments as whether the applicant received a disability pension.
Insurers with a disproportionate number of young, affluent, healthy clients were required to contribute part of their revenue to funds with more "bad risks".
Universal enrolment
Then, in 1995, all insurance funds in Germany were opened to everyone.
This open enrolment was a mile- stone for citizens, as traditionally many insurance funds were "closed clubs" accessible only to certain professional groups. Previously, a well-endowed insurance fund for engineers or lawyers could offer better services with lower premiums than the general fund. Now, such
"cream skimming" is barred, though
it may take years before the public truly benefits from the reform.
World Health • SOth Year, No. 5, September-October 1997
Similarly, Israel has introduced a new national health insurance pro- gramme designed to promote fair- ness in sharing financial burdens.
Employer and individual health taxes are now paid into a central fund, and combined with government contribu- tions. The combined amount is distributed to insurers on an age- adjusted basis. As a result, the largest
fund, which insures more elderly and
poor clients than others, now re- ceives additional revenue. Insurers with healthier subscribers receive a smaller amount. As with the German reform, insurance funds can no longer be selective in enrolment. So, as the position of the large fund improves, small "elite" funds find themselves in the new position of covering clients in varying states of health, with less revenue.
In the Netherlands, the govern- ment has tried to encourage competi- tion among insurance companies.
Initially, the plan was to merge pub- lic and private health insurance programmes, but after eight years of debate, there has been little progress.
Market competition has been op- posed on the grounds that it would undermine solidarity, a cornerstone of the country's health insurance system.
Market-oriented measures are not confined to financing systems based
Vulnerable groups, such as elderly people, tend to represent o higher risk in terms of cost.
Their health needs nevertheless hove to be addressed. Photo WHO/E. Mondelmann
9
A waiting room at a paediatric clinic in Germany. Health core reforms have to balance equity and financial benefits. Photo Keystone/DPA/W. Weins©
on defined contributions to health insurance funds. Health care systems funded by general tax revenues, as in Finland, Sweden and the United Kingdom, also use competition in an attempt to make their systems more efficient. The principles that "money follows the patient" and that doctors should manage their own budgets are applied in an effort to ensure that health care providers are paid ac- cording to the amount and quality of the services they deliver.
Ensuring that vulnerable groups continue to be covered through contributions from more affluent, healthier groups, while introducing competition among insurers is an ambitious and difficult undertaking.
Ljubljana Charter
At a conference in Ljubljana, Slovenia, on European Health Care Reforms, European Member States outlined the fundamental principles which they thought should underpin the health care systems of Europe.
The guidelines of the Ljubljana Charter on Reforming Health Care are based on an analysis made by the WHO Regional Office for Europe, the World Bank, and university experts. According to the Charter, health care reforms should be value- driven, health-focused, people- centred, quality-based, financially sound, and oriented towards primary health care.
The Charter further outlined these principles for managing change:
• health care reforms should be part of a coherent policy base;
• policy-makers and planners should pay attention to the voice of the people;
• they should re-examine health care delivery methods;
• they should build and strengthen human resources for health;
• they should strengthen manage- ment capacity;
• they should learn from the experi- ence of others.
Professor Robert Evans, a keynote speaker at the Ljubljana conference, referred to a Scientific American article ('Health care without perverse incentives', Scientific American, 1993, 260(1): 109), saying that
"fundamental economic principles place competitive efficient markets for health care in the same category as powdered unicorn horn. They are works of imagination." In the same way, perfect relationships among partners in health care systems are difficult to find. In organizing health care delivery, economics and market competition cannot be the only basis for successful performance. The system's fairness must also be considered. •
Dr Mikko A Vienonen is Regional Adviser for Health SeNices Management, Health Core Systems, WHO Regional Office for Europe, 8 Scherfigsvei, DK-2 100 Copenhagen 0, Denmark.
