EuroHealth 2006

Overview

European countries operate essentially compulsory health systems, funded through general taxation, payroll taxes, hypothecated taxes, or social insurance premiums. With taxes, they provide funding either from the general revenue pool or from a fund where the tax is hypothecated. With social insurance premiums there is either population-based risk pooling with fixed premia, or insurer competition around a package of care for a set value (the latter emerging first in the Netherlands). The plurality of European systems offers difficulties when put against the strictures of the internal market. A series of court cases in the European Court of Justice have created challenges and led to improved opportunities for patients to seek health care services in other member states. There is no subrogation in the European Union for health care.

In all these countries, essentially 100% of the relevant populations are covered, offering full portability within the country across jurisdictional systems (Switzerland most recently having abolished its discriminatory age-linked and cantonical pricing system). In all cases countries, are concerned about the impact of health spending on total spending within the economy and making various efforts to reform health care and introduce cost-containment systems. For states within the European Union or the European Economic Area, there is a legal requirement to ensure full portability of social insurance and social welfare benefits, subject to the various laws of the European community.

Canada uses a monopsony system, within a provincially-run health care system with federal oversight under the Canada Health Act which stipulates various conditions for the operation of provincial systems if they wish to receive federal funds; this act provides the only national coherence to the Canadian system which is otherwise lacking interprovincially. Canada is one of the few countries which prohibits separate and competing health insurance. This is not the case in Europe. A recent Canadian Supreme Court challenge, though, has stirred thinking and is creating tensions between those who see need for change and those who don’t. Inter-provincial portability of benefits is uncertain, given provincial reluctance to reimburse full-costs of receiving care in other provinces. Health care is excluded from the North American Free Trade Agreement (NAFTA), but it would be unlikely that Canadians would be able to seek health care in the US under it. This is separate from insured care arising from accidents, for example, in the US, where subrogation is pursued.

The road to friendliness

The most common first step appears to be a move to increase provider competition to seek greater efficiency in provider use of health system finances and service priorities.

Another direction for reform appears to be to encourage value-for-money competition between insurers in bidding for enrolees within the fixed premium system.

Some countries pursue a policy of regionalisation which creates integrated provision and funding, but a weakness is that it fails to ensure that resources are effectively distributed as such an approach tends to favour incumbent providers and further entrench legacy patterns of service delivery.

Beginning in the UK, the movement toward evidence-based prospective purchasing is taking hold which restricts purchasing to care for which there is evidence of clinical efficacy. Germany, for instance, is looking to ensure that there is not only purchaser competition by loosening the principals of its Bismarckian system, but also to ensure increased use of effective methods. Canada is trying to figure out how to mandate specific waiting times for individual clinical procedures, while the European Court of Justice solved it simply by saying that a patient should wait only as long as it clinically acceptable.

There is considerable discussion of “managed care” and “disease management” in some countries. But this discussion needs to be understood within universal systems. “Managed care” really means a high level policy regarding how the reimbursement or funding system works; it is unlikely to attract the micro-management typical of US managed care institutions since there is risk-pooling and the incentives to cream-skim are unacceptable at the policy and regulatory levels. Where there can be market cross-over between purchasers and providers whereby purchasers may gain financial or other control of providers then more US-style models may prevail. Whether the public regulatory bodies would permit this within their efforts to create managed markets remains to be seen.

Markets

The comments above reflect the views prevailing on the public or compulsory system. Within all countries are purely private systems, cash markets, and other arrangements between patients and care providers, not always sanctioned by ‘authorities’. But they account for no more than 10 to 15% of the system, though having considerable impact in countries with large private provider systems operating in the public sector.

Smaller private systems are typical of northern Europe, with the southern European countries having larger private systems. Greece is notable for having failed to develop its public system given the public support for a large private system. Spain, in contrast, is moving to create open and competitive systems within a publicly regulated and decentralised system, giving people greater freedom of choice to permit public opt-outs. Systems such as the Netherlands essentially permit a public opt-out since above a certain income level, people must contract with the private insurers for their public cover.

Table: A breakdown of public and private markets across Europe

	Health financing					public health spending as % of
	tax funding	insurance funding	public/private providers	type of public competition	market contestibility	total health spending, 1993
Austria		x (40% private)	both	provider	Good	65.1
Belgium	8%	92%	both	provider	Good	88.9
Czech Republic		x	mainly public	purchaser, provider	Good	N/A.
Denmark	100%		mainly public	some provider	Difficult	82.9
Finland	100%		mainly public	purchaser, provider planned	?	77.1
France	36%	64%	both	provider	Fair	74.2
Germany		x	both	provider; purchaser planned	Receptive	73.0
Greece	45%	55%	mainly public	provider	?	75.8
Hungary		x	mainly public	purchaser planned	Improving	N/A.
Ireland	x		mainly public	little	Receptive	77.8
Italy	48%	52%	mainly public	provider; internal planned	Receptive	72.9
Luxembourg		x	both	none		100.0
Netherlands	x	x	mainly private	purchaser, provider	Receptive	78.2
Norway	100%		mainly public	none	Difficult	93.3
Poland		x planned	mainly public	provider	Fair	N/A.
Portugal		x	mainly public	none		55.7
Spain	73%	27%	mainly public	purchaser, provider	Receptive	78.6
Sweden	100%		mainly public	some provider	Fair	83.5
Switzerland	39%	61%	mainly private	purchaser, provider	Improving	71.8
UK	82%	18%	mainly public	provider	Fair	84.8

The percentages show the extent to which the systems are essentially tax-based or insurance-based. In most countries there is a tradition of both public and private hospitals, depending on whether they have ever been nationalised (the UK in 1948) or not. As all countries are exploring or have competition of one sort or another, the type of competition describes whether providers compete (more common), or purchaser compete (less common but increasingly seen as a key reform direction in insurance systems, and in others monopoly through regulation). Tax systems most are essentially completely public. Most countries, though, have private contracted primary care systems, and most are fee-for-service for specialists (but there is a trend toward salaried primary care and salaried specialists). Contestibility is my opinion of the extent to which the health system is inviting to novel market entrants.

Market reform in health care is focusing first on the provision of services or the mechanism for its purchase. Most European states have varying degrees of structural rigidity in their labour markets, healthcare labour markets being most often subject to national pay scales, and fee schedules, as well as universal unionisation. Health labour markets are being reformed to the extent that the different countries are undertaking macro-economic labour market reform. In the same context, compensation and benefits are invariably national, with private sector contractors (e.g. doctors in private practice only) making their own arrangements, but not always, as governments as a matter of policy invariably extend public sector benefits to health care professionals working in the private sector as a matter of public good. This creates difficulties in designing incentive systems or linking clinical practice to market features.

A note on Europe, itself

The countries of Europe treat health care systems, health care labour markets, and compensation and benefits as a matter of special public concern with governments explicitly accepting responsibility for ensuring that health systems act in the public good.

Health care is uniquely excluded from the Treaty of Rome, establishing the European Community, and was still excluded from the Treaty on European Union, establishing the European Union, and which created European citizenship rights. The latter did extend European competency in matters of social protection including into public health. Universality in social protection, however, is a “convergence” criterion within the social policy arena (EC Council, July 1992) and therefore it is unlikely that any European state will permit reform that reduces government regulatory control of health systems themselves. Applicant states to the European Union must accept what is called the acquis communautaire, the whole legal framework, from the first day of membership; they will, therefore, be concerned to ensure their economies and social policies conform (specific requirements will be contained in the Avis from the Commission to these countries which will identify specific concerns).

The more recent Treaty of Amsterdam extended the role of the EU into areas of public health, but stopped short of encroaching on member states’ interests on financing.

The development of competitive markets within the European Union, though, has created a single European market in insurance products, including social security and similarly in medical devices and pharmaceuticals. At present, there is now a European system for drug approval (European Medicines Evaluation Agency) and medical devices, but no similar system for insurance. There is consolidation occurring in European insurance companies (AXA most recently having moved aggressively into the UK which is seen as a fragmented market by European standards).

Differences in health and social security coverage are relevant in the context of European Directive 1408/71 (and amendments) which provides for complete portability of health and social security benefits within member states including European Economic Area. The applicant states of Eastern Europe (Czech Republic, Hungary and Poland) will need to satisfy the European Commission that they can ensure this as part of their application for membership.

The European Court of Justice continues to amaze many observers by slowly eroding the rights of member states in areas of social policy, recently ruling that out-patient care did not require prior authorisation from insurers for enrolees to secure treatment outside of their state of residency (for dental services and for spectacle prescriptions). A similar case is pending on whether this applies to inpatient care.

Key drivers in the European health markets

Health service organisations need to achieve micro-economic efficiency both a function of their place within universal health systems, as an individual organisations in their own right, and offering a mix of services which maximises a combination of health outcomes and patient satisfaction for the available GDP. [Micro-economy]

• Costs should be minimised (technical and cost efficiency)

• There should be a search for organisational and technological advances which raise the productivity of given resources.

• labour management, including performance management, compensation

• skill mix/reprofiling/substitution

• new business development, outsourcing, contracting out, reengineering supply chains

• service integration across referral boundaries (vertical/horizontal integration, virtualisation); gatekeeper development/redevelopment

• quality management, certification, accreditation, clinical performance, evidence-based practice

• qualitative and value for money evidence by insurers that differentiate offerings in a competitive market, apart from price and location along

• organisational redesign, change management, strategic reprofiling and models of care

• technology assessment

• information management

• risk management, utilisation management

• competitive advantage issues

It is a social imperative in most states to respect in some way the freedom of choice for consumers within the public system, and desirably within private sector schemes. [Freedom of Choice]

• public consultation and advocacy; lobbying, consumer militancy

• communications programmes, outreach, public access such as “0800” call centres

• public interest publishing including of performance data (“Which health?”)

• market analysis; portfolio analysis

• responding to medical tourism and increased mobility with EU

Professional and institutional autonomy needs to maximised compatible with achieving the other objectives above. [Autonomy]

• clinical performance management systems, including physician reimbursement schemes and modeling of value for money in clinical treatment

• development of systems of best practice, linked to new business opportunities, such as disease management

• labour substitution and labour market/skill mix reprofiling

Assessment

Major market force x = possible market opportunity; X = key market area	Micro-economy	Freedom of choice	Autonomy
the move to managed competition, internal markets and the use of contracting methods (e.g. purchaser/provider distinction)
clinical performance management (performance measurement, value for money, portfolio management, protocols, best practice)	X	x	X
price competition except where quality is bought at a premium (threatens academic medical centres), preferred provider	X
reimbursement on the basis of performance, not cost, and use of price bidding and contracts (DRGs, capitation, risk-bearing arrangements)	X	x	x
move away from single payer health plans (purchaser competition)		X	x
integration of care across referral boundaries
novel aggregation of services (carve-outs, disease management)	x	x	X
increasing demand for acute services linked to ability to treat more intensive care requirements (higher cost/higher risk patients) – risk push	x		x
organisational and managerial restructuring and redesign	X		x
labour market shortages and employment related structural problems
labour substitution, new professions	X	x	X
employment restructuring and unemployment linked to increasing cost control and management of care	X		X
increasing demand by patients for more control or influence over the care they receive
patients seek to influence who, when where, service is provided		x	X
interactive participation in delivery decisions and service structure		x	X

On this analysis, opportunities fall into one of four broad trends:

• the extent to which there is public sector reform through the introduction of various forms of competition

• the extent to which there are large-scale changes in the functioning of labour market employment, particularly toward increased flexibility and labour substitution

• the extent to which there is a consumerist element and increased focus on value chains being integrated toward the consumer/patient

• the extent to which the micro-economic infrastructure (purchasers, payers, providers) are undertaking organisational improvements, either as a result of the introducing of competition, or through increased labour market flexibility.

Most noteworthy at this stage are elements focusing on increased leveraging of employee involvement in the organisation, increased patient or client involvement, the creation of virtual health networks and new business opportunities associated with that, and cash and risk management associated with competition (both public and private sectors).

Structure of potential marketing messages which respond to specific drivers in the European health systems

Focus of attention	Competition and reform	Professional staffing and skills	patient-centric management and decision-making	service restructuring, redesign and integration
demography and impact on patients	responsiveness of system to large-scale change	responding to changes in the labour market	age-specific	redesigning the organisation around the client
Financial factors	risk management, social responsibility and role, macro-economic financing and co-financing	cost of labour and labour substitution issues	income protection within enhanced private decision-making	value for money for the end-user (patient, payer)
Contractual relationships	social contracting	leveraging employee involvement	leveraging client involvement	redesigning the organisation around the client
Value creation	advanced health purchasing and value for money	organisational behaviour, quality management	integrating the value chain toward the patient to enhance access/equity	redesigning the organisation around the client
Virtual health systems	alternate delivery systems and virtualisation of care infrastructure; health gain	flexible labour force with wide skill base; compensation redesign	improving patient choice of service across traditional referral structure	creation of virtual networks; health informatics; build new businesses

Which factors are most relevant in which countries?

	competition	labour market factors	patient-centric management and decision-making	service restructuring, redesign and integration
Austria		like Germany		like Germany
Belgium	relatively open market already, but suffers from same problems as France	rigid	direct access to specialists	better management controls in place, but not early candidates for restructuring
Czech Republic	moving toward managed market as “free” market thinking changes, but influenced by Germany	still rigid	under-developed	in need of reform
Denmark	appear not interested	rigid	social rights
France	serious inability to control spending; structural controls likely	started talking about labour market flexibility – long way to go	strong belief in integrity of doctor/patient relationship	large hospitals, over-bedded, not known for management control and efficiency; probably over-service client
Finland	internal markets model	rigid	social rights
Germany	managed competition between physicians, hospitals	professional control of system, rigid	reform impact on LTC, disposable incomes; direct access to specialists	prospective hospital budgeting; point based clinical funding linked to performance
Greece	endeavouring to control public/private spending to meet EMU convergence criteria			structural reform needed to improve quality and safety
Hungary	probably influenced by German reform	like Germany		inefficient infrastructure but open to new management thinking; “westernised”
Iceland	internal market under construction		social rights
Ireland	insurance reform likely	trying to keep nurses in labour market	social rights
Italy	considering UK reforms as model

Luxembourg		largely dependent on neighbouring countries to satisfy demand
Netherlands	cost containment focus of reform through incentives in purchaser competition; small private HI; managed competition between hospitals		social rights; high mistrust of organised medicine	trend to DRG financing
Norway	little interest		social rights
Poland	more likely to follow UK example	deregulation		very inefficient infrastructure
Portugal	not yet, but influenced by UK
Spain	emergent purchaser/ provider split and devolution to autonomous regions		emergent interest in purchaser/provider split more linked to governance
Sweden	local authority based health reform suggests some interest in markets, but challenges social cohesion		social rights	County Councils exploring alternate models (purchaser provider, internal markets, managed competition)
Switzerland	highly discriminatory premium system; encouraging US style managed care policies		now faced with increased choice of insurance products	in response to changing patterns of purchaser behaviour
United Kingdom	primary care control; evidence-based models to guide purchasing; ‘hidden’ competition, but still purchaser/provider driven	declining attractiveness of health careers (nursing crisis); professional practice reform	increased performance transparency; consumerist revolution in health underway but little understood	active redesign projects, PFI links, “primary care led NHS”
European Union	development of competitive industries; question of public sector enterprises; trans-border networks and single markets in goods and services	labour mobility, recognition of qualifications, cross-border standards	European citizenship rights and democracy	Commission sponsored developments in organisational redesign, telematics; e-Europe health initiative