Healthcare is rarely out of the headlines today. Rising longevity and constantly improving medical treatments are having a profound impact on the costs, delivery capabilities and consumer expectations of medical systems worldwide.
Healthcare is rarely out of the headlines today. Rising longevity and constantly improving medical treatments are having a profound impact on the costs, delivery capabilities and consumer expectations of medical systems worldwide.

From the heated discussion in the US over President Obama’s plans for universal coverage, to the battles in the UK over the management and future of the NHS (National Health Service), healthcare is a crucial issue that needs intelligent and objective analysis and consideration.

Best in the world?
Switzerland’s health system has been described by some as the best in the world and is often held up as a model for other countries.

The reasons are easy to see: Switzerland has an extensive network of doctors and clean, well-equipped hospitals and clinics; waiting lists for treatment are short; patients are free to choose their own doctor and usually have unlimited access to specialists; accident and emergency rooms are rarely overwhelmed. That’s probably why around 90% of users report moderate or complete satisfaction with the system.

So how exactly does medical care work in Switzerland, and what are its pros and cons?

Universal coverage – mandatory but not socialized
Since the implementation in 1996 of the Swiss Federal Health Insurance Act of 1994, Switzerland has guaranteed comprehensive medical treatment to all its 7.6 million residents.

Swiss private insurers are required to offer basic coverage to everyone, regardless of age or medical history. At the same time, all residents are obliged to take out basic health insurance, (for newcomers, within three months of taking up residence or being born), known as LAMal (Loi sur l’Assurance Maladie obligatoire) or KVG (Krankenversicherungsgesetz).

Unlike many of the state-supported European models of universal coverage, the Swiss system relies heavily, although not exclusively, on the private sector. At the same time, however, the 26 cantonal governments provide important subsidies to hospitals, and the federal government plays a key role in regulating the industry and influencing premiums and medical costs.

Services covered
The mandatory basic insurance covers a broad range of treatments set out in the Federal Act. These include most general practitioner/family doctor and specialist services, as well as medicines, hospital treatment, pregnancy, psychiatric care, physiotherapy, some preventive therapies, nursing and transport, plus accidents (important for people not covered by employers’ mandatory accident insurance).

Supplementary health insurance is available to cover additional services. Although this is not obligatory, many Swiss buy it to ensure extras such as a private hospital room or dental coverage.

Delivery is through a combination of public, subsidised private and totally private delivery services.

Choice of health insurers
Basic insurance is offered by over 80 health insurers or health funds. Although private, these are strictly regulated and are not allowed to make a profit on mandatory health insurance. Anyone who applies to join must be accepted, and while the level of premium can vary enormously between insurers, rates must be identical within each company for all insured persons in the same age category and region, regardless of sex or state of health. (To combat the dangers of risk selection, there is a retroactive risk equalization scheme in force between insurers.)

On the other hand, insurers offering supplementary insurance are allowed to reject applicants and to set exclusions. Premiums are risk-based, and insurers may make a profit.

Individual consumers
In Switzerland, health insurance is organized individually, with everyone free to choose their own health insurer. Unlike in many countries, health insurance is not generally offered by employers (although it is common among multinationals with foreign workers based in Switzerland), and some encourage regular exercises and offer additional benefits, such as flu vaccination. Premiums of the health insurance are not tax-deductible.

An important aspect of Swiss health insurance is that the insureds are expected to contribute to the cost of treatment. This is done through:
• an annual deductible, also called a franchise, which ranges from a minimum of CHF 300 to a maximum of CHF 2,500 per doctor or treatment scheme. The deductible is selected by the insured. A higher deductible permits lower premiums, although research shows that the perceived risk-averse Swiss generally prefer not to take advantage of this option
• a charge of 10% of costs in excess of the deductible, up to a stop-loss amount of CHF 700 a year. This is called the retention, and excludes medication.

Insureds pay the insurance premium for the basic plan directly to their provider. If the premium is higher than 8% of their income, the government provides a cash subsidy directly to the individual to pay for the difference. Those on social benefits receive help from government sources. It is estimated that 35-40% of the population receive support in this way.

What does it cost?
Let’s start with premiums. In 2010, average monthly compulsory basic health insurance premiums (including accident insurance) in Switzerland were:

CHF 350 for an adult (from age 26)
CHF 294 for a young adult (age 19 - 25)
CHF 85 for a child (up to age 18)

To put this in perspective, the average monthly wage in Switzerland for a secretary is about CHF 5,500, and for a middle manager CHF 11,250.

Taking the overall picture, Switzerland’s healthcare spending is the third highest in the OECD after the USA and France (2009). This is in terms both of expenditure per capita and as a share of GDP (10.8%). And Swiss out-of-pocket expenses, at an average of CHF 1300 a year, come top of the OECD charts. These expenses include co-payments, a payment paid by the insurance person each time when accessing a medical service, although they are mostly made up of the costs of long-term care and dentistry.

With insurance premiums and out of pocket expenses constantly rising in Switzerland – as elsewhere – this is an ongoing cause for concern. What is being done to combat this?

Keeping costs under control
Patients are increasingly taking up the option to join HMOs (Health Maintenance Organizations) or physician networks, which restrict the choice of doctors in return for lower premiums. Just under 45% of insureds chose this kind of managed care basic insurance in 2010.

For its part, the Swiss government intervenes to reduce spending by regulating drug prices and fees for laboratory tests and medical devices. By requiring patients to share costs, they have a strong incentive to avoid unnecessary treatments. A 20% co-payment charge for brand-name drugs with a generic alternative encourages cost-awareness, as does the flat fee paid to pharmacists for dispensing, which is not based on price (and thus does not encourage them to recommend the most expensive drug).

Insurers run a system of controls which mean that if doctors cannot justify a treatment, they can be required to repay a portion of the services prescribed. More importantly, many insurers now offer advice on the telephone in an effort to reduce visits to the doctor.

Other ways to manage costs include upcoming changes to hospital financing, including a change from per diem payment rates, which encourage longer stays, to diagnosis or service-related remuneration schedules.

The pros and cons

The pros of the system for patients are obvious: guaranteed coverage, high-quality service and patient choice, with no financial worries in case of catastrophic illness, accident, or chronic conditions. At the same time, from the point of view of insurers, co-payments help to reduce over-use, the risk equalization system (which is due for reform to include an indication of health status) helps to keep a lid on risk-picking, and the government also takes some measures to keep down expenses.

The cons are also clear: high and constantly rising premiums and other outgoings for both individuals and the public purse (which are often not appreciated by consumers). The Swiss governance system of control by each of the country’s 26 cantons most likely also adds a layer of administrative complexity and cost, Furthermore, insurers and providers (particularly doctors) perceive themselves to be very highly regulated.

Could this model be reproduced elsewhere?
Switzerland has several unique characteristics: a heterogeneous population, good levels of health awareness and general health, and in general higher levels of income. The country typically enjoys low unemployment, and has relatively few individuals on benefits. Its citizen’s traditional values of sturdy independence are balanced by a commitment to collective responsibility. Generally speaking, the citizens prefer to contribute to the society as a whole, rather than collecting social benefits.

While it is clear that cantonal governments contribute to healthcare (particularly through public hospitals), and that taxation is used for this, Switzerland’s particular form of bottom-up democracy ensures that citizens still feel they have a say in controlling the system and are prepared, so far, to continue to support it.

Would the Swiss model work elsewhere? Many countries are examining Switzerland’s healthcare system for ideas to adapt for themselves. In the meantime, Switzerland is also making adjustments to deal with its growing challenges. Essentially, only time will tell whether the Swiss model can both heal other countries’ healthcare systems and remain strong and well itself.