The New Dutch Healthcare System

Posted on September 7, 2007
Filed Under General Rationing Issues |

Jason Shafrin at the Healthcare Economist has posted an excellent analysis this morning of the new Dutch healthcare system, also described yesterday in the Wall Street Journal.

The three operating principles of the Dutch system are these:

1) All individuals must purchase health insurance on the private market.
2) Health insurance companies must insure anyone who applies.
3) The insurers, while charging whatever they want for insurance premiums, are in active competition for subscribers.

There are, of course, details. But thanks to the Healthcare Economist (who presents a thorough summary of the innovative Dutch system, along with the usual insightful analysis of its advantages and potential pitfalls), DrRich has the luxury of limiting his comments to the Real Question, the Real Question being: How does the Dutch system account for healthcare rationing?

Healthcare rationing occurs when some centralized agency makes decisions regarding the distribution of available healthcare resources, such that, given a group of individuals who would probably benefit from certain healthcare services, at least some will not be permitted to receive those services.

Any time we create a centralized pool of money from which all healthcare services must be paid, some degree of rationing must occur. This is because the centralized pool of money, even if it is very large, is nonetheless limited, whereas the amount of money we could spend buying every bit of potentially worthwhile healthcare for every person who might benefit is fundamentally unlimited.

The only way to avoid any rationing whatsoever would be for individuals to pay for all of their own healthcare out of pocket. This way, any limitations in healthcare services would be determined by the individual, and not arbitrarily by some outside agency. (DrRich stipulates that such a system - where everybody simply pays for their own healthcare like they pay for their own housing or food - is not feasible. This is why he perseverates on the question of HOW we do the subsequently necessary rationing - that is, openly or covertly.)

The Dutch system does not avoid centralized pools of money from which healthcare services are paid, and so cannot avoid rationing.

But it does introduce an intriguing feature that might render the necessary rationing less destructive to individuals and to society than the kind of covert rationing we have in the US, or the kind of somewhat-less-covert rationing common in countries that have single-payer systems.

Under the new Dutch system, individuals are making the health insurance purchasing decisions themselves, and they have a choice among insurance companies. Individual Dutch citizens a) have suddenly become the customers of the insurance companies, and b) have the power to take their insurance premiums elsewhere if they don’t like the offerings of their present insurer.

This arrangement is radically different from what we have in the rest of the world, the US included - under the Dutch system, insurance companies are forced to compete with one another for the business of individual citizens.

Furthermore, the competition will be based not just on cost, but on value. That is, what do you get for your money? As always, there will be limits on which healthcare services are covered (in other words, there will indeed be rationing of available services). But the need to compete on the basis of value, ideally, will eventually force insurance companies to be more forthright on what those limits are. Individuals could then choose their health insurance based not only on the cost of premiums, but also on the various rationing features of available insurance products. Call it “competitive rationing.”

Competitive rationing will require insurance companies to attempt to discover the “perfect” balance between cost and services. Since not all individual purchasers will have the same set of values in this regard, a range of insurance products will have to evolve to meet the needs and desires of different customers.

So in theory, at least, the Dutch system has much promise. It doesn’t eliminate rationing, but it has the potential of bringing it out into the light, limiting it as much as possible, and rendering it far more equitable than either the covert rationing we have in the US, or the arbitrary, heavy-handed, centralized rationing we see in single-payer systems around the world.

Unfortunately, we can already see how the Dutch system is likely to fall apart. The problem stems from the system’s first two operating principles:

1) All individuals must purchase health insurance on the private market.
2) Health insurance companies must insure anyone who applies.

Competitive rationing, as DrRich conceives it, depends wholly on the competition that occurs in free markets. But in a system where every buyer must buy insurance, and every insurer must sell to anybody who applies, free markets cannot exist.

The only way to make these two operating principles feasible is to provide subsidies to the insurance companies in order to underwrite the cost of mandated coverage for those who are too old, or sick, or poor to pay for it themselves. Accordingly, the Dutch government has done just that. DrRich isn’t saying the government doesn’t need to do this; there’s no other way he can think of to provide mandated insurance to those who can’t pay for it. But the bottom line is that the Dutch system simply does not create free markets. It can’t.

We can already see where this will lead. The government will pay for a larger and larger chunk of Dutch healthcare, and if it hasn’t already, will begin dictating behaviors within the healthcare system. It will have to (to protect the investment of the taxpayer). As a direct result, the rationing decisions in the Dutch healthcare system will necessarily become centralized once again. To avoid having to admit that it is making rationing decisions, the government will attempt to keep those decisions and their execution as covert as possible.

The guru of the Dutch system is Professor Alain Enthoven of Stanford University. Professor E is best known as the father of “managed competition,” which was the driving idea behind the Clinton’s attempt to reform American healthcare in the early 1990’s. The Dutch system is, in fact, the first actual implementation of managed competition.

The major difference between what the Clintons proposed and what the Dutch have actually implemented, as far as DrRich is concerned, is that the Clintons were more forward looking than the Dutch. They saw exactly what sort of end-game was destined for “managed competition,” and went right to the bottom line. Accordingly they presented to the American people an appallingly massive book of rules and regulations for the centralized control of our healthcare system (read: for covertly rationing healthcare). It scared the hell out of us, and we said no. (We opted instead for a more gradual pathway to an appalling system of covert rationing, one administered by both the government and private insurers.)

While what the Dutch have is in many ways a good idea, they will almost certainly also end up with a healthcare system that is largely centrally controlled. And unless the question of rationing is addressed openly and forthrightly, they, like us, will eventually fall under a system where the necessary rationing is done covertly.

God bless them for their attempt, though. It is a brave one.

Comments

One Response to “The New Dutch Healthcare System”

  1. George Berger on January 1st, 2010 5:51 pm

    The following article was written by me around April of last year. It has been published and has appeared on a good number of blogs, from which it has in turn been reproduced.
    DUTCH HEALTHCARE IS A DANGEROUS ‘ANOMALY IN EUROPE’

    George Berger (PhD), Uppsala, Sweden
    21 April 2009

    The Netherlands is often thought to have a system of public healthcare whose generosity and effectiveness approaches those of the Scandinavian countries. Such notions no longer reflect reality. The country once had a mixed, public-private system that guaranteed access to everyone, provided excellent service, and was financed by private policies and taxes. One’s source of coverage (private insurer or government schemes) depended on one’s income and employment situation. It worked reasonably well. I was proud to enter it when I left America to work in the Netherlands in 1972. I had attained an academic position in a society that was far more rationally and decently organized than was the USA.
    Although there were forebodings my enthusiasm ended abruptly in 2007, when my Dutch wife became seriously ill. She was 72, I was 64. Misdiagnoses, 7 appointments cancelled without explanation or apology, and an outright lie straight in her face by the head specialist of a hospital division ruined her health for good. I was furious at what I thought were the failures of individuals: the usual story of uncaring personnel and inefficient bureaucracy familiar to users of the NHS.
    I was wrong. In January of 2006 control over the Dutch medical system (except for a tax-funded system for difficultly insurable expenditures, the AWBZ) was transferred from the State to the private insurance firms by government decrees and legislation. Funding of facilities and staff was divided between tax revenues and premiums. The government guarantees everyone a ‘basic package’ provided by the insurers, but the latter determine the size, quality, and cost of the many remaining care provisions and facilities. State-supervised competition among insurers—called Regulated Competition in the USA—was the officially voiced mantra. Profit maximization, free market deregulation, and future privatization were and are the true motives. The public, whose inordinate respect for any authority has been ingrained in them since the 80 Years War by Calvin’s local henchmen, the Dutch Protestant priests, were easily fooled into thinking that this new system would work to their advantage. I am not of Dutch descent and was not deceived. My study of these changes since the onset of my wife’s illness led me to strongly suspect that her neglect was mandated by rules set by insurers and politicians acting in collusion. I decided that we were dealing with institutionalized age discrimination. I informed people but could do little except describe what had happened and voice my suspicions. Few Dutch persons believed me. My impression was and is that few wanted to believe me.
    Last December I was diagnosed as having aggressive prostate cancer and applied for treatment at the (Calvinist) Free University Medical Center in my city of residence, Amsterdam. The treatment offered seemed to be minimal, and my initial attempts to secure definite dates for tests were disregarded. A highly placed medical friend employed by a leading hospital in Manhattan confirmed the minimalism. I flew in secret to Sweden, for a second opinion and treatment plan at Uppsala Care, a division of the prestigious Academic Hospital (Akademiska Sjukhuset) of the great University of Uppsala. Two highly regarded specialists spoke with me and examined the tests results that I had brought with me. One decided that my condition was so serious that action within six weeks was necessary. They proposed a treatment plan that was far more extensive than the two proposed by ‘my’ Free University urologist, Dr R.J.A. van Moorselaar (I am now undergoing the first component of the plan’s finalized version.)
    I confronted Dr. van Moorselaar and asked him why his plans omitted a certain procedure that the Uppsala specialists said was an important part of their treatment. I did not tell him about my visit abroad. He gave me no medical reason but mentioned a Dutch ‘directive’ governing treatment. It is now official policy. I was shocked when I found that directive’s PDF and saw that its archival name (here translated without abbreviations) was ‘65+ prostate carcinoma 2007.’ Dr. van Moorselaar was one of its writers. (After I voiced my suspicions the archival name was changed. The ‘65+’ is no longer mentioned.) I was 66 and suspected government-sanctioned age discrimination motivated by the cost-cutting superprofit plans of the insurers. I moved quickly to Uppsala, after fruitlessly attempting to publicize this in the Dutch press, and sought proof for my surmise. My fear was and is that such insurer-dominated deadly practices, if now active in the Netherlands, would be adopted by other EU countries. For their politicians could succumb to the influence of national and multinational insurance conglomerates such as AIG, whose corporate connections with my and other Dutch insurers ought to be more widely known and might be the source of the shabby options offered me by Dr van Moorselaar. The EU would lose a major component of its humanitarianism. (The state of Massachusetts has adopted a version of the Dutch system, and an influential American healthcare economist, Professor Alain Enthoven of Stanford University, has been urging its use throughout the USA.).
    Late in March I obtained the needed proof. My source is a medical specialist employed by a hospital in the Netherlands (where most specialists work exclusively for public hospitals). This person is not of Dutch birth. This source told a reliable acquaintance of mine that a secret system of prioritization indeed exists in the Netherlands. It regulates the granting and withholding of treatment, or parts of internationally standard treatments. It is based on at least three factors: age, cost, and relevant statistics. Given my personal experience, research, and discovery of the PDF, I now maintain that this system was inspired by the insurers, developed in secret by government committees set up to study these issues, and then adopted as official but unannounced policy whose ultimate aim is twofold: (1) cost-cutting that increases profits and saves the government money, and (2) consequent service inefficiencies, so that the possibly complicit directors of medical institutions will beg for privatization as an attractive alternative that will have the support of a public desperate for decent healthcare. Something like this has already occurred in one Amsterdam hospital, Slotervaart, which is now owned by big business.
    I hold that this hitherto unknown arrangement was set in motion right after the transfer of power in January 2006. Whatever the details might be, in no other EU country do the insurance companies have such extensive decision-making freedom that national law prevents its government from interfering with most of their activities. (This differentiates the secretive Dutch system from the UK’s, in which NICE [National Institute of Clinical Excellence] does the dirty work but can be publically called to account.) For this reason EU civil servants have called the Netherlands an ‘anomaly in Europe.’ Are elderly persons considered—even in the higher echelons of the EU—economically unproductive and hence financial burdens rather than sources of pride? And who bears these ‘burdens’ in the Netherlands? Not the taxpayer, but the government and insurers, who try to prevent any increase in their expenditures. Dutch citizens and legal residents pay their premiums and healthcare taxes every month, or are granted the basic package, in the expectation of receiving adequate and expert medical attention when necessary. Although many are vaguely aware that something is wrong, few know that and how they are being cruelly deceived. Does the reader want this dangerous anomaly to become the rule in the EU? The danger is real.

Leave a Reply