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Shidlo: Swiss Model Shows the Holes in Obamacare

By Gil Shidlo   |   Tuesday, 26 Oct 2010 03:51 PM

Before you buy into President Barack Obama’s optimistic outlook on healthcare, consider the Swiss experience. It’s clear from experience that heavy government regulation seen in the Swiss model doesn’t guarantee a reduction in costs, nor does it improve transparency and quality of services for all citizens.

A study by the Organisation for Economic Co-operation and Development (OECD) shows that although the United States spends more on healthcare per capita than any other country, Switzerland isn’t far behind (at No. 3, with Norway ahead of it). Most Swiss citizens pay for their own healthcare, while the government helps to finance insurance for the poor. No one is supposed to pay more than 10 percent of their income on health insurance.

That’s basically the same promise made by Obama — regulated scarcity with no means to control costs. The new healthcare law which Congress passed in March 2010 will provide coverage to more than 30 million uninsured starting in 2014. The actual cost of Obamacare could easily soar to uncontrollable levels; some estimate costs are above $1 trillion.

So what does $1 trillion buy? The Swiss healthcare model advocates universal coverage for all its citizens. Sounds workable, but then the holes in this “Swiss cheese system” start to appear.

First, Swiss insurance companies aren’t allowed to make profits on basic health insurance. So they profit by offering “premium” services, like private or semi-private rooms, coverage for alternative medicine, and coverage of higher-cost physicians (some doctors operate outside the negotiated schedules).

Some estimates are that 40 percent of Swiss citizens purchase such supplemental insurance. Thus, heavy regulation by government results in increased costs to citizens, both in premiums paid for extra insurance and higher deductibles, despite being “covered” on the premium cost.

Then consider quality. The Swiss don’t have a national health system but rather 26 subsystems — one for each canton. Its advocates tend to overlook the fact that quality of care varies considerably between the cantons and moving from one canton to the other for better treatment, though theoretically possible, is impractical. Would an American in Florida travel to California or New York for treatment? Unless it was an aggressive cancer or a rare or genetic disease — and assuming the patient had the financial means and flexibility — probably not.

There is serious lack of transparency. People don’t have information of which hospital or clinic or doctors have the best performance for specific illnesses. Indeed, recently, I tried finding a specialist in Switzerland for a friend who had a rare disease and was astonished that I couldn’t find the level of information one is used to finding in the United States.

Although Switzerland is a small country — just more than 7 million inhabitants — a person in Geneva has no idea if there is a better doctor in Zurich. We tried some contacts in the French part of Switzerland who asked their local family doctors, but they had no information on who is the top specialist for this disease.

Whatever the critics say of the U.S. system, it is the most transparent health model in the world and one can look up performance and success rates easily. The free-market system now rewards hospitals and doctors for locating services in major metropolitan areas. (Think of the billboard campaigns you see bragging that your local clinic has the best heart doctors or the fastest emergency room service. Under a heavily regulated system, those incentives to compete disappear.)

Are costs controlled? Not really. The Swiss health system is one of the most expensive in the world. That specialist, if you can find him or her, can easily cost more than $1,000 for a short consultation. A brief two- or three-day stay in a hospital can cost in the tens of thousands of dollars for foreign visitors.

The World Health Organization has shown again and again that, although there are positive outcomes of the Swiss healthcare, these are offset by a chronic inability to control costs. Healthcare-insurance premiums have increased by about 7 percent a year for the period 1996 to 2008. During that period, Swiss general inflation was 0.92 percent. In U.S. terms, that would be about the same as annual medical inflation of better than 21 percent.

And in fact, the increase in costs there is higher if one takes into account the doubling of the minimum deductible and a decision by the government to let insurers reduce statutory reserves. According to one study, many Swiss may soon be unable to sustain the cost of premiums and fees imposed by the system.

No wonder that many of the Middle East’s rich are opting for private healthcare in nearby Germany. One can expect rich Americans to make do with their own resources. Given the sinking dollar, our best doctors and hospitals may well opt to focus on wealthy elites who travel to the United States just for medical treatment.

This business model has been around in Miami for years. Under Obamacare, as supply shrinks, you might ask yourself: Are you ready to wait in line behind a rich foreigner?

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Before you buy into President Barack Obama s optimistic outlook on healthcare, consider the Swiss experience. It s clear from experience that heavy government regulation seen in the Swiss model doesn t guarantee a reduction in costs, nor does it improve transparency and...
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