Monday, August 27, 2007

Observations from Iceland

As noted below, I had a chance last week to attend a very informative conference in Iceland with representatives from the major hospitals and medical schools of the Nordic countries (Iceland, Sweden, Denmark, Norway, and Finland). The health systems in these countries are owned and financed by the government and are often appropriately cited for the quality of care offered to the public. Indeed, in debates here in the US, they are often called out as examples of what we might strive for in terms of universal coverage and a greater emphasis on primary care than we have.

An advantage of actually meeting with people who run such systems is that you get to hear some of the details that do not make it into the public discussions here. I thought I would share just one aspect with you. In so doing, please recognize that I make no apologies for or denials about the inadequacies of our own approach. I am just trying to relate aspects of theirs that might be overlooked.

So, the simple question I asked was this: When the parliament sets the national budget for health care, how does it decide how to much to allot? Here in the US, the "budget" that we set for health care is partially set by Congress (for Medicare) and by state legislatures (for Medicaid), but well over half of our health care budget is not set centrally, but results from thousands of decisions and transactions by multiple players in the system. I was curious to learn, in contrast, how a welfare state decides on the appropriate amount.

I did not get answers about each country, but a pattern began to emerge. Using Iceland as an example, the answer seems to be that the parliament uses, as a rough guide, a desire to maintain overall health care costs at a certain percentage -- 10 or 11% -- of GNP. The US, at 15% is viewed as too high. Other European countries, at under 10%, are viewed as too low.

I pursued the question further. Is this percentage based on a quantified assessment of the actual health care needs of the public, i.e., is it driven by public demand (e.g., a growing aging population)? No. Does it take into account the government's expectation for certain quantifiable levels of service quality, medical quality, or operational efficiency of hospitals and other parts of the system? No.

In essence, this appropriation by the parliament is a politically derived decision, just as it would be for any appropriation for a program of important national priority, and it therefore competes with other worthy national programs for resources.

I offer this not in criticism, but just as a useful reminder to those of us in the US. The managers of the Nordic hospital systems, once their single annual appropriation is handed down, make important decisions about what services to offer to the public and what services not to offer. They also respond to appropriation levels by determining service quality levels. In the face of inevitable limitations on the ability of the nation hospital system to offer all services demanded by the public, a growing parallel system is emerging, in which private practitioners offer elective therapies and procedures outside of those supported by the national system.

Of course, we make similar managerial choices here when we run hospitals. The difference is that we do so in response to a variety of price signals set forth by a meld of public and private payers. Also, we have the advantage of one factor not really present in Europe, philanthropy from generous donors who help us provide advanced diagnoses and treatments that would not otherwise be available to the public.

As I note above, I am not saying one is better than the other. Just different. I predict, though, that the systems will start to look more and more alike over time. Pressure in the US for a more nationally-determined approach. Pressure in Europe for more of a private market approach. It shouldn't surprise us to see this convergence. After all, the countries are dealing with the same organisms, both biologically and politically.

11 comments:

Patient Dave said...

I'm not knowledgeable enough about the details, so I'll just ask blindly: to what extent is the US education situation comparable to Iceland's medical situation?

One concern is what's happened as a result of our school budgeting process. A generation from now, I wouldn't want our health care system to have suffered the same decline as primary and secondary education.

I know there are a million other factors and I'm not trying to oversimplify - just expressing that concern, since it seems to echo what Paul describes in Iceland.

Personally I don't want politicians OR overly powerful business people (e.g. pharms or insurance industry) running the show. I believe in the corny old "we the people" approach, especially government for, by, and of the people.

Paul Levy said...

Universities -- including the medical schools -- there are public, as well.

The Imp ;-) said...

I'm a Canadian, however I have a good deal of experience with the American healthcare industry as I am a software salesperson with HealthCare as my primary focus. Oh, and don't worry Paul, you're not in my patch, so I won’t bother selling to you. ;-)

Direct personal experience with the American healthcare system was gained by a visit an urgent-care facility when I sprained my wrist down in AZ, playing basketball… I can’t say that I got better or quicker service than I would have at my local clinic back home. Xray and a brace, $225.00 and on my way in 2 hours.

Here in Canada, of course our socialized healthcare is the third-rail of politics, with the issue being around 1) wait times and 2) privatization. We have a continuous debate that never really dies down, with the various medical groups demanding more funding, while the more right-wing folks demanding that we expand the services that private corporations can provide. Keep in mind a right-wing Canadian is roughly equivalent to a Center-left Democrat.

The fear of course is that we end up with an ‘American’ style system (and I’m not trying to be derogatory; half the definition of Canadian is ‘not-American’)… the paradigm shift from universal healthcare to an private insurance-based or pay-based system is one that would be quite traumatic to the general populace. That being said, there are many things in our system that need improvement; I personally think that we should invoice the people that use our system, to show the true costs, even though they wouldn’t be required to pay. I have a sneaking suspicion that casual users of our healthcare system have no idea of the true costs.

You can add to the general debate groups like the Canadian Medical Association who regularly agitate for moving to a more private-healthcare model; given that their members have a vested interest in this, one has to take their arguments with a grain of salt.

It is going to be quite interesting to see where your system and ours ends up; nothing created by mankind is ever going to be static and fixed.

Regards,

Mark

Harry said...

A thoughtful post, Paul. It asks the fundamental question of how resources are allocated to health care vs. other possible uses.

Equally important from an economic and a public health point of view is that pricing decisions and policies (including those concerning the out-of-pocket expenses paid by the patient) should create incentives for behaviors that advance the overall care objectives.

I doubt that one such model could possibly fit all.

Anonymous said...

"I predict, though, that the systems will start to look more and more alike over time. Pressure in the US for a more nationally-determined approach. Pressure in Europe for more of a private market approach. It shouldn't surprise us to see this convergence. After all, the countries are dealing with the same organisms, both biologically and politically."

...so where do you think the systems will converge to?...which is perhaps another way of asking the question, where should the systems converge towards to maximize improvement in patient outcomes given difference in people and political and economic establishments? What if you have an economy where there is practically no financial contribution from the government and most healthcare spending is private pay? What should the system "look like" under that scenario?

The context behind this question is India...(I focus on Indian healthcare investing - my new mantra). India spends less than 5% of its GDP on healthcare. When you add the fact that it also is the most populous country in the world, that 5% spending translates to $27 on a per capita basis. (Compare that to approximately $6,000k per capita in the US). Only 20 million Indians of the 1 Bn + have some form of commercial insurance (covers limited acute care), and acute care episodes are perhaps the highest cause of personal bankruptcy and the #1 reason for households to take on additional debt (in an already poor country). Given the lack of government assistance (monitarily and unlikely to change in our lifetimes) in delivering healthcare (that is a whole other topic-suffice to say for now that it just does not have the financial resources to cover or contribute to covering the cost of a billion people) healthcare delivery is almost completely private sector dominated and caters to the 400 million + "rich and middle class" and is all private pay!...AP

Barry Carol said...

I think it is interesting to note that the four Scandinavian countries (Denmark, Norway, Sweden and Finland) have a combined population of only 23 million or a bit more than the state of Texas. Given our much larger population, large regional differences in culture, lifestyle, climate and diversity of our people suggests that our healthcare needs are more complex which makes our healthcare system more complex than most others as well.

Moreover, middle class people in Scandinavia pay north of 50% of gross income in combined income taxes, value added or sales taxes, property taxes, etc. as compared to closer to 30%-35% of income for similarly situated people in the U.S. While the population in these countries seems satisfied (and even proud) of their welfare state and the safety net protections it offers, it's hard to imagine that they would be willing to pay much more in taxes than they do now.

When politicians try to set a healthcare budget that will not starve other worthwhile priorities while keeping the tax burden tolerable, the incentives are in the direction of sprinkling benefits over as many people as possible. They do this, in part, by emphasizing primary care. By contrast, there is a reluctance to expend grossly disproportionate resources on the sickest 2%-5% of the population, most of whom are probably too sick to vote anyway. The upshot is that the strategic approach toward care for the elderly, especially at the end of life, is most likely very different (much less generous and costly) than it is in the U.S. I won't argue whether this is good or bad, but the political calculus tends to push policymakers in this direction when trying to square the circle in a taxpayer funded healthcare system. To the extent that the private sector and supplemental health insurance that people pay for themselves can relieve some of the pressure on the system, it's probably seen as a good thing.

Anonymous said...

Interesting post. Maybe if our national health care budget was capped, people would get serious about overeating and the importance of exercising.

Paul Levy said...

Thanks to all for your comments. Barry, an excellent and eloquent summary of the situation. Here's an interesting rub: There is real ambivalence on the part of some about the establishment of a supplemental private systems because they think it sends the country on a slippery slope away from the principles of the socialized system. So, there is some opposition to it, notwithstanding -- or perhaps because of -- the inevitability of the social and economic forces pushing that way.

Markymark said...

Would a more "socialized" system in the US encourage economic development? In other words, would government insurance provide efficiencies such that individual consumers would find that their resulting savings would be directed toward either investments or consumption? If this were the case, one could argue that the ensuing growth would justify the cost of capital of a socialized system, and shifts the plane of debate from ideology to economics.

Rob said...

"Interesting post. Maybe if our national health care budget was capped, people would get serious about overeating and the importance of exercising."

Comments like this are most illuminating of the fundamental problem in the US: Our puritan culture insists that if something bad happens, it's due to a moral failing.

Yes. Overeating is a real problem. So is the poor nutritional content and high junk-calorie rating of the food that under-paid workers can afford.

Will we blame those under-paid, under-educated workers for everything? Certainly they make bad choices. Many of them are forced upon them by dire circumstances, while a few of the rest of us get to extract what value we can from their hides.

One basic thing we've ignored in this discussion is this: No one, not anyone, no person under any circumstances should have to prove "worthy" of the attention of a doctor. Yet we, in this country, go under the assumption that one must earn this "priviledge." Last time I checked, a doctor has a sacred duty to provide this attention. We, as a society, should catch up to that notion and agree that we're all human, we're all frail, and no one is so "morally weak" by virtue of a bad diet or bad genes or bad circumstances that they are denied care. Period.

Try to get THAT through Congress. There's no profit, is there? No.

Argue all you want about how to pay for this, but first we have to decide that there is no need to deserve care. The former won't be solved until we demonstrate the will to want it.

And we don't want it. I think it's that simple.

Lavinia said...

I continue to believe that change will only come when we can sit down actually look at what we refuse to see. We have a system in this country dominated by hospitals and insurance companies.

We have the worst employment and education practices and have not really looked at how we compare to healthier countries from a cultural perspective.

Yet we are ranked 37th in delivery and access of care.

We work more hours, eat more food and live a more stress filled life in America.

What I find interesting is that in China, diseases are now emerging that did not exist because of moving out of an agricultural based society to an industrial society in the last 40 years. I wonder based on this change what percentage of China population will be chronically ill in another 20 years and what the data is on this now?

1/3 of the population in the US is chronically ill that might benefit from methods of care and diet that reduce hospital utilization and emergency room visits.

Dr. Bill Thomas is showing reduction of hospital stays and cost for elderly with his Green House Elder Care approach. I wonder what would happen if we invest more funds there as did Robert Wood Johnson Foundation?