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Obama, Congress: Take A Look at the Swiss Answer to Health Care

If Congress and the Obama administration aren’t too far down the road to big-government health care to rethink, they ought to read “Who Killed Health Care?— by Harvard business professor Regina Herzlinger.

[IMGCAP(1)]Her answer to the title question of her book is the same as Agatha Christie’s in “Murder on the Orient Express.—

She writes that “everybody— — especially hospitals, employers, insurance companies, lawyers and government — created the current wasteful health system that, she argues, also kills people.

But even more compelling than her acid evaluation of what’s wrong is Herzlinger’s recommendation of the right alternative.

“Consumer-driven health care,— she insists, can be universal, efficient and end up costing less money than the current system — or any system being considered this year by Congress.

A consumer-driven health care system actually exists in Switzerland, which could be a model for the United States, but the administration and Congressional Democrats haven’t looked at it.

Switzerland has an individual mandate requiring everyone to be covered by private insurance. There is no employer-provided or government-managed coverage, and poor people are subsidized to help them buy insurance.

Switzerland has health care outcomes comparable to the most affluent U.S. states, while its health costs per capita are 40 percent lower than in the U.S.

Herzlinger’s proposal for the United States is that employees would receive in cash what their employers currently spend on health insurance premiums and it would be tax-free, provided they used the money for health care or insurance.

Employer-provided family health insurance now costs, on average, $17,000 a year. Uninsured people who are able to pay — about a quarter of all the uninsured — would be required to buy coverage.

Poorer people, including current Medicaid recipients, would get a government check to buy insurance based on their age, gender and location — but they could not be discriminated against on account of illness.

She acknowledges that the plan initially would be expensive — as much as $2 trillion over 10 years — but that competition among insurance companies and providers would bring costs down over time.

She told me she thinks that current plans being discussed in Congress will cost far more than current $1 trillion estimates and will not lower costs in the long run unless rationing is put into effect.

Herzlinger argues that consumer choice and good information would lead to an explosion of innovation in health care delivery, customizing care and reducing costs.

She predicts that “focused factories— would develop — specialized integrated treatment teams providing coordinated care for specific conditions like diabetes, AIDS or heart disease and that patients would choose the best based on published outcomes data.

Insurance companies also would bid for customers based on their needs and on cost. She said that Switzerland, with a population smaller than Virginia’s, has 84 separate health plans competing for business.

Besides subsidizing the lower-income people, she said, government’s job would be to ensure “transparency— — creating an information system rating each doctor, hospital, drug and procedure on their outcomes so that customers could make clear choices.

She’d also create an agency like the Securities and Exchange Commission to provide clear information on insurance plans, their coverage and costs.

But it would be different from the “exchange— contemplated by current legislation, which would prescribe services to be covered by any eligible plan.

“A government exchange will be very dangerous,— she said. “Inevitably, the government will micromanage. Congress will get lobbied hard to include things like massages, acupuncture and in vitro fertilization as mandatory.

“I like massages and I have sympathy for childless couples, but that kind of coverage shouldn’t be mandated,— she said.

Also, she said, current proposals for a “public plan— like Medicare and “play or pay— requirements by employers will inevitably lead to a single-payer government-run insurance system and eliminate choices for consumers.

“Play or pay— proposals involve low-level fines for employers who don’t provide coverage. That, plus generous subsidies for the uninsured, will lead employers to drop coverage and force their workers into an expensive private insurance market.

The workers, in turn, will gravitate to the cheaper “public plan— and, over time, private insurance companies will be driven out of business.

And, while they are trying to survive, private plans will merge. So will hospital systems — all diminishing choices available to patients.

Ideologically, Herzlinger calls herself a “Jeffersonian Democrat,— a believer in smaller government and maximum individual choice. She’s a registered independent.

Her plan partly resembles that advocated during the 2008 campaign by Republican Sen. John McCain (Ariz.) and proposed now by Sens. Tom Coburn (R-Okla.) and Richard Burr (R-N.C.) and Rep. Paul Ryan (R-Wis.).

But it’s also different. They would eliminate the current tax exclusion for employer-based health insurance and provide workers with a tax credit for buying health insurance.

Inevitably, that idea is open to political attack as “taxing health benefits,— she said. Giving workers cash tax-free, she said, is more salable.

Moreover, her plan would cover all the uninsured and would not be “revenue neutral.—

“If you want to cover the uninsured, it’s going to be expensive,— she said. “Are you willing to pay extra taxes to cover these people? I am. But I want to do it in the most effective way possible.—

Opponents of free-market health ideas argue that health is too complicated for ordinary citizens to navigate. But Herzlinger points out that buying auto insurance isn’t — and that millions of workers are successfully managing 401(k) retirement accounts.

To the objection that insurance companies would “cherry-pick— — cover the healthy and leave the sick — she proposes that insurance companies “reinsure— each other, spreading risk evenly.

They’d do it themselves — as in Switzerland — out of fear that, if they didn’t, the government would do it.

Right now, most health care reform plans being considered in Congress don’t even give consumers a role in controlling costs. Letting them run the system is hardly on anyone’s radar screen.

So, before Congress puts the government in charge of health care, I have an August recess suggestion: Members who can should visit Switzerland. Members who can’t should read “Who Killed Health Care?—