May 29, 2012


Switzerland Its Not Just About Banking 

By Melvin J. Howard

Imagine an economist taking the place of a surgeon at an operating table. Such an inhumane experiment would undoubtedly result in a serious bodily harm for the patient. Now let us picture another experiment a Ministry of Health managed by a physician. What would be the difference? The extent of the death toll. An economist at an operating-table would never be able to cause as many premature deaths as a doctor trying to handle the funding of health care without a basic knowledge of how markets work.

In many countries, common sense is not so common in the health-care finance. We should therefore look at the system used in a country where pragmatism means everything, and ideology means little. Switzerland no health care system is perfect, but the Swiss one makes very few people complain. It is able to provide services to heads of state as well as the poorest, including immigrants from different countries, who make up about a fifth of the population.

What lesson should we take? Swiss common sense tells us that the market is the best solution for almost all areas of human activity, including the provision of health-care services. Public funding comes only when the private sector fails. What a difference when compared to the static approach prevailing in  many other countries. Also, public does not inevitably mean state. Swiss health care is extremely decentralized.

Switzerland does not have any Ministry of Health. Every canton and every self-governing administration unit is in charge of its own regulation, hospital accreditation, and funding. Thus, there are 26 slightly different systems in a country with a population of 7 million. A static bureaucrat will immediately think of the chaos that must reign there. But an economist sees a different phenomenon competition.

Yes, even though the country lacks a health ministry, it does have the Federal Office of Public Health. Yes, it does regulate health care standards, but financing is mostly left to the market. Yes, health insurance is mandatory in Switzerland, which applies even to foreigners staying longer than three months. However, the system is primarily market-based. There are about 90 competing health-insurance companies. Patients are completely free to choose their insurance company, general practitioner, and specialist. The funding from public resources accounts for some 15 percent of the total cost. About 10 percent is covered from old-age or disability insurance. Health-insurance firms cover almost a half of the expense. About a quarter is financed by the patients in direct payments. The remaining share of the cost is divided between cantons, cities, and the federal government.

There are no officials who would decide how much money should flow into the system. No bureaucrat decides, for instance, that an insurance company pays a hospital about 5 per hour for the use of an operating theatre. Everything is a matter of market relations between the patients, insurance companies, and health-care facilities. The law only lays down that the basic insurance must be provided on a non-profit basis. The insurers make profit on above-standard programs. Its worth noting that even the basic programs would be deemed highly above-standard in most other countries.

In a system based on supply and demand, the patient is not a supplicant left at the mercy of gods in white gowns, but a respected client. Switzerland naturally also remembers its needy citizens. Cantonal hospitals are intended just for them. Switzerland, unlike many other developed countries has never connected health care to employers, an arrangement that hinders competition in many other countries. It is the poor who are most penalized by this system.

Swiss health care is obviously costly. However, any service of good quality, based on top-skilled labor in a developed country will always be expensive. But do we want doctors and other medical staff to take vows of poverty? Should patients be treated by paupers worrying about their basic necessaries of life?

With equal costs, a system based on market prices will always be more efficient than a state-governed one with administrative prices. The money will be used more effectively. Taxpayers will not subsidize poor management of hospitals. A facility or a doctor that provides bad services will go bankrupt. Public subsidies are directed to poor patients, not to poor hospitals, as it routinely happens under the Czech health care system. Even poor patients have lots of power to choose.

It is impossible to set out all the details in this brief summary. The Swiss system is not absolutely faultless it lacks proper disclosure of quality of health care facilities, for instance. Also, according to some critics, role of the government has been slowly but surely increasing. Yet we can conclude one important message health care should be managed not by a physician, nor by an economist, but by the market. And this is why Swiss health care is so good.