If you’re a moderate or conservative, what do you get if you stop pretending that the massive government intervention into healthcare you’re promoting is a “free market” solution? You can build a pro-private sector health insurance system that actually works. Here’s how they do it in the Netherlands:
Health care in the Netherlands is financed by a dual system. Long-term treatments, especially those which involve (semi-)permanent hospitalization, and also disability costs such as wheelchairs, are covered by a a state-run mandatory insurance. This is laid down in the Algemene Wet Bijzondere Ziektekosten (AWBZ, see article in the Dutch Wikipedia), “general law on exceptional healthcare costs” which first came into effect in 1968.
For all regular (short-term) medical treatment, there is a system of obligatory health insurance, with private health insurance companies. These insurance companies are obliged to provide a package with a defined set of insured treatments. For those who would otherwise have insufficient income, an extra government allowance is paid to make sure everyone can pay for their health care insurance….
Funding for all short term health care is 50% from employers, and 45 percent from the insured person and 5% by the government. Children until age 18 are covered for free. Those on low incomes receive compensation to help them pay their insurance. Premiums paid by the insured are about 100 € per month with variation of about 5% between the various competing insurers.
The key to the system is that they take away insurance companies’ incentives to avoid insuring sick people.
Risk variances between funds due to the different risks presented by individual policy holders are compensated through risk equalization and a common risk pool which makes it more attractive for insurers to attract risky clients.
Here’s how risk equalization works:
arranging for a third party to organize a regulatory system of risk-adjusted premium subsidies. The financial transfers are then channeled via a so-called Subsidy Fund. In European countries such as The Netherlands, Belgium, Germany and Switzerland the Subsidy Fund is run by a government agency which assesses risks for individual policy holders.
Personally, I’d still prefer a single-payer system — it seems like a much simpler, straightforward way of providing affordable, high-quality healthcare insurance. But if you want a major role for the private sector, this approach seems like a very smart way to go.
UPDATE: Exhibit A why a private sector-oriented plan’s gotta have risk equalization:
documents obtained by the House Committee on Energy and Commerce… show, for instance, that one Blue Cross employee earned a perfect score of “5″ for “exceptional performance” on an evaluation that noted the employee’s role in dropping thousands of policyholders and avoiding nearly $10 million worth of medical care.
WellPoint’s Blue Cross of California subsidiary and two other insurers saved more than $300 million in medical claims by canceling more than 20,000 sick policyholders over a five-year period, the House committee said.
