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ISE 434

Memo
To:

Professor Bob Emerson

From: Matthew Pinkus


Date:

April 28th, 2011

Re:

Project #1

Professor Bob Emerson,


I Matthew Pinkus am herewith submitting the first project of the semester entitled Analysis Of
Switzerlands Health Care System. Included within are the title page, table of contents, and body
of the project.
If you have any questions please dont hesitate to contact me.
Regards,
Matthew Pinkus
Mpinkus1@binghamton.edu

ANALYSIS OF SWITZERLANDS HEALTH


CARE SYSTEM
WHAT CAN THE SWISS HEALTH CARE SYSTEM, WHICH COMBINES
CONSUMER CHOICE AND GOVERNMENT REGUALTION WITHOUT
COMPROMISING THE QUAILTY OF CARE, TEACH THE UNITED
STATES ABOUT AFFORDABLE HEALTH CARE COVERAGE FOR ALL?

Submitted in partial fulfillment of the requirement of ISE 434


Spring Semester, 2011.

Systems Science & Industrial Engineering Department T.J. Watson School of


Engineering & Applied Science State University of New York at Binghamton

TABLE OF CONTENTS
Section

Page

Introduction

II

Universal Access

2-3

III

Consumer Choice

3-5

IV

Government Regulation

5-6

Quality of Care

6-7

VI

Conclusion

VII

Works Cited

VII

Appendix

10

INTRODUCTION
The health system in Switzerland is unique in that every citizen has coverage but it is not a
single payer system, rather it is run through a heavily government regulated mandatory private social
health insurance system. The system has two key elements that make it an interesting topic of study
which are its high approval by the citizens and its ability to regulate costs to some degree.

One

citizen Frieda Burgstaller, 72, says she likes the freedom of choice and access that the private
system provides. (Schwartz, 2009) What Frieda is referring to is the Swiss citizens ability to
choose for themselves what health insurance provider they want as well as what doctor they want to
see.
The two main criteria when trying to implement a health care system are cost and quality.
These two criteria are directly related; when one wants better care this usually comes at a higher
cost. The Swiss seem to have a system that works for them with a healthy life expectancy at birth as
of 2003 of 71 years for males and 75 years for females. (WHO, 2003) These numbers dont actually
give us any idea how great the health care system is. In order to determine that we would need to
compare this healthy life expectancy to other nations as well as analyze various details of the system
such as out of pocket costs and hospital stay time. Just taking into account life expectancy, in
America as of 2003 healthy life expectancy for males is 67 years and 71 years for females. (WHO,
2003) through research it is clear that in Switzerland people seem to live about 4 years longer than
people in America. In Switzerland the health care cost per capita is $4,312 as of 2006 and in
America its $6,714 as of 2006. (WHO, 2006) As the research confirms, the people in Switzerland
live longer, while spending less money. This ability to provide everyone of its citizens coverage
without the high costs is something that we strive for in America and is why analyzing the Swiss
system is of great importance.

UNIVERSAL ACCESS
When Switzerland passed the Federal Health Insurance Act of 1994 one on the main
components of the health care system implemented was universal access. Switzerland makes sure
that every citizen young or old, sick or healthy, poor or rich has health coverage which is referred to
as universal access. In order to receive that universal access, every citizen must buy a mandatory
health insurance package. This requirement had some heavy implications that came along with it.
Some aspects represented are what was included with the mandatory coverage package and who
would provide the health insurance. Also, since it would be mandated that every citizen buy
insurance, Switzerland decided that the government would have to supplement this cost by awarding
government cash subsidies to people if health insurance equals more than 8 percent of personal
income. (Schwartz, 2009) In 2001, 32.7% of the insured received subsidies and almost 19% of the
enrollee premiums for the mandatory package were paid with Swiss government funds. (Hertzlinger
& Parsa-Parsi, 2004) Therefore the proposition of paying for everyones insurance can be expensive
and this is one of the main issues that we as Americans have with this system because we have a
much larger population. The Swiss system is paid for similarly to how the U.S. government pays for
Medicare; half comes from the federal government and half from the taxes assessed by the twenty
six cantons. An important addition to note is that if everyone had health coverage then they would be
able to treat their illnesses before they become serious and therefore cut down on emergency room
visits which in turn reduces costs for the country.
In Switzerland the mandatory coverage package includes everything from sickness to
accidents as well as maternity coverage. Even though everyone must have the mandatory insurance
package there are still some high out of pocket expenses associated with this plan. The lowest
deductible for the mandatory insurance is 300 SFr (Swiss Francs); opted for by 45% of the

population in 2001 and the highest deductible is SFr 1500; opted for by 9% of the population in
2001. (Reinhardt , 2004) This depicts that most of the Swiss would rather pay a higher premium than
run the risk of paying more when they become ill. Most Americans are also afraid of not being able
to pay when they need coverage so there would be a parallel in our decisions of taking higher
premiums for lower deductibles. As well as paying the deductible, the Swiss pay a 10% coinsurance
rate on all health care included in the standard package up to a maximum of 700 Swiss Francs per
year. (Reinhardt , 2004) The chart below shows the increase in total, public and out of pocket
spending for each Swiss individual in U.S. dollars over a ten year period from 1998 to 2008. This
shows that the Swiss government is absorbing most of the total spending increases in order to keep
out of pocket payments down. Although this number is high, being $1085 in 2002 for Switzerland
and only $737 in the United States, this could be the reason that spending in the U.S. is out of
control being that most of the costs in the U.S. are paid directly by the insurer and therefore the
consumer is not concerned how much they use or what the price is of their health care.

CONSUMER CHOICE
Switzerland has a population of 7.2 million that live in 26 cantons, or districts, and within
each of these cantons, citizens are able to decide between health plans and providers offered by

competing insurance companies, not employers or governments. (Hertzlinger & Parsa-Parsi, 2004)
Swiss households have a pick from 90 private insurance companies that all must provide the same
basic coverage. These insurance companies are not allowed to earn profit on the mandatory basic
plan, but they have always been permitted to profit from the sale of supplemental plans. (Schwartz,
2009) Although there are many choices for insurance three fourths of the population are covered by
fifteen large carriers where the largest carrier has more than 15% of the Swiss population enrolled.
(Reinhardt , 2004) These insurance companies must be registered with the Swiss Office of public
health in order to sell the basic health insurance. This provides customers with the freedom to choose
which insurer they would like and therefore decide what kind of premium and type of health plan
they desire. Individuals are able to switch insurers for free twice a year and there are journals
consumers can consult with which compare insurance options. (Hertzlinger & Parsa-Parsi, 2004)
This means that if an individual is not happy with their current health insurance they are able to
move to another provider at no additional cost. They have the information available to them to make
a good decision on which provider to choose next and they know without a doubt they will receive
the same coverage no matter what company they go with.
What does vary is the amount any individual citizen will pay for a premium based upon the level of
annual deductible but these premiums are community- rated. Community rating means that a 30 year
old and a 90 year old must be charged the same amount for the same type of policy. (Reinhardt,
2004) Since the premiums cannot vary by age and are regulated by the government, it is easy to see
how every citizen is able to obtain affordable insurance. Citizens also pay their bills directly and
then seek reimbursement from their insurance company. In this way, many more citizens will be
aware of exactly how much their health care is costing. This is a very large problem in the U.S.
because there are many people who have no idea what their health care is costing them.

The Swiss insurers offer different types of managed care products as well that can lower
premiums for individuals but limit access. The first plan is the HMO (Health Maintenance
Organization) plan that restricts the network of providers. The second is a gatekeeper policy that
requires the general practices approval for visits to specialists. These additional options could be
very important in a United States system as most Americans will want to keep their premium costs
down and are already used to HMO type plans.
GOVERNMENT REGULATION
The Swiss government regulates how the countries health care system operates in many
ways. Since the government requires insurance companies to accept all citizens, even if they have
pre-existing conditions, at set premiums, it sometimes ends up that the company is not charging
enough based on the actual costs for that citizen. The government makes sure in this way that
women and people with pre-existing conditions are not discriminated against like is prevalent in the
United States. However this does cause a big problem: one company may end up with many citizens
that are using more than they are paying in insurance. In order to correct for this discrepancy the
government does risk adjustments to insure that the insurers with a costly risk pool are compensated
by insurers with low cost risk pools. Some doctors in Switzerland complain that in an effort to keep
down costs, the government goes too far. In the New York Times article Swiss Health Care Thrives
Without Public Option, Dr. Gerlinde Schurter says the Swiss government has been known to fight
doctors to keep down costs and the insurance companies even go as far to tell doctors that they are
prescribing too many drugs or performing too many procedures. (Schwartz, 2009) Therefore doctors
must be able to justify why they prescribed a certain drug or they will have to repay the insurance
company. This could be both good and bad as far as health care goes. On one hand doctors may not

order tests for the sake of just checking but it might also prevent them from practicing good
medicine for fear of having to pay for unnecessary tests. (Schwartz, 2009)
The Swiss government does not have a global budget or a maximum amount that can be
spent on health care and in this way they have avoided the waiting lists that are seen in other systems
around the world. Having no global budget has its advantages and disadvantages. The Swiss have
much greater access to modern medical technology and no waiting lists but conversely spend around
11.5 percent of GDP on health care, which is the most of any country except for the United States.
(Tanner, 2008) Also since the government controls exactly what the mandatory benefits package
includes, special interest groups could try and persuade the government to add in or remove benefits
in order to fit their needs and this in turn could affect the cost of the premiums to the citizens. This
expansion of benefits in the mandatory package has lead to an increased cost of insurance and
further leads to larger deductibles and a high out of pocket cost to the consumers. Tight government
regulation overall is beneficial for the Swiss health care system and the high quality and low cost of
the Swiss health care can be attributed to this regulation.
QUALITY OF CARE
Since everyone in Switzerland has the same health insurance policy and doctors are paid on a
fee for service basis from the insurance provider there is no discrimination against the poor. The
doctors and hospitals have no idea that a patient may be getting subsidized from the government and
this makes it so everyone gets the same care regardless of what your economic status is. This is
unlike what we see in America where fees for Medicare are much lower than fees paid by private
insurers and because of this many places will not accept Medicare patients. (TSUNG-MEI
CHENG, 2010) This is depicted in the chart below where even across different levels of income in
Switzerland everyone still goes to the doctor and uses prescription drugs when needed. There is not

much variance among the numbers in any column which represents a good distribution of health care
resources to all economic levels.

Herzlinger, R. E. et al. JAMA 2004;292:1213-1220


The Swiss have a health status at least as high as that in the United States while costs are
lower and everyone has insurance unlike in the Unites States where there are approximately forty
million people uninsured. This is seen in the chart below where people in Switzerland have low
patient dissatisfaction where in the United States these levels are higher.

Herzlinger, R. E. et al. JAMA 2004;292:1213-1220

CONCLUSION
What the Swiss health care system teaches us is that government regulation is needed in
order to achieve a successful low cost health care system. The government regulates how much the
insurance companies can make, it forces everyone to buy insurance, it subsidizes every one without
insurance and it makes sure doctors are not ordering unnecessary tests or prescribing treatments
without cause by issuing slips when they do. The Swiss system still lets the insurance companies
profit by letting them make money off of supplemental insurance which covers certain things like
dental that are outside the mandatory plan but makes sure that people that they cannot make money
on the mandatory plan which everyone in the country is required to have. The government makes it
so even the little insurance companies can survive by making the companies with low risk patients
give compensation to companies with high risk patients. This in turn gives citizens the option of
choosing the company they want to get the mandatory insurance through so they can shop around for
the best price. Since every citizen has insurance they are not afraid to go to the doctor for checkups
or minor illnesses. On the other hand since there are high co-payments, people dont abuse the fact
that they have insurance. All these factors combined contribute to the Swiss systems low overall
costs and high quality of care.

Works Cited
Schwartz, Nelson. Swiss Health Care Thrives Without Public Option. The New York Times. 1
October 2009. Web 15 Feb. 2011
<http://www.nytimes.com/2009/10/01/health/policy/01swiss.html>
World Health Organization Statistics <http://www.who.int/countries/che/en/> and
<http://www.who.int/countries/usa/en/>
Hertzlinger, Regina. Parsa-Parsi, Ramin. Consumer-Driven Health Care: Lessons from
Switzerland. Journal of the American Medical Association, Vol.292, No.10, 8 September, 2004
Reinhardt, Uwe, The Swiss Health System: Regulated Competition Without Managed Care, Journal
of the American Medical Association, Vol.292, No.10, 8 September 2004
Tanner, Michael. "The Grass Is Not Always Greener: A Look at National Health Care Systems
Around the World." Policy Analysis. No. 613. 18 March 2008 Web 22 Feb. 2011
<http://www.cato.org/pubs/pas/pa-613.pdf>
Cheng, Tsung-Mei. Understanding The 'Swiss Watch' Function Of Switzerland's Health System.
Health Affairs, 29, no. 8 (2010): 1442-1451 . 13 September 2010 Web 14 April 2011
<http://www.pnhp.org/news/2010/september/understanding-the-swiss-watch-function-ofswitzerlands-health-system>

Appendix

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