Six years following the introduction of universal health insurance in the Netherlands, there are serious concerns about its escalating cost and the containment of the cost of services in the coming years is now the major challenge facing health managers there, writes Maureen Browne.
Six years following the introduction of universal health insurance in the Netherlands, there are serious concerns about its escalating cost and the containment of the cost of services in the coming years is now the major challenge facing health managers there.
In 2006, the Netherlands – beset by a costly two-tier public and private healthcare system, where public patients had difficulty in accessing services in a timely manner and with concerns about efficiency, quality and productivity – began a major reform.
The aim of the reform was to marry the aspiration of universal coverage with the principles of regulated competition.
Six years later, the services have improved dramatically and are lauded as the best in Europe. Waiting time for hospital treatment and specialist care have either disappeared or are greatly reduced, hospital productivity has increased significantly and in 2008 and 2010, the Netherlands ranked first on the Euro Health Consumer Index, which measures quality of healthcare system in Europe. (In 2010, Ireland was ranked 13th out of the 34 countries surveyed.)
However, this has been achieved at the expense of very significantly increased health care spending. The Netherlands’ expenditure on healthcare is equivalent to 12 per cent of GDP, (the third highest in the OECD) while total expenditure on healthcare increased by 16.4 per cent between 2008 and 2009 and the cost per consultation is higher than in most other countries.
As it stands at present, the system also favours in-patient care at the expense of outpatient care, even when outpatient care might be clinically and socially more appropriate. Interestingly, about 90 per cent of the population take out supplementary healthcare insurance which covers specialties such as dentistry and physiotherapy not covered in the basic plan.
Prior to the 2006 reform, primary and hospital care services in the Netherlands were based on a two tier system – private healthcare for those with above average income (at that time the limit was about €33,000) and a less effective state provided care system for the lower income people.
Long term care for chronic conditions was – and continues to be – covered by a separate insurance fund (based on the Long Term Medical Expenses Act), to which all Dutch citizens must contribute.
Under the reforms, the system of funding for primary and hospital care was replaced by a compulsory universal basic private health insurance scheme, with identical entitlements and contributions for all.
This is financed in two ways – by individual insurance premia (which covers about half the cost) and a government taxation fund into which employees in 2012 pay 7.1 per cent over a maximum of €50,064 of their taxable income and the self employed and pensioners pay 5.0 per cent. The Department of Health is the regulatory and standards body.
Six years later, the services have improved dramatically and are lauded as the best in Europe, waiting time for hospital treatment and specialist care have either disappeared or are greatly reduced, hospital productivity has increased significantly.
Low income people (those earning around €36,022 or less per year as a single person household or €54,264 euro as a couple in 2012) and those on social welfare receive tax credits to help with their premia. The small number who fail to take out insurance (about 2 per cent) have a fine of about 130 per cent of the annual premia deducted directly from their wage packets.
Managed competition has been introduced in the hospital markets, with health insurers and health providers given more freedom in contracting.
The basic health insurance is provided by 14 competing not for profit private insurance companies and several related subsidiaries. The basic package covers hospital care, care by GPs and medical specialists, prescription drugs, maternity care, obstetrics, technical aids and dental care for children.
Insurers are required to accept each applicant at a community related premium, regardless of age or pre-existing health conditions. People can switch health insurer once a year, over a six week period, and about five per cent switch annually.
Approximately half of the total cost of the health services is financed by insurance premia with the remainder paid to the insurers from a risk equalisation fund. The funding of this risk equalisation fund comes from the income dependent premiums.
Insurance companies receive risk equalisation payments to compensate for high risk members and the care of children under the age of 18.
The basic insurance package costs members about €1,200 a year (which is paid directly to the health insurer) and there is a compulsory deductible of €220 a year in 2012 for hospital care. About 90 per cent of the population buys a supplementary health insurance package as well. This covers for specialties such as dentistry and physiotherapy which are not covered in the basic package.
For the first five years following the introduction of the new system, all the major health insurers made losses on the basic health insurance. These losses were covered by capital the insurers had accumulated previously and profits on the supplementary insurers. At present, most insurers make a small profit on the basic package as well.
The Netherlands’ expenditure on healthcare is equivalent to 12 per cent of GDP, (the third highest in the OECD)
Insurers contract directly with health care providers and are increasingly engaging in preferred-provider contracts, providing incentives to their customers to use these preferred providers. They can waive deductibles when customers use one of the preferred providers.
Insurance companies work with local, regional or national patient groups to develop patient-centres criteria for contracting care providers. Insurers have become more and more interested in the preferences of patients when purchasing care. They also use selective contracting, offering faster access to care in one hospital which at the same time lengthening waiting times at others. Insurers use the length of waiting time to steer patients to better quality hospitals.
Hospitals are reimbursed on the Basis of Diagnosis Treatment Combinations (DBCs). The seven figure DBC code specifics the diagnosis and the normative treatment in terms of consultations, diagnostic tests, treatment and normative time spent on the patient by medical specialists. The DBC price covers the full costs of treatment, including hospital stay, materials, costs of physicians and staff and compensation of equipment and building costs. This replaces the former funding system where hospitals received separate budgets for beds, building and renovation, purchase of equipment and treatment of patients. As a result of the changeover some hospitals have started to make financial losses and a few have become insolvent.
For about 70 per cent of all hospital interventions DBC prices are freely negotiable and hospitals compete on price and quality of care. The Health Authority sets prices in healthcare markets where prices are not freely negotiable.
The DBC also determines the compensation of medical specialists. For each hour allocated by the DBC for a medical specialist, the consultant receives €132.50 and consultants’ remuneration is determined by the total number of DBCs. On average, consultants in the Netherlands earn about €250,000 per year
There are about 98 general hospitals in the Netherlands and they are not for profit. There is also a growing number of independent treatment centres which provide specialised ambulatory care, day care and in some cases in patient care for selective treatments.
Quality of care is monitored by the Health Care Inspectorate and major mergers between health care organisations are subject to approval of the Netherlands Competition Authority. The Competition Authority can also intervene and impose sanctions when two or more health care organisations are colluding to increase prices or trying to divide the market between themselves. A quasi governmental institution, the College of Health Insurance, advises the Minister of Health about the content of the insurance package and the inclusion of innovative treatments for reimbursement in the basic health insurance package.
As a result of the changeover some hospitals have started to make financial losses and a few have become insolvent.
The major challenge facing the health care service in the Netherlands now are financial with the greatest risks the costs of hospital care, mental health care, GPs and pharmaceuticals.
For hospital costs there was a risk sharing mechanism where high hospital costs are partly shared between insurers. Insurance companies are also compensated if the macro budget for health care – on which the premia levels are based – is exceeded. These risk sharing arrangements are now gradually abolished, resulting in more risk expose for health insurers on costs of hospital treatment.
Prof. Wim Groot, Professor of Health Economics at Maastricht University and a member of the Council of Public Health Care in the Netherlands said “These compensation mechanisms considerably reduce the financial risk for insurers and consequently the incentives for insurers to force hospitals to reduce costs and increase efficiency.
“It also discourages substitution of inpatient care by outpatient or pharmacotherapeutic care. This lowers the efficiency of the system, hampers welfare gains attributed to the utilisation of innovative drugs and may reduce the potential gains in quality of life of patients as they do not receive the best available treatment. Health insurers have had little incentive for cost containment in the hospital sector in favour of outpatient care and innovative pharmaceutical care even when the utilisation of innovative drugs is more cost effective.
“The performance of the health insurers in cost containment is poor. The annual real growth rate of health care is 4 – 6 per cent. Insurers have been most active in reducing costs of generic pharmaceuticals, with most insurers having a policy under which only the cheapest drug within a class of identical generic drugs is reimbursed. This has reduced spending on pharmaceuticals by approximately €500 million a year or 5 – 10 per cent of the total costs.
“Eliminating the risk mechanisms for the health insurers is one of the most important tools to provide insurers with more incentives to control costs. The overwhelming evidence for a positive relation between quality and efficiency will eventually force health insurance companies to make purchasing decisions based on quality instead of exclusively on prices.”
