We’re Not Switzerland

December 20, 2009

The pro-Senate health bill contingent keeps trotting out the example of Switzerland to buttress their arguments.  Here’s a quick recap of why the comparison doesn’t work:

First or all, Switzerland is a wealthier country: OECD figures show that the median household income there in 2007 was $60,288, versus $50,233 in this country. Despite their greater prosperity, roughly one-third of its citizens receive financial assistance from the government to pay their premiums.   If you increased the average American’s salary by 20% and then offered them health insurance for no more than 8% of their total income, who wouldn’t take that deal?

Defenders of the Senate’s excise tax use past wage and benefit trends to argue that the tax will cause benefits to be cut – but that employers will give that money to employees in the form of wages.  Unfortunately there are new studies like Towers-Perrin’s (pdf)  which show compellingly that isn’t true.   (Only 9% of employers surveyed said they would share any of the savings with employees, much less give them the whole amount.)

All insurance companies in Switzerland are non-profit, too. What’s more, the Swiss system includes price controls that would never pass ideological muster in the US.

Benefits are also much stronger there.  At a current exchange rate of nearly 1:1 between the Swiss franc and the US dollar (0.96:1.0), the Swiss typically have a government-mandated deductible of roughly $300 dollars for a basic plan (deductibles can be several times that under the Senate bill).  After the deductible is met, Swiss insurance pays 90% of all medical costs (much more generous than what we typically have), up to an out-of-pocket limit of – get this – roughly $700 per year per person.

So the maximum out-of-pocket cost for care in Switzerland is $1,000 per year adult (unless they choose more minimal coverage).  In a typical Swiss plan, two adults and two children would pay a maximum of $2,700 in out of pocket costs in their worst year, regardless of income.  In this country even a family of four struggling to get by on $54,000 could pay up to $5,000 under the Senate bill (and that’s after paying $4,000 in premiums).

And here’s another point:  Given the wage difference between the US and Switzerland, our family would be earning nearly $65,000, not $54,000.  That renders the US/Swiss comparison even less valid.

Ironically, any American plan with benefits like those would be a likely target for the Senate’s excise tax.  A percentage of its benefits would be taxed at 40% – meaning that plan benefits would probably be slashed.  at which point it wouldn’t be a  Swiss-style plan anymore …

But wait, there’s more.  Those nonprofit Swiss insurers are forbidden to charge any more for a 90-year-old than they do for a young and healthy adult, while wide variances (3 times or more) are permitted in the Senate bill.  Not only are the Swiss protected from having their premiums go up as they get older – a protection not afforded by the Senate bill – but the excise tax will exacerbate our  American “age penalty” by disproportionately affecting health plan whose members are older than average.

Needless to say, the Swiss pay much less in healthcare costs than we do, and their costs are rising much more slowly.

This bill doesn’t do things the Swiss way. You can’t impose a Swiss-style mandate on a system that is more expensive, provides less benefits, and is profit-based, unless you provide meaningful cost controls and more equitable coverage. If you also decide to tax any benefit plan that begins to approach Swiss-style coverage, you’ve rendered the comparison completely meaningless – if it wasn’t already.

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