Switzerland: Regarding Health System Reform

BY EMILY THACHER

Executive Summary

Twenty years ago, the Swiss health sector faced two key problems: rising inequality and rising costs. In an effort to strengthen solidarity and contain costs, the Swiss passed a major healthcare reform bill called LAMal in 1994. Inspired by the French and German systems, it established meaningful universal coverage through a regulated private market. The reforms were successful at expanding access to care while maintaining quality and choice, but costs remain high. Between 1995 and 2012, health expenditure per capita more than doubled in real terms. Containing costs is the most critical issue in the Swiss healthcare system, but preparing for the shifting burden of disease and improving data on health inequities are also important objectives.

Motivations for Reform

Twenty years ago, the Swiss health sector faced two key problems: rising inequality and rising costs. Both problems resulted from the rise of for-profit insurance companies.

Traditionally, the Swiss bought into private insurance plans through their employers. Because these insurers were not selective about whom they covered, very nearly all employed people had health insurance. In the 1980s, however, the few for-profit insurance firms began buying up the old nonprofit plans. Tending to their bottom line, these firms increased premiums, refused to cover high-risk people, and denied expensive claims.

By 1993, spending had skyrocketed, even as coverage had dropped. Swiss per-capita spending on healthcare was second only to the United States. Moreover, nearly 400,000 Swiss, or about 5% of the population, did not have health insurance. For some, healthcare had catastrophically expensive or even unaffordable.

To the Swiss, this was unacceptable. Switzerland was not only a rich country—in 1993 it had a GDP per capita equivalent to $36,027 2014 USD—but also a country that believed strongly in the principle of solidarity. The fact that healthcare was accessible to some but not to all was a violation of a core national value. The problem would only worsen if costs continued to rise.

Health Reform

In an effort to strengthen solidarity and contain costs, the Swiss passed a major healthcare reform bill called LAMal in 1994. With LAMal, policymakers struck a balance between the two Swiss values of capitalism and solidarity.  Inspired by the French and German systems, it established meaningful universal coverage through a regulated private market.

Universal Access to the ‘Basic Package’

The primary goal of reform was to ensure all Swiss citizens access to essential care. In order to accomplish this, the law requires that all individuals purchase health insurance from a private insurer. Insurers must charge all people the same price for a given health plan; individuals who cannot afford the premium even for a basic plan receive tax-financed subsidies from their cantons. Insurers are required to accept all applicants and cover them for a ‘basic package’ of services. The list of services is determined by the federal government on the bases of appropriateness, medical effectiveness, and efficiency.

Because insurers must accept all applicants and charge them the same premiums, it is necessary to equalize risks between insurers. A government body is therefore responsible for redistributing funds from lower to higher risk health plans. The transfers are determined on the basis of age and sex of enrollees.  

Containing Costs While Maintaining Choice

The second goal of reform was to contain costs without limiting consumer choice more than necessary. The reform tried to control costs by limiting profit and preventing overutilization. Profits are kept low in two ways. First, insurers are prohibited from making a profit on basic plans that cover no more than the basic package. Second, the various insurers are supposed to compete with each other to drive down premiums. Patients are also discouraged from getting unnecessary care in two ways. First, patients can only seek care from providers that are in their canton of residency and are accredited to receive reimbursement for providing basic treatment. Second, deductibles and copayments share the immediate financial burden with the patient. The federal government sets a minimum and maximum deductible of about $300 and $2600 USD; the insurer sets the level within this range. Once the deductible has been met, the patient still pays 10% of the remaining costs, unless these costs amount to more than about $730 over the year.

In order to allow individuals the freedom to choose from among a diverse range of options, everyone also has the right to purchase supplementary insurance to cover anything beyond basic care. For these supplementary plans, insurers are permitted to make a profit and deny certain individuals coverage. This gives individuals greater ability to choose the care they want—yet that freedom comes at the expense of equality, since not all Swiss are able to afford supplementary plans.  

Service provision and payment

Healthcare service provision is generally organized at the cantonal level, with only a moderate amount of federal supervision. Cantons have relatively little power over primary care provision, while they have increasingly more over hospital-based care. In all cantons, primary care providers typically work in independent practices and are paid by insurers on a fee-for-service basis. Hospital-based care provision and payment, however, varies greatly between cantons. Until 2012, hospitals in most cantons were paid on a per diem basis. Public hospitals were also eligible for cantonal funding while private hospitals were not. A new reform law passed in 2007, however, has caused all hospitals to receive payment from insurers through a diagnosis-related group (DRG) system. The DRG system compensates the hospital on a case basis instead of a fee-for-service model. This system incentivizes use of best practices and discourages long hospital stays.

Outcomes of Reform

The reforms were successful at expanding access to care while maintaining quality and choice, but costs remain high.

Health indicators have tended to increase since the reform, although only marginally because they were very high to begin with. From 1994 to 2012, life expectancy at birth increased from 78 to 83 years, giving Switzerland the fifth highest life expectancy in the world. Similarly small improvements were observed in the maternal mortality ratio and infant mortality rate.

Health system performance indicators have also been favorable. The 5% of the population that was uninsured in 1993 is now covered, there has been about a 25% increase in the number of physicians per capita, and patient satisfaction indicators are unusually high.

Costs, however, have increased, and out-of-pocket spending has decreased only marginally. Between 1995 and 2012, health expenditure per capita more than doubled in real terms. Over the same period, total health expenditure and public health expenditure as percents of GDP grew from 9% to 11% and 5% to 7%, respectively. Meanwhile, out-of-pocket expenditure fell from its 1995 level of 33% of health expenditure, but only to 28%.

Remaining Challenges and Recommendations

Containing costs is the most critical issue in the Swiss healthcare system, but both preparing for the shifting burden of disease and improving data on health inequities are also important objectives.

The primary driver of high costs has been the expansion of the basic service package without attention to cost-effectiveness. The federal government currently determines service inclusion on the bases of effectiveness, appropriateness, and efficiency, but the process is not transparent. Initially conceived as a package of truly basic services, the package now includes a far wider range of services, some of which are not cost-effective. In order to contain growing costs while providing the maximum health benefit, the federal government should add cost-effectiveness to its list of criteria.

A further consideration is Switzerland’s aging population and shifting burden of disease. As the populace has become more sedentary and adopted a less balanced diet, obesity, hypertension, and other risk factors for noncommunicable disease have risen. At the same time, new medical technologies keeping people with chronic diseases alive longer. As the burden of chronic disease increases, demands on the hospital system are likely to surpass current capacity. The best response, however, is not to expand hospital capacity. Instead, more emphasis should be placed preventing disease through public health efforts and primary care.

Finally, new and better data must be collected to determine the level of inequity in the system. Because each of the cantons functions semi-autonomously, there is not strong central data collection. Improved data collection and sharing systems are needed to determine whether the systems’ fragmentation is masking important health inequities.  

Final Comments

Switzerland’s health reforms over the past two decades have balanced the demands of solidarity and capitalism. Swiss citizens enjoy universal coverage as well as a high level of choice among providers. Nonetheless, the disregard for cost-effectiveness and lack of data on health equity are dangerous to the health system’s long-term sustainability and will need to be addressed in the near future.

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T.R. Reid, The Healing of America: A Global Quest for Better, Cheaper, and Fairer Health Care (Penguin Group US, 2010), 179-80.

World Development Indicators. World Bank Databank. Accessed Nov 14 2014.

Claire Daley et al., “Healthcare Systems: Switzerland,” (Civitas, 2013).

WHO OECD, “Oecd Reviews of Health Systems: Switzerland,” (2011).

Daley et al., “Healthcare Systems: Switzerland.”

Ibid.

Thomas Lufkin and Stefan Stefaniak, The Introduction of Swissdrgs in Switzerland (EMBA Healthcare Management Conference: Paianet, 2012).

World Development Indicators. World Bank Databank. Accessed Nov 14 2014.

Mark Rovere and Bacchus Barua, “Opportunity for Health Reform: Lessons from Switzerland,” Fraser Forum  (2012).

World Development Indicators. World Bank Databank. Accessed Nov 14 2014.

OECD, “Oecd Reviews of Health Systems: Switzerland.”

World Development Indicators. World Bank Databank. Accessed Nov 14 2014.

OECD, “Oecd Reviews of Health Systems: Switzerland.”

Ibid.

Ibid.