The 'Zurich Model' – a market-based approach to health care reform Dr. Ulrike Götting VFA - German Association of Research-Based Pharmaceutical Companies Civitas Health Policy Roundtable Cologne, 22 February 2005

Cologne Roundtable | 22 February 2005 | U. Götting, VFA| 2 Agenda VFAs approach Key points of the proposal Its feasibility

Cologne Roundtable | 22 February 2005 | U. Götting, VFA| 3 Current Health Policy Since the late 70s, the model of health policy in Germany (as in many other European countries) has been: selective interventions – no fundamental changes of the health care system in place policies primarily aimed at cost containment favourite policy tool: new regulations

Cologne Roundtable | 22 February 2005 | U. Götting, VFA| 4 Future-oriented Health Policy The old model no longer works. To make the health care system fit for the 21st century, we need to: design and carry out a comprehensive structural reform foster competition in all sub-sectors of the system adjust policies for a consumer-driven health care system

Cologne Roundtable | 22 February 2005 | U. Götting, VFA| 5 The 'Zurich Model' The VFA asked Professor Peter Zweifel and Dr. Michael Breuer, Socioeconomic Institute, University of Zurich, to develop a proposal for comprehensive health care reform in Germany. Their reform proposal aims to reduce the role of government in health care as much as possible and, at the same time, to empower citizens to make decisions that affect their own health. The VFA has been advocating for this proposal since 2002.

Cologne Roundtable | 22 February 2005 | U. Götting, VFA| 6 Outline of the proposal free choice of health insurance tariffs health coverage for all citizens individual, risk-appropriate premiums tax-financed social transfers freedom of contract for health insurers and providers benefits financing contracting

Cologne Roundtable | 22 February 2005 | U. Götting, VFA| 7 1. Reform of the benefits catalogue choice of insurance coverage and providers –individuals should be given the opportunity to determine the nature and extent of their health insurance coverage (as to services covered, deductibles, preferred providers, etc.) –informed consumers need good information and consultation compulsory health insurance for all Germans –basic safety net, limited on financially 'high risks' –catalogue to be defined by the government

Cologne Roundtable | 22 February 2005 | U. Götting, VFA| 8 2. Reform of the financing system insurance-related health care funding –detachment of SHI contribution from employment –move to individual, risk-appropriate health contributions –insurance premium will have the function of a price and, thus, will actually allow for competition among health insurers additional transfer scheme –at the same time, the social redistribution task must be reorganized outside of the health care system –government should provide low-income people with adequate resources to be financed from tax revenues

Cologne Roundtable | 22 February 2005 | U. Götting, VFA| 9 3. Reform of the contracting scheme individual contracts between health insurance companies and service providers –instead of joint and uniform collective agreements –implies that health insurers will no longer be governed by public law, social and private health insurance schemes will merge effective competition law and antitrust legislation needed

Cologne Roundtable | 22 February 2005 | U. Götting, VFA| 10 The role of government consumers insurer provider govern -ment diversity of tariffs (based on individual premiums) diversity of contracts (fees, quantity and quality of services) transfers compulsory insurance control of competition, antitrust

Cologne Roundtable | 22 February 2005 | U. Götting, VFA| 11 What would be the benefits of the new system? patients / insurees: empowerment health care system: greater efficiency by competition national economy: impulses for growth and employment maintance of affordable health coverage financing of redistribution by all taxpayers more transparency in health care funding

Cologne Roundtable | 22 February 2005 | U. Götting, VFA| 12 How do we get there? Step 1: preparatory measures (e.g. converting employers contributions into wages; introduction of cost reimbursement principle) Step 2: policies to strengthen competition among insurance funds (expanding contractual freedom; differentiating the benefits catalogue) Step 3: move to new health care funding scheme (individual premiums; tax-transfer system; free contracting) Scenario for two legislative terms suggested by Zweifel/Breuer:

Cologne Roundtable | 22 February 2005 | U. Götting, VFA| 13 Feasibility Estimates by Zweifel/Breuer show that the changes in health care financing suggested could be adopted without additional financial obligations for public authorities. All parties involved – consumers, insurance funds, providers – must have time to adapt to the new system. This militates for a stepwise implementation. Market-based health care is an open system: We cannot design the future system in detail at the drawing table.