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Health care reforms in Europe and their implications for Japan. Peter C. Smith Centre for Health Economics University of York. Structure of presentation. Introduction Promoting cost-effectiveness Cost containment Markets and competition Quality improvement Other aspects of reform

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Health care reforms in Europe and their implications for Japan

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Health care reforms in Europe and their implications for Japan

Peter C. Smith

Centre for Health Economics

University of York

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Structure of presentation

  • Introduction

  • Promoting cost-effectiveness

    • Cost containment

    • Markets and competition

    • Quality improvement

  • Other aspects of reform

  • Implications for Japan

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An acknowledgement:the WHO European Health Observatory

  • Surveys of individual countries Healthcare Systems in Transition profiles

  • Books on important topics:

    • Financing

    • Hospitals

    • Social insurance

    • Purchasing

  • Web site:

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Common features of western European Health Systems

  • A broad package of insured health care, embracing most mainstream health interventions (not always long term care)

  • Universal coverage of all citizens, regardless of financial or health status;

  • Low reliance on direct user charges

  • Financial contributions according to ability to pay, independent of health status (tax or social insurance)

  • High levels of regulation of providers

  • A unifying principle of ‘solidarity’ - the health risks of all citizens are pooled, with contributions to the risk pool unrelated to health status

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Four broad types of health system

  • Social insurance: unreformed

    • France, Austria

  • Social insurance: competitive

    • Netherlands, Germany

  • Public sector: devolved

    • Sweden, Spain

  • Public sector: centralized

    • United Kingdom, Italy

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Figure 1: Public and private health expenditure as a percent of GDP, 2001 (Source: OECD Health Data)

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Life expectancy 2000 (Source: OECD Health Data)

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Preoccupations of European health systems

  • 1980s: Cost containment

  • 1990s: Efficiency and markets

  • 2000s: Quality

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1. Cost containment

  • Gatekeeping

  • Copayments

  • Community care

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1a) Gatekeeping

  • Traditional feature of public European systems (UK, Scandinavia, Italy)

  • In some respects, directed at enhancing quality of care

  • But main focus is on containing costs

  • Some evidence of success

  • Social insurance countries seeking to encourage gatekeeping through payment mechanism (France, Germany)

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Figure 2: Average number of doctor consultations per capita, 2000 (Source: OECD Health Data)

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General practice fundholding UK

  • In force 1991 to 1998

  • Voluntary participation by general practices

  • Average practice size 7,500

  • By 1997, 50% of patients had a fundholding general practitioner

  • Fundholders received budgets from health authority to purchase routine non-emergency surgery and prescribing for patients

  • Emergency and complex surgery paid by health authority

  • Fundholding abolished April 1999

  • To be reintroduced April 2005?

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Difference between fundholder and non-fundholder hospital admission rates

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Gatekeeping principles

  • Limiting access to specialist care

  • Persuading citizens to use preferred providers

  • Potential lever to improve costs and quality

  • Needs to be implemented alongside many other policies

  • Very different effectiveness in different systems.

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1b) Copayments

  • Traditionally low levels of copayment in European systems

  • Widespread voluntary insurance against copayments in some systems, diluting incentive effect (France, Ireland)

  • Tentative experimentation with copayments in public systems (Sweden, Netherlands)

  • Reference pricing as a form of copayment for pharmaceuticals (Germany, Spain etc.)

  • Differential copayments according to lifestyle? Not yet tried.

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Figure 3: Percentage of total health care expenditure in the form of out-of pocket payments (Source: OECD Health Data)

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Copayments for physician visits: German example 2004

  • €10 fee for each first appointment with a doctor in a three month period

  • Some evidence of an effect on demand, but reform may distort the pattern of utilization

  • Concern that the poor and chronically sick will be disadvantaged

  • No market in voluntary copayment insurance yet.

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Reference pricing

  • Designed to encourage use of cheaper generic substitute drugs

  • Involves setting a fixed ‘reference price’ for all drugs within a cluster

  • Patients must pay difference between drug price and reference price

  • Complex technical issues (choice of clusters, choice of referenceprice)

  • Widespread use in Europe (Sweden, Germany, Spain, Italy), but Norway abandoned because ineffective.


    Kanavos, P and Reinhardt, U (2003), “Reference Pricing For Drugs: Is It CompatibleWith U.S. Health Care?”, Health Affairs, 22(3), 16-30.

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1c) Community care

  • Objective is to keep patients out of unnecessary hospital care, and to minimize length of stay

  • Some crude attempts to limit very long lengths of stay (bed blocking) (Belgium)

  • Some discussion of introducing ‘no claims’ insurance premium discount (Netherlands)

  • Incentives for local government to arrange for community care (England)

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Figure 4: Trends in average length of stay, all acute episodes (Source: OECD Health Data)

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2. Markets and efficiency

  • Provider markets

  • Payment mechanisms

  • Purchaser markets

  • Information and markets

  • Health technology assessment

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2a) Provider markets

  • Major efforts to make provider markets more competitive and contestable

  • Clearly relevant to some aspects of acute care, but concerns at implications for chronic care

  • Little evidence on effectiveness of provider markets

  • Little evidence on relevance of ownership of providers

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2b) Payment mechanisms

  • Almost all systems reimburse providers according to some sort of DRG payment

  • Most DRG fee schedules are set passively, according to expected average costs

  • DRG systems are augmented by numerous other payment mechanisms

  • Payment mechanisms less well developed in ambulatory care

  • Key issue is sharing risk within the health system.

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Adjustments to payment mechanisms

  • In Norway, funding of local governments is partly on the basis of DRGs (that is, actual activity) and partly on the basis of risk-adjusted capitation (that is, expected activity).

  • In the Netherlands, some cost-sharing between the payer and the provider occurs once provider costs on a particular patient exceed some threshold.

  • Many systems augment the pure DRG payment with other sources of finance, such as local government subsidies for capital resources (Austria) and tax subsidies (Belgium).

  • In Germany, patients in registered chronic disease programmes attract additional capitation payments for sickness funds [23].

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2c) Purchaser markets

  • Payers for health care (local governments or insurance funds) have tended to reimburse passively

  • Major efforts to make sickness funds competitive in social insurance systems (Netherlands, Germany, Belgium)

  • Early experience suggests the a concern with the risk adjustment process, needed to create a fair market and prevent cream skimming of rich, healthy patients

  • Little evidence of benefits in terms of quality or efficiency

  • Key issue: how to reconcile active purchasing with the patient’s traditional freedom to use any provider and fixed fee schedule.

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Risk Adjustment 1:Age and sex: English Acute sector

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Risk Adjustment 2: Additional needs: English Acute Sector

  • Limiting long-standing illness (under 75)

  • Mortality (under 75)

  • Unemployment

  • Older people living alone

  • Single parent households.

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The outcome of the English redistributive system

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How much greater should the funding gap be?

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2d) Markets and information

  • Information is a key resource in the functioning of health care markets

  • Traditionally poor level of information on costs and quality

  • Great opportunity to enhance information base for patients and collective purchasers

  • Concern about distortions induced by public reporting.

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English performance ratings: acute hospitals





Hospitals with the highest levels of performance

Hospitals that are performing well overall, but have not quite reached the same consistently high standards

Hospitals where there is some cause for concern regarding particular key targets

Hospitals that have shown the poorest levels of performance against key targets

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Performance ratings – key targets 2002

  • no patients waiting more than 18 months for inpatient treatment

  • fewer patients waiting more than 15 months for inpatient treatment

  • no patients waiting more than 26 weeks for outpatient treatment

  • fewer patients waiting on trolleys (gurneys) for more than 12 hours

  • less than 1% of operations cancelled on the day

  • no patients with suspected cancer waiting more than two weeks to be seen in hospital

  • improvement to the working lives of staff

  • hospital cleanliness

  • a satisfactory financial position


    … a satisfactory quality inspection.

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York Hospital Performance Rating

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York Hospital Performance Rating 2002continued

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Effect of performance ratings

  • Positive impact on ‘key targets’

  • Some concern that gaming or fraud has distorted the information provided by organizations

  • Also concern about unintended side-effects on unmeasured aspects of health care

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2e) Health technology assessment

  • Universal move towards defining an ‘essential’ package of care

  • Principal criterion for inclusion in package is cost-effectiveness of interventions

  • Experience at a very early stage

  • An enormous task, with numerous methodological and practical complexities

  • Many countries setting up health technology assessment institutes (England, Finland, Germany, Sweden)

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3. Quality improvement

  • Professional improvement

  • Patient empowerment

  • Incentives for quality

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3a) Professional improvement

  • Two distinct perspectives:

    • Supporting professional best practice (e.g. Netherlands, Sweden)

    • Identifying unsafe practitioners (e.g. England)

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Rectal Cancer Surgery

Prostate Cancer

Bladder Cancer

Sarcoma Group

Esophageal and Gastric Cardia Cancer

Cervical Cancer Screening

Stomach Cancer

Malignant Melanoma of Skin



Total Hip Replacement

Knee Replacement

Rheumatoid Arthritis

Lumbar Spine Surgery

Spinal Cord Injury

Pain Rehabilitation

…. about 50 in total.

SWEDENSome active quality registries

Source: Rehnqvist, N. (2002), "Improving accountability in a decentralised system", in P. Smith, Measuring up: improving health systems performance in OECD countries, Paris: OECD.

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Identifying unsafe practitioners:could surveillance have detected Bristol early?

DJ Spiegelhalter, R Kinsman, O Grigg and T Treasure. (2003) ‘Risk-adjusted sequential probability ratio tests: applications to Bristol, Shipman, and adult cardiac surgery’, International Journal for Quality in Health Care15:7–13.

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3b) Patient empowerment

  • Contradictory pressures within Europe

  • Some public systems seeking to enhance patient choice (Denmark, England)

    • Purpose is to enhance quality (principally waiting times)

  • Some social insurance systems seeking to circumscribe patient choice (France, Germany)

    • Purpose is to encourage use of ‘preferred providers’ (quality and cost)

  • Information for patients is a key resource in promoting choice

  • Notion of giving a voucher (or cash payment) to chronic patients – some tentative experiments.

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3c) Incentives for quality

  • Increased evidence of wide variations in clinical quality

  • New ability to measure quality

  • Publication of quality data not enough to secure improvement in clinical performance

  • Direct incentives needed to secure improvement.

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New General Practitioner contract

  • Each practice can earn ‘quality points’ according to reported performance

  • 146 performance indicators

  • 1,050 points distributed across indicators according to perceived importance

  • Points based on absolute level of attainment (not adjusted for local difficulty)

  • About €110 per point for an average practice, but increasing if a difficult environment

  • Minimum income guarantee (no loss of earnings)

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GP Contract:Indicators and points at risk

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GP Contract: Clinical indicators

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Hypertension: indicators, scale and points at risk

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Some other European concerns

  • Sustainability of finance sources

  • Manpower

  • Pharmaceutical regulation

  • Aging population

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Implications for Japan

  • General themes from Europe

  • Lessons from reform

  • Relevance to Japan

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Four weaknesses of social insurance systems

  • The narrow finance base;

  • Sickness funds securing quality or cost control over providers;

  • Lack of control over expenditure growth;

  • Lack of accountability of providers to insurers and patients.

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Some reforms that can address weaknesses

  • Cross subsidy from general taxation or other sources of finance

  • More active purchasing of health services by insurers

  • Incentives for patients to use preferred providers

  • Increased application of health technology assessment

  • Gatekeeping

  • Reform of copayment policy

  • Enhanced information, particularly on the quality and costs of providers

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Three ‘headline’ issues for Japanese policy?

  • Improvement of comparative information on the quality and efficiency of providers and insurers.

  • Experimentation with financial incentives for patients.

  • Encouragement of more active and flexible purchasing by sickness funds.

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