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The Dutch Disease: Holland is not a model for US health care.

Stirling Newberry's picture

It isn't like this isn't obvious: the Commonwealth fund comes out and says that mandatory private insurance is the model for the US. It's BoD has on it the chair of Obama's MedPac and Presidents of leading private insurers and for profit Hospitals. Call it the Third Way Think Tank for how to defeat Single Payer, without dirtying their hands with the facts that it works better. The facts are "a non-starter."

So why is the Dutch Model a bad one? Well, because it isn't a model. Let's do the numbers.

The reports from its advocates glow with admiration, the new system in the Netherlands provides private choice, for profit health care services, universal coverage, and lower cost. Private profit and cost containment, with no fewer government bureaucrats. They love it. Delving in to the specifics, they should seem very familiar to anyone following Obamacare: mandates, a basic private insurance package, requirement to take patients, and social insurance remaining in place. In short, one could almost translate the outline of the 2006 act, and elaborate the details in English.

Let's roll the drool footage:

While no nation can be deemed "the best" in terms of its health care system, the United States is consistently outperformed in such areas as the prevention of medical errors, the provision of timely care for all citizens, and coordination of care. The U.S., it would seem, could learn from models and best practices used in countries that have achieved these higher levels of performance. One such country is the Netherlands. In 2003, this nation of just over 16 million people spent 9.8 percent of its gross domestic product on health care, below the spending levels in Germany, France, and Canada and more than one-third less than the percentage spent in the United States (Table 1). Even under the constraints of this budget, the Netherlands has implemented a number of health sector reforms that have led to important quality improvements.

or this one from The Century Foundation:

In a recent issue of Health Affairs, Wynand van de Ven and Frederik T. Schut, two professors at Erasmus University in Rotterdam, authored an excellent profile of the Dutch health care system, which includes some appealing features that might serve as a model for the United States. [Click these links for earlier pieces on Germany and China.]

Why should we care how they deliver health care in a tiny country most of us will never visit? Few European health care systems have garnered the kind of attention from Americans that the Dutch system has received—especially from folks not known for their Euro-philia, including the Bush Administration. In the fall, the White House sent a delegation to the Netherlands to learn more about the Dutch system. The Wall Street Journal also has praised the Dutch system for accomplishing “what many in the U.S. hunger to achieve: health insurance for everyone, coupled with a tighter lid on costs.”

What could make conservatives entertain the possibility that we might learn from Europeans? Under the Health Insurance Act of 2006, the Dutch have created a system of universal coverage delivered entirely through private insurers. In this, the Dutch plan is very much like the plan Dr. Ezekiel Emanuel proposes for the U.S. in his new book Healthcare, Guaranteed. (We wrote about Emanuel’s plan here and here), calling it a “fresh” proposal for reform.)

Consumers Have Choices

For those Americans uncomfortable with the idea of “Big Government” delivering their health care, the Dutch model is appealing. And Americans are bound to like the idea that consumers have many choices: according to the Commonwealth Fund, there are 14 private insurance companies in the Netherlands and several related subsidiaries. This means that individuals can shop for insurance—a process made all the easier by a Dutch government web site “where consumers can compare all insurers with respect to price, services, consumer satisfaction, and supplemental insurance, and compare hospitals on different sets of performance indicators.” Thus, much to the delight of consumer-minded health care reformers, the Netherlands has essentially institutionalized comparison shopping.

There are only a few problems here. One: It doesn't work as advertised. Two: The United States is not Holland. And three: The data doesn't say what they says it says. Let's read the lede that The Century Foundation buried:


Already, competition between insurers has led to a “premium war,” with insurance companies reducing their premiums to attract customers. The result in 2006 was a total loss of €563 million (2 percent of revenues) in 2006. In other words, competition is leading to losses —which affects the capacity of an insurer to survive. Meanwhile, individuals looking for a better deal keep switching plans: in 2006, an all-time high of 18 percent of the Dutch population switched insurers.

This may sound like competition is working—and in a way, it is. But the early stages of competition in a new market have a way of thinning the herd—and as insurers see their profits and customer base erode, their number will decrease. Already, insurers have begun to merge with their competitors to survive. As a result, about 90 percent of the Dutch population is insured by six large insurers, while the other 10 percent is insured by seven smaller, regional insurers.

In other words, this system is still in the stages where the companies involved are willing to absorb losses to make future profits. It hasn't had to run the health care system for any length of time, which means that progressive incentives to avoid investment haven't happened yet. In this stage, given a choice between investing in capital, and providing treatment to a current customer, the customer gets treated.

This is because the system has only been in place for three years. One can't call it a model, until it has demonstrated, at least in theory, that it can sustainably run a health care system. And right now, it is running at a loss. In the long term, the Dutch system most resembles Switzerland, which has the highest health spending percentage per capita other than the United States.

Another source of savings? The Dutch are low users of health care:

In the Netherlands, most women try to have their babies at home. They view giving birth as something that should be natural, not medical, Schnabel says, and services across the country reinforce this idea. For example, in Amsterdam there's a center for pregnant women that combines a spa, shopping center and school — not something one would likely see in the United States.

Only 8 percent of all Dutch women use epidurals for pain relief during childbirth.

Pain helps guide the birthing process, says midwife Beatrijs Smulders, one of The Netherlands' most vociferous proponents of natural childbirth.

Another factor which is pushed aside by the glowing reviews is that the Dutch system isn't all that good at outcomes relative to risk. For example, the Commonwealth Fund pushes the lower cost versus Germany's in GDP terms. However, Germany has an older, sicker, population with larger rural sectors. Adjusting for size, East Germany's general lower standards of health, and percentage of elderly, and the Dutch system comes out to be exactly as cost effective as the German system.

What is likely to happen is that the Dutch system will evolve either in the direction of a great deal more "management" in the competition, or into more "non-profit" in the provision of health insurance, or more subsidies. The Dutch system is very heavily dependent on subsidies.

It also tolerates a very high level of administrative overhead and profit compared to single payer systems, 5% versus 1%. In the US that number is closer to 30%. It isn't competition that is making the difference between 30% and 5%. Instead, it is that the Dutch insurance industry, in general, is more heavily regulated and treated far more as a utility.

What the Dutch system is then, is monetizing national frugality, reducing long term investment, reaping a short term gain during a predatory price war, and an already more heavily regulated insurance environment, plus a more favorable risk pool. Adjusting for the risk factors shows that the Dutch system provides almost the same quality of care for cost as the German model, and adjusting for price discovery and consumer preferences means the dutch are doing worse.

What the numbers say is not that competition has resulted in any cost savings, rather that the Dutch have decided to ration care by income, particularly end of life care. And that's precisely the problem. Euthanasia is an acceptable cultural option in Holland, and avoidance of medications and treatment is common. Their elder population is lower. So if Obamacare wants to see the cost benefits of the Dutch system, it would logically have to discourage hospital treatment, use of pain killers, mandate euthanasia, and shrink the size of the US elderly population. Oh, and fewer dentists: for example Germany has 8 per 1000, Holland only 5. For reference, the US has 16.

The reality here is that the rationing of Dutch health care falls, where it does in almost every developed world private system, on the not quite healthy young: the people who could use health care, but don't need it. The costs of doing this does not show up for decades, until they are dropped on public insurance, and so there is a short term cost savings. Which the Dutch have pocketed and run with.

In the US, when this has been tried, for example in The Commonwealth Fund's stomping grounds of Massachusetts with its higher risk population, lower density, higher health care consumption, the result has been very predictable: The costs have ballooned, quality of care has deteriorated, and larger proportions of the population have opted out, while budget cutters slice subsidies for insurance.

But you aren't going to hear this, because many of the articles out there are plants from people who have an axe to grind. This is pretty general: Very few people can be independent for any length of time. Sooner or later the pressure is to be a shill for a special interest. Need an example? Consider this article, which supposedly balances the virtues of the French against the Dutch model. It doesn't do any of the numbers to show how the Dutch model is simply going through a low cost phase on the road to a high cost future.

The author? Paid for by the Commonwealth Fund.

In short, Massachusetts is already coming down, with the Dutch Disease.

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Comments

Valley Girl's picture
Submitted by Valley Girl on

for this excellent post.

I'm getting so tired of the "baffle 'em with bullshit" approach.

cal1942's picture
Submitted by cal1942 on

Left as is it looks like the Dutch system could end up with one private insurer. Then IT could really hit the fan.

The bullshit studies we'll see thrown around will be given a high media profile. No one seems to do disinterested anymore.

We have to thank for this the neo-Liberals who permeate the entire Obama administration and that includes the occupant of the Oval office.

The outlook isn't brilliant.

selise's picture
Submitted by selise on

great post, thank you stirling.

another MA resident here... and i'm just astounded how little attention our efforts (and failures) at reform have gotten.

mass's picture
Submitted by mass on

I'm trying to sound the alarms bells, you don't want Romney-Care!, but so many people seem to be just sticking their fingers in their ears. I read your comments(I think it was you) at FDL about HCAN. Very informative.

selise's picture
Submitted by selise on

yeah, that was me at fdl. i am tolerant of people with different tactics/strategy and similar. but i can't stand dishonesty, manipulation and stupidity when combined with arrogance. so, i HATE hcan.