Building a competitive insurance system: Switzerland's strategy for managed-care healthcare

This paper applies the five standard criteria for assessing the performance of an economy to one of its sectors, namely, the provision of health care. They are (1) matching of consumer preferences, (2) technical efficiency, (3) adaptive capacity, (4) dynamic efficiency, and (5) a distribution of income that provides incentives for producers to attain criteria (1) through (4). Being insurance-based, the Swiss healthcare system comprises three contractual relationships that can be judged in the light of these criteria. First, the relationship between consumers and health insurers satisfies criterion (1) to a high degree, not least thanks to the managed-care (MC) options that were introduced with the new law on health insurance (effective 1996). However, it fails with regard to (2) because cost reductions achieved by MC cannot be passed on to consumers but to a very limited degree. The relationship between health insurers and service providers, by way of contrast, does not fully satisfy any of the five criteria, mainly because health insurers continue to operate under an any-willing-provider clause for conventional fee-for-service care. This makes it difficult for them to find MC providers. Finally, the relationship between consumers and healthcare providers match consumer preferences well (criterion 1) but do not result in an income distribution in the healthcare sector that is conducive to the attainment of criteria (2) through (4). The total score for the Swiss healthcare system amounts to 13 points out of a maximum of 30, to which the relationship between insurers and providers contributes only 3 points. Therefore, performance could be improved by granting health insurers freedom to contract not only with domestic but also foreign healthcare providers offering a favorable benefit cost ratio.