Billions are wasted in the healthcare system – what use is the cost brake?

The patient suffered from frozen shoulder. The matter was painful. The family doctor sent the patient to a specialist. The latter recommended shoulder surgery. But the patient wanted conservative treatment. The family doctor then prescribed nine visits to the physiotherapist – a package of nine because health insurance companies often cover nine visits for physiotherapy without any questions being asked. The patient went to physical therapy, but only two or three times. Then he decided that he could do the necessary exercises at home. The exercises apparently had an effect: the shoulder problems disappeared.

That’s what the patient told me. The moral of his story: Without his cost-conscious behavior, there would have been an expensive, unnecessary operation and various unnecessary visits to the physiotherapist. The person affected is the Obwalden Center Council of States Erich Ettlin. He sits on the committee of the popular initiative for a cost brake in the healthcare system.

According to the text of the initiative, the federal government must take effective countermeasures in cooperation with other actors if the costs of compulsory health insurance (OKP) grow significantly faster in percentage terms than wages or the overall economy. The initiative text leaves open the threshold at which intervention would have to be made and which measures would be necessary and with what effect; Only the transitional provision specifies a threshold value. However, Parliament could override this through its own rules.

10,000 francs per resident

The core message of the initiators: Slowing the rise in costs in the healthcare system is possible without sacrificing quality because there is a lot of waste. Switzerland has one of the most expensive healthcare systems in the world. The total costs for the Swiss healthcare system amounted to almost 92 billion francs in 2022 – a good 10,000 francs per inhabitant. The OKP accounted for around 33 billion francs net of this.

Measured in terms of total health expenditure per capita, Switzerland is in second place behind the USA, according to data from the OECD. However, the expenditure measured in relation to the overall economy is more meaningful, because with increasing prosperity the demand for health services typically increases disproportionately. Here, Switzerland is practically on a par with three other countries between places 4 and 7 (see graphic).

Many experts say that there is a certain amount of waste in the Swiss healthcare system. This is ensured by the false incentives among central actors. The providers largely determine the demand for medical services themselves, as patients usually lack specialist knowledge. Obtaining second opinions from patients and resorting to “Doctor Google” can perhaps alleviate the problem, but cannot completely eliminate it. For doctors, hospitals and therapists, additional services mean additional sales and therefore more income.

Passing on of costs

Meanwhile, patients are not always as cost-conscious as in the example mentioned at the beginning: they can usually pass on most of the costs of medical treatments to the health insurance companies and thus to all insured persons and taxpayers.

Even as voters, patients often have false incentives. When voting on a regional hospital on your own doorstep or on the national legal framework in the healthcare system, you can pass on part of the costs to others, as long as you, as a tax and premium payer, do not have to bear a proportional share of the costs. With a strong expansion of state premium subsidies, as called for by the SP premium initiative, these disincentives would be even greater.

The cantons have conflicts of interest due to the combination of their roles as hospital operators and arbitrators in collective agreements. Many experts say that Switzerland could get by with significantly fewer than the current 270 hospitals. So far, the lack of savings incentives among cantons, hospitals, voters and patients has prevented more supra-regional and therefore more cost-effective hospital planning. To what extent this will change with the current wave of red numbers at hospitals remains to be seen.

The discrepancy in financing between outpatient and inpatient services also contributes to the disincentives: outpatient services are borne entirely by the health insurance companies, while the cantons cover at least 55 percent of inpatient services. According to experts, Switzerland has an “excessive” market share of inpatient services – which are more expensive compared to outpatient medicine. Parliament has decided on uniform financing in 2023. That promises savings, but because of a union referendum the people will decide on it.

10 to 20 percent potential

The extent of waste in the sense of unnecessary healthcare services is the subject of various expert estimates. In 2017, a group of experts appointed by the federal government casually estimated the savings potential at around 20 percent, citing previous reports. That would correspond to around 18 to 20 billion francs per year in total health care costs and around 7 to 8 billion francs in the OKP.

A central basis for the above-mentioned estimate was an overview of the state of research from 2012 by the Swiss Academy of Sciences. That paper estimated the quantifiable large items of waste at around 6 to 7 billion francs per year, which corresponded to around 10 percent of total health care costs at the time. According to the authors, there were also other items that were difficult to quantify.

In 2019, a federally commissioned study by the consulting firm Infras and the Zurich University of Applied Sciences estimated the savings potential in OKP services at 16 to 19 percent. In absolute figures, this corresponded to a potential of 7 to 8.4 billion francs for the year 2016 under investigation. The authors found the biggest savings in inpatient hospital services (a good 2 billion francs), outpatient doctor services (around 1.5 billion), prescription drugs (0.9 to 1.4 billion) and outpatient hospital treatments (around 1 billion). .

These estimates should be understood as rough approximations. Here are some of the mentioned categories of suspected drivers of waste, although the individual elements may partially overlap:

Unclear effects

Are savings on unnecessary services possible without also cutting useful services? There is no certain answer. A success of the cost brake initiative would put pressure on the system to save money, but the effects would be completely open. In the case of brute force with a fixed and very narrow cost ceiling, there would be a great risk of meaningful services being curtailed. With a very loose interpretation of the initiative text, perhaps little or nothing would change compared to Parliament’s counter-proposal.

The most promising solution would be to correct the disincentives. For example, it would be desirable to have more savings incentives for the cantons, with their central role in hospital planning and collective bargaining. One element of this would be to leave the premium reduction entirely to the cantons instead of only around half so far. However, the SP premium initiative aims in the opposite direction with its demand for a federal share of at least two thirds.

Cost control also plays an important role in collective agreements for doctors and hospitals. A popular yes to the cost brake initiative would increase the pressure on collective agreements. Theoretically, there is room for improvement in cost-benefit comparisons for medications, but the practical implementation is tricky.

Promising models

It would be desirable to see greater spread of insurance models with integrated care, for example via group practices, which can bring savings without sacrificing quality by avoiding duplication and unnecessary consultations. The research literature at home and abroad provides positive feedback on such models. However, the range of estimated savings effects is large. It really depends on the details.

According to federal statistics, a remarkable 77 percent of all insured people were no longer insured in the standard model in 2022. According to a representative survey by the comparison service Comparis from 2023, around half were insured in an HMO (group practice) or in a family doctor model. According to an industry estimate, only around 20 to 30 percent of insured people are in models that include at least a modest share of budget responsibility from doctors. Such models can bring about noticeable savings, especially if expensive customers such as chronically ill people are among the insured. Industry information suggests that chronically ill people are disproportionately represented in such models.

A conceivable option would be to limit the reduction in premiums to those insured in alternative models with verifiable savings effects. However, health insurance representatives doubt whether such a requirement would mean that the “right” insured people would be included in these models. A gentler variant would be to calculate the premium reduction based on the (cheaper) premiums of such models. It would also be conceivable to increase the minimum deductible in the standard model, which would make alternative models with lower cost participation by the insured more attractive for chronically ill people.

There will hardly be any miracles. Discussions about rising costs in healthcare have been going around in circles for decades – mainly because no one wants to be worse off and conflicting goals are often difficult to avoid. This will continue to apply. Whether with or without an official cost brake.