An International Health Model History Lesson

Thursday, August 31, 2017 | Larry Sobal

 

 

After my blog post last week, single payer health care emerging as a discussion topic, I had a few emails asking about the predominant health care models in place in other westernized countries: the Bismarck Model, the Beveridge Model and the National Health Insurance Model. As a history geek, I thought it would be helpful and interesting to elaborate on their fascinating backgrounds.

Starting with the Bismarck Model, you may be surprised to learn that it was developed way back in 1883 by Chancellor Otto von Bismarck, a Prussian autocrat, making it the world’s oldest national social health insurance system. Interestingly, his motivation was not so much a reflection of his social tendencies for the greater good of the population, but rather was part of his plan to unify the various German states that were autonomous at the time. By creating the first welfare state in the modern world, he sought to gain support from the working class that might otherwise go to his Socialist opposition.

His primary unification strategy was not really about health care reform, but about wars against Denmark, Austria and France to acquire and conquer territory; and there are still debates whether his real goal was unification of Germany or simply to expand the power of the Kingdom of Prussia. Historians refer to his strategy as a form of Revolutionary Conservatism.

Nevertheless, it is clear that Chancellor Bismarck invented the welfare state as part of the unification of Germany. Despite its European heritage, this system of providing health care should look fairly familiar to Americans. It uses an insurance system — the insurers are called “sickness funds” — usually financed jointly by employers and employees through payroll deduction.

The Bismarck model is found today in Germany, of course, and France, Belgium, the Netherlands, Japan, Switzerland, and, to a degree, in Latin America. However, the implementation of the model varies. In Germany, for example, employers and employees jointly fund insurance via withholding; in Switzerland, individuals purchase their own policies. Unlike the U.S. insurance industry, though, Bismarck-type health insurance plans have to cover everybody, and they don’t make a profit. Doctors and hospitals tend to be private in Bismarck countries; Japan has more private hospitals than the U.S. 

The Beveridge model also has an interesting history. Although not nearly as old as the Bismarck model, it is named for William Beveridge, who in 1942 published the Social Insurance and Allied Service, also known as the Beveridge Report. This became the blueprint for the postwar British welfare state.

While it focused mainly on social insurance − what Americans think of as Social Security − the report also advocated for the right of anyone to receive health care on the basis of clinical need regardless of ability to pay. While the term "socialized medicine" is often used carelessly and incorrectly, the Beveridge Model is in fact socialized medicine: a health care system owned and operated by government.

What is often ignored about the Beveridge Model is the role played by Aneurin “Nye” Bevan. He was born a poor coal miner who in 1942, at the age of 32, was elected to the House of Commons as a Labour Party candidate. He was known to be belligerent and was a vocal critic of Winston Churchill. In 1945, new Prime Minister Clement Attlee named Bevan the Minister of Health for Great Britain. It was Bevan who actually worked to take the concepts and principles in the Beveridge Report and installed a universal nationalized health care model under the newly formed National Health Service of Britain in 1948. It could arguably be called the “Bevan” model, such was his critical role in making the concepts of the report a reality.

Unlike the U.S. insurance industry, though, Bismarck-type health insurance plans have to cover everybody, and they don’t make a profit.

Today, the Beveridge Model is utilized by Great Britain, Denmark, Finland, Hong Kong, Italy, Norway, Spain, Sweden and Cuba. With the exception of Cuba, all are capitalist democracies that have decided to remove the profit motive from health care on the grounds that it compromises equity and efficiency. One feature that is fundamental to this model is that primary care physicians strongly serve as gatekeepers, and it is not uncommon for Beveridge Model countries to have a two-to-one ratio of primary care to specialists, roughly the opposite of the United States.

Finally, we have the National Health Insurance Model. Mostly associated with our neighbor to the north, Canada, this model has elements of both Beveridge and Bismarck. Health care in Canada has long been a source of national pride, and took a long path to get to its current design. Known as “Medicare,” the system is publicly financed but privately run, it provides universal coverage and care is free at the point of use. Although it is actually a “thirteen payer” system if you count ten provinces and three territories, for the most part it is a closely coordinated structure that works like a single payer system.

The genesis for the Canadian model can be traced back to 1910 to a knee injury suffered by 10-year-old Tommy Douglas in Falkirk, Scotland. His injury was serious and his family too poor to afford needed surgery, so his injury became a disability that was likely to be permanent when they moved to Canada a year later. But by a stroke of luck, a professor of orthopedics in Winnipeg chose Tommy to demonstrate a surgical technique to his colleagues and Tommy was healed.

Tommy went on to become the Premier of Saskatchewan in 1944, and he remembered his childhood injury when he launched a government run, single payer healthcare system for all of Saskatchewan’s one million residents. Other provinces began to copy the model. In 1961 Saskatchewan again led the way when it introduced a universal, provincial medical insurance plan to provide doctors' services to all its residents.

The spread of Tommy Douglas’ health care plan from Saskatchewan to the rest of Canada was likely also due to the Constitution Act of 1867, in which provinces were given responsibility for establishing, maintaining and managing hospitals, asylums, charities and charitable institutions, and the federal government was given jurisdiction over marine hospitals and quarantine. The federal government was also given powers to tax and borrow, and to spend such money as long as this did not infringe on provincial powers. 

By 1971, all Canadians were guaranteed access to essential medical services, regardless of employment, income, or health. But it began to be challenged due to rising costs for health care, accompanied by low fees to doctors, so many doctors began to opt out of the system and started billing patients themselves.

In addition to Canada, Australia, South Korea, and Taiwan have adopted the National Health Insurance model.

What we can conclude from this history lesson is that all of these models have many years behind them. The same can be said for the United States, although the passage of Medicare in 1965 makes it appear quite young in comparison. Furthermore, the Bismarck, Beveridge and National Health Insurance models all have something in common that is lacking in the current American health care debate – a general agreement or set of principles to serve as the foundation for a health care design. Until we can accomplish that, we are likely to continue with endless political debates and a patchwork of health care models.

I’ll end today’s lecture with an extra credit assignment to watch this short video that provides a fascinating history lesson related to world health. Class dismissed.

 

 

Illustration: Lee Sauer

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Larry Sobal is Executive Vice President and a Senior Consultant at MedAxiom. He has a 35-year background as a senior executive in medical group leadership, hospital leadership and health insurance. Larry consults, writes and presents on topics relevant to transforming physician practices and health systems. His weekly blog post comes out on Thursdays and can be accessed at www.medaxiom.com.

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