July 12th, 2024

Are European models for health care a red herring?

By Lethbridge Herald on May 28, 2022.

Doreen Barrie

In the battle for hearts and minds on health care, invoking “American-style health care” is kryptonite. When NDP leader Rachel Notley accused Jason Kenney of seeking a U.S. style, privatized system, the premier shot back that he had no intention of adopting the “deeply flawed” American model which lacks universal insurance. His preference is for aligning our system with countries in western Europe where the private sector plays a role. 

Kenney is paying heed to decades-old advice Ernst & Young (which recently advised the Alberta government on health care reform) gave to clients interested in opening the “biggest unopened oyster” in the Canadian economy – health care. Aware that American health care is our worst nightmare, the consulting company counselled these companies to stress European models in their quest to gain a foothold in this potentially lucrative field. So, what are these European models, and could they provide a solution to what ails us or is the Premier using them as a red herring to distract Albertans?

There are lessons to be learned from Europe but there are also reasons why these models may not travel unscathed across the Atlantic. 

Firstly, in addition to cross-national comparisons being problematic, each system sits within a unique basket of social programs and policies which reinforce each other. However, there is a western European consensus grounded in the principle of social solidarity. In essence, it is the long-held belief that everyone is part of the same community in which the young subsidize the old, the healthy subsidize the sick and the rich subsidize the poor. Citizens understand that their taxes pay for much-appreciated social supports and acknowledge that the state has a legitimate role to play. The strong social safety-net in European countries includes not just health care but also dental care, pharma-care and other benefits including free tuition at universities in some countries.

The two broad approaches to funding health care are the Bismarckian system with payroll deductions and the Beveridge system funded through general taxation. Germany is an example of the former which requires mandatory health insurance with deductions from wages. Germans pay over 7 per cent of their wages for health care, a figure that is matched by their employers. Germans also pay almost 2 per cent towards long-term care insurance. Britain and Canada exemplify the Beveridge model i.e. paid for through general taxation.

In Britain, patients do not pay at the point of service. However, people can purchase private insurance that gives them faster access to elective surgery. This two-tier arrangement does not reduce wait times for the rest of the population. The Guardian newspaper reported that there were 6.4 million patients in England who were on waiting lists in March 2022. These figures are only partly due to disruption of the system caused by the pandemic. 

The French have been moving closer to the Beveridge model, with less reliance on payroll deductions. The employee deduction for health care is now less than 1% while employers’ share is approximately 6.8 per cent of income. There is another deduction of over 9 per cent from an employee’s wages, most of which goes to health care. 

In Europe, public and private hospitals co-exist and both private insurers and non-profit insurance companies provide coverage for the population. There is a robust non-profit sector in many European countries, a legacy of benevolent societies which provided a form of social insurance to their members. Private providers in most countries are paid either by national health insurance systems or by tightly regulated social health insurance schemes. In fact, the extent of regulation is so great that the German case has been described as “manacled competition.”

European models are more comprehensive and have many admirable features which we envy. However, if they are transplanted to Alberta, the soil might not be suitable for them to thrive. In a clash with the mindset of medical entrepreneurs who see health care as an unopened oyster to be exploited for profit, European models would likely wither and die. 

The benefits Europeans enjoy are not trivial nor is the price they pay for them. If Alberta employers had to match employee contributions to health care, it is doubtful they would welcome such a move. However, the most salient question is: would a government that is committed to cutting red tape, monitor and regulate for-profit providers as stringently as governments do in Europe? 

Doreen Barrie

Assistant Adjunct Professor

Department of Political Science

University of Calgary

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