|Improving territorial equity in a Federal State|
|Implemented in this survey?|
In the last few years the number of Swiss who find it hard to pay their health insurance premiums has been on the constant increase, although a state program of subsidies exists for households with modest incomes. In March 2005 the federal parliament approved a change in the law aimed at extending the support offered to families with children. This is the last act of a long legislative procedure, during which the initial bill was significantly down-sized.
|Medienpräsenz||sehr gering||sehr hoch|
The reform of the articles of law concerning premium reductions gave rise to a long, labored process. The first reform bill, which provided for the introduction of a maximum limit of incidence for health insurance premiums of 8 percent, was rejected in 2001 (see Report 2/2003 ), the second bill, even more ambitious from a social point of view, was rejected in December 2003 (together with all the second revision of the Health Insurance Act); the third bill (the message in March 2004), separated from the other dossiers regarding the health insurance reform within the scope of the unbundling strategy adopted by the Federal Council (see Report 3/2004), was considerably down-sized in parliament, who removed the indications which, by means of an explicit definition of national social and/or family policy, would have forced on the cantons a real convergence in their respective models for premium reduction. The bill approved in March 2005 is therefore a text of law which has been impoverished in its social charge and desire to realize a greater territorial equity in the sector of compulsory health insurance.
|Implemented in this survey?|
Since 1996 the Swiss health care system has been based on compulsory individual health insurance whose premiums are fixed independently of income and individual risk. In order to correct the vertical inequity due to community rating the Confederation and cantons have jointly financed a state program of subsidies since 1996; its objective is to reduce the insurance burden for households with modest incomes in a specific way. There are two main problems with this mechanism of premium reduction:
In order to find a remedy for this situation, in spring 2004 the Federal Council put forward a draft bill [see reference 1] which, at least on paper, should have introduced a national social
target with the intent of making the cantonal systems for reducing premiums more similar to each other. The report 3/2004 entitled "Improving territorial equity in a Federal State" was dedicated to
the analysis of this draft bill.
The cantons were vehemently hostile to the draft bill in the consultation phase. It is important to remember that in the present years a revision of the respective duties and relative expense burdens of the Confederation and cantons is in process (with the title "new financial equalization system"). From 2008 at the earliest the present distribution key of the financing of health insurance subsidies (3.6 billion, which has increased by 1.5 percent from year to year and shared to the extent of two thirds as the Confederation's contribution and one third the cantons') will be replaced by a system which defines the Confederation's financial commitment with no regard for the share of population with modest incomes. In the future the budget of the Confederation for the program of premium reductions will total "25 percent of the compulsory health insurance expenditure for 30 percent of the population". Then the commitment to bridge possible gaps in the financing of the program will be entirely up to the cantons.
According to the estimates of the cantons putting the draft bill of the Federal Council into effect would have meant:
Secondly the model proposed by the Federal Council (see Figure 2) would have introduced a mechanism which (a posteriori, by virtue of the premium reduction paid by the State to households with modest incomes) up to a certain income threshold would mimic a system of income-dependent health insurance premiums, thus pushing Switzerland in a direction opposite to the liberal ideologies and also to the wish expressed by the population in a recent popular referendum (on this issue see report 2/2003)
Figure 1: Average net premium as a percentage of after-tax income, across the 26 Cantons (2002)
|Federal Council||sehr unterstützend||stark dagegen|
|Council of the States||sehr unterstützend||stark dagegen|
|National Council||sehr unterstützend||stark dagegen|
|Swiss Conference of Cantonal Directors of Public Health||sehr unterstützend||stark dagegen|
In order to avoid the negative consequences which the definition of a national target for social policies would have entailed, at the end of the summer 2004 the cantons (by means of the Swiss
Conference of Cantonal Directors of Public Health) launched an alternative proposal [see reference 2]. The cantons' bill substantially took up again an idea put forward in June 2004 by a State
Councilor in the Canton of Schaffhausen.
The present situation (based on individual income-independent premiums) is especially hard on families. Today a family of 4 persons (two parents and two children) pays for its compulsory health insurance 4 times the community rating premium (two full premiums for the parents and two reduced premiums if the children are less than 18 years old or less than 25 and are still being educated). In fact, the community rating system provides for all adults of a certain collectivity to pay the same premium, although the average consumption of health services increases with age. As a result, young adults are called upon to pay a solidarity contribution in favor of the older generations. In 2003 the solidarity contribution, which the adult population below 55 years of age paid, reached the total sum of Fr. 4.5 billion. This information comes from the data of the Fund for risk compensation, from which it can be seen for example that the health services consumed on average in 2003 by a couple of thirty-year-olds corresponded to:
Taking the economic situation of many young families into consideration this solidarity contribution in favor of the older generations represents an excessive burden for those who also have
children to support, according to the cantons. In some cantons half of the families with children benefit nowadays from the state subsidy for premium reductions. In 2003 two thirds of those with a
right to a premium reduction were less than 40 years old and 2 beneficiaries out of 5 were less than 25 years old.
Taking the above into consideration the cantons have suggested including the children's insurance cover in that of the parents, thus exempting children under the age of 18 from premium payment and asking young people under 25, who are still being educated, to pay only half the adult premium. The financing of health services to children and young people should have been assumed by the collectivity of the insured by means of the compensation fund of risks among health insurers. This change in the system would have enabled fiscal funds used till now for the reductions in premiums for children to be set free, thus increasing the resources available to realize the social policy in favor of adults with modest incomes.
Moreover, the cantons' proposal would have had the merit:
Taking this approach would have produced a clear separation between objectives of social policy (achieved by means of the instrument of premium reduction) and objectives of family policy (achieved by means of the exemptions of children from paying the premium). However, the cantons' proposal would also have entailed some politically undesirable effects, in particular:
Since neither the cantons' proposal nor the Federal Council's bill seemed to enjoy the necessary political support in Parliament, in September 2004 a third approach took shape within the Committee
for Social Security and Health of the Council of States.
The new variant, a sort of compromise between the Federal Council's proposal and the cantons' proposal, was worked out by a Christian Democrat Senator. While maintaining that the imposition on the cantons of a uniform model of premium reduction at national level (through setting a national social target) was excessive, at the same time judging a solution with uncertain redistribution effects as inopportune (that of exempting all children from paying the premium), an attempt was made to "square the circle" by imposing a simple objective of uniform family policy at national level on the cantons. The draft bill put to the attention of the Committee for Social Security and Health of the Council of States suggested, in fact, exempting children (and young people under 25 still being educated) from low-income (4 times the minimum state pension) families from paying the premium, and reducing the premium to 50 percent for children from average-income (between 4 and 6 times the minimum state pension) families.
Though having a more circumscribed range of action compared to the message of the Federal Council (a uniform solution at national level for the reduction of children's premiums, full autonomy of the cantons concerning the premium reduction of adults), at the same time the third variant would have been more binding on the cantons, since it would have explicitly defined the limits of income and the amounts of subsidy which, by law, would have had to be respected in each canton (it is important to remember that the proposal of the Federal Council left the cantons the choice to establish individually the threshold of income beyond which they could suspend the right to subsidies and the freedom to modulate the bands of income for which they could make binding a certain maximum incidence (see report 3/2004
For this reason not even this third proposal obtained the committee's support in its original formulation. The Committee for Social Security and Health of the Council of States considered a further downsizing of the bill to be reasonable. In particular, the text of law has been made less binding for the cantons. In substance the members of parliament have decided not to state the exact limits of income which establish the right to subsidies for children, so as to leave full autonomy in the matter to the cantons. The text of law proposed as a parliamentary vote thus formulates a generic objective of family policy aimed at families with low and average incomes.
The cantons will be obliged to grant these households a premium reduction equal to at least 50 percent of the base premium. Each canton will be free to establish (a) the threshold of income beyond which low and average incomes lie, (b) with reference to which income definition the right to children's subsidies will be anchored (cantonal or federal taxable income, after-tax income) (c) the exact amount of the subsidy paid (50, 60 or 70% percent of the premium).
On 15 December 2004 the Council of the States and on 10 March 2005 the National Council approved the draft bill, which will enter into force on 1 January 2006 and will oblige the cantons to adapt their own cantonal laws within one year (by 1 January 2007).
In spite of having met the ambitious time table set by the Federal Council, the federal parliament produced a rather modest reform. The only certain piece of data, the only good piece of news is an extraordinary increase in the federal contributions of 200 million, to which the cantons should add their contribution of 100 million.
With respect to vertical and territorial equity the new legislation will introduce "a drop of solidarity in a sea of injustice" - that of a country which, though it is considered one of the richest in the world, in future will continue to have the health system with the lowest financing equity among all the western European States [see reference 4].
|Federal Council||sehr groß||kein|
|Council of the States||sehr groß||kein|
|National Council||sehr groß||kein|
|Swiss Conference of Cantonal Directors of Public Health||sehr groß||kein|
The implementation of the new norm will fall to the cantons. Although there is the intention to create a group for intercantonal co-ordination, the draft bill offers the cantons sufficient degrees of freedom to adopt differentiated solutions, reflecting the political sensitivity and financial resources present in each canton.
The law attributes the Confederation the task of monitoring the achievement of the family policy objectives and imposes the obligation on the cantons to deliver the Confederation with all the data necessary for this purpose. Since the obligations imposed by the law are absolutely flexible (as they depend on the definitions of threshold values which distinguish low and average incomes, and which are left to cantonal autonomy), the Confederation will probably limit itself to taking note of the differences which exist between the cantons in the implementation of the law (as, on the other hand, is already the case with the target of social policy).
Overall the outcome of the legislative process is to be considered somewhat modest, both from the point of view of social and family policy as well as from that of territorial equity. The new norm
does not significantly strengthen the equity in the finance of the Swiss health system and does not even solve the problem of territorial equity.
Moreover, one cannot exclude a priori that putting the new law into practice might determine the following undesirable effects:
|Qualität||kaum Einfluss||starker Einfluss|
|Gerechtigkeit||System weniger gerecht||System gerechter|
|Kosteneffizienz||sehr gering||sehr hoch|
The history of this reform is rich in its teachings: in an era distinguished by a structural crisis in public finances and continuous growth in health costs it is difficult to promote ex-post
vertical equity and territorial equity in the financing of the health system, that is supporting a social health insurance based on community rating with sufficient fiscal resources to maintain the
system of transfers aimed at modest-income families effective through time. In this perspective federalism is a further element of difficulty.
The Swiss lesson therefore contains useful indications for those countries which, like Germany, are evaluating the opportunity to reorganize their own health insurance system in this direction.
Schweizerischer Bundesrat, Botschaft zur Änderung des Bundesgesetzes über die Krankenversicherung (Prämienverbilligung) und zum Bundesbeschluss über die Bundesbeiträge in
Dürr, M., Für die Abschaffung der Kinderprämien. Entlastung der Familien - administrative Vereinfachung, Neue Zürcher Zeitung (28.10.2004), p. 15
Swiss Federal Office of Public Health (2005), Statistik der obligatorischen Krankenversicherung 2003, http://www.bag.admin.ch/kv/statistik/d/2005/KV_2003_DE_v030205.pdf
Amtliches Bulletin, Ständerat - Wortprotokolle der Wintersession 2004. http://www.parlament.ch/ab/frameset/d/s/4706/116943/d_s_4706_116943_116968.htmDisplayTextOid=116969
Amtliches Bulletin, Nationalrat - Wortprotokolle der Frühjahrssession 2005. http://www.parlament.ch/ab/frameset/d/n/4707/119514/d%5Fn%5F4707%5F119514%5F119515.htm
Wagstaff, A. et al (1999), Equity in the finance of health care: some further international comparisons, Journal of Health Economics 18, 263-290.
|Improving territorial equity in a Federal State|
Process Stages: Gesetzgebung
Luca Crivelli (proof reading by Iva Bolgiani and Mary Ries)