|A drop of solidarity in a sea of inequity|
|Implemented in this survey?|
From 1st January 2008 Switzerland has adopted a new system for financial equalization between the Confederation and the Cantons, which provides for a clearer attribution of the tasks and the financial resources associated with each governmental level activity. The financing of health insurance subsidies is one of the fields touched on by the reform. Although it remains a joint task of federal and cantonal governments, the sector is subject to deregulation with possible repercussions on equity.
A wide-reaching draft bill leading to a more rational definition of federal and cantonal competences
In 2001 Switzerland started a process of rethinking the role and the tasks of the state, where the main objective was to consolidate federalism, giving intergovernmental relations a more modern, transparent and efficent structure.
For some years in Switzerland we have seen a progressive centralization of certain competences, with the result that the cantons' leeway has been gradually reduced, also within the ambit of spheres of activity which the Federal Constitution attributes to cantonal authorities. One of the reasons for this evolution is to be found in the method of providing intergovernmental grants. In fact, 75% of the federal grants are paid to the cantons in the form of matching grants, which have two joint aims: (1) encouraging certain activities and (2) realizing a redistribution of resources between the strong cantons and weak ones.
In November 2001 the Federal Council presented a draft bill [see ref. 1], which was finally approved by Parliament in October 2003 [see ref. 2] and which involves a series of changes to the Federal Constitution [see ref. 3]. The amendments, which were subject to compulsory referendum, were approved by the population in November 2004. The objectives of this wide-reaching reform bill can be summarized as follows:
Once the general framework of the reform bill had been approved, the Federal Council set out a second draft bill in September 2005, which concretely establishes the methods for carrying out the new philosophy of financial equalization, defining all the legislative amendments necessary to implement the new system [see ref. 4]. The final version of the document [see 5] was approved by the two houses of Parliament in October 2006. The various amendments came into force on 1st January 2008.
The amendments to the Federal Health Insurance Act (FHIA)
Among the laws subject to amendment we also find the FHIA . To reduce the social impact of per capita payments, the FHIA of 1996 had decided to eliminate the historical generalized subsidy to health insurance, granted as per capita subsidy to the sickness funds within the ambit of the previous legislation, in favor of a subsidy earmarked to the individuals in need. The latter was realized by means of individual subsidies, the beneficiaries of which were the insured in modest economic situations; as clearly stated in the Federal Council's bill in 1991 the aim was to correct the inequity of a system of fixing premiums, which does not consider the citizens' ability to pay, although it is within the ambit of a social insurance. Since it was considered necessary to allocate this task jointly to the Confederation and the cantons, the financing of these subsidies was ensured to the extent of two-thirds by the Confederation and one third by the cantons, through general taxation. The Confederation's funds were distributed as a specific matching grant, mixing the objective of an equal distribution of resources with that of equitable burdens. Each canton's financial participation was established in consideration of its financial strength. For these reasons the marginal cantonal price for one CHF of distributed subsidy ranged between 7 cents in Obwalden and 65 cents in Zug in 2006. Moreover, the cantons had the authority not to use all the federal grant (and to reduce their own contribution), but were obliged to use at least 50% of the federal grant (and to provide at least 50% of the corrisponding amount of their own financial resources). Finally, the task of implementing the subsidy distribution system lies solely with the single cantons. In other words, since 1996 the Confederation has not promoted a comparable vertical equity within the cantons, indicating e.g. what should be the maximum threshold of incidence of premiums and on what principles the household income should be assessed by the cantonal authorities. The federal law limited itself (1) to regulating the total amount of federal contributions destined to this goal and the distribution key among the single cantons; (2) to establishing the minimum expenditure limit for each canton (equal to 50% of the sum paid by the Confederation to the canton and of the compulsory contribution from its own resources).
Since 2008 the law in force has been subject to important amendments. Article 66 of the FHIA was greatly changed.
|Medienpräsenz||sehr gering||sehr hoch|
|Implemented in this survey?|
|Federal Department of Finance||sehr unterstützend||stark dagegen|
|National Council||sehr unterstützend||stark dagegen|
|Council of States||sehr unterstützend||stark dagegen|
|Parliamentary left-wing||sehr unterstützend||stark dagegen|
|Voting majority||sehr unterstützend||stark dagegen|
The debate in Parliament did not make history [see ref. 6]. Some left-wing exponents, mindful of the recent increase in financial resources intended for the financing of at least 50% of the premiums for the children of middle-class households (this happened in 2006, see survey (5)2005), tried to introduce a provisional ruling which would oblige the Confederation and the cantons to maintain the level of grants achieved in 2007 for three years. But the proposal was rejected by the majority, as it was contrary to the spirit of the new financial equalization sanctioning cantonal autonomy. Constitutionally the Confederation is responsible for the functioning of the national social insurance mechanisms, while the cantons' task is to guarantee the social security of individuals.
In the parliamentary debate an amendment to the text of the bill proposed by the Federal Council was recorded, on the suggestion of the National Council's commission for social security and health. The September 2005 bill still spoke about 25% of the expenditure for 30% of the population. This wording could have given rise to misunderstandings, leaving open to interpretation that there was a constraint for the cantons to define the circle of beneficiaries of the cantonal subsidies so as to reach 30% of the population (in 2006 the differences between cantons were huge; in canton Vaud the circle of beneficiaries corresponded to 21.1% of the population and was as high as 56% in Obwalden); so in order to avoid judicial controversies in the final text in October 2006 they preferred to speak more simply of 7.5% (the product of 0.3 and 0.25) of gross expenditure. Thus the full freedom of the cantons to realize the social policy they consider appropriate is confirmed. The majority of Parliament in fact opted for this simplification.
Finally the left-wing put forward the proposal to increase the federal contribution to 9% (30% for 30% of the population), instead of limiting itself to 7.5%. But also in this case Parliament's response was to confirm that the sense of financial equalization was to provide the cantons with more financial means for free end-use in order to be able to increase the leeway of their own policies. The increase hoped for by the left-wing in federal funds tied to premium reduction would have worked in the opposite direction, and it was therefore rejected.
|Federal Department of Finance||sehr groß||kein|
|National Council||sehr groß||kein|
|Council of States||sehr groß||kein|
|Parliamentary left-wing||sehr groß||kein|
|Voting majority||sehr groß||kein|
The next figure is related to the section "monitoring and evaluation"
Change in net premiums as a % of disposable income for three typologies of household in the cantons having the minimum and maximum incidence of net premium and the Swiss average (1998-2004)
Every two years an independent institute is commissioned with a study on the efficacy of premium reduction in the 26 cantons by the Federal Office for Public Health (the study is called "Monitoring der sozial- und familienpolitischen Wirksamkeit der Prämienverbilligung"). At present the study published in 2005 is available for data relative to 2004 (see ref. 7). One should have been realized on 2006 data. However, in order to be able to ascertain the changes in the system in premium reduction decided on by Parliament in 2005 (see again survey (5)2005), which were to come into force in 2007, the Federal Office decided to put off the study for a year, commissioning it with reference to the 2007 situation. Malicious tongues raised doubts, however, that the main reason for the postponement was political in nature; if the usual biennial rhythm had been respected, the study data would have been made known in the weeks preceding the ballot on the single sickness fund in March 2007, so it was feared that these data might influence the citizens' voting decisions. Now the publication of the report relating to 2007 is to be at the beginning of May 2008. The Federal Office for Public Health has a project to present and up-date this information, which in future should be displayed in graphic form, on its internet site, with the aim of strengthening the political impact of this comparison among the cantons.
From 1996 to 2007 the budget allocated to premium allowances by the Confederation and the cantons increased at an average annual rate of 4.4%, whereas premiums increased at an average annual rate of 5.5%. But since the cantons could decide not to use all the budget allocated by the Confederation, if the subsidies really distributed are taken into consideration, the amount grew at an average annual rate of 5.8% between 1997 and 2006, therefore slightly more than the growth in premiums. On the other hand, in the same period income in Switzerland rose at decidedly lower rates (equal at the most to one third of the premium increase). For this reason, the additional allowances distributed could not completely offset the rise in health insurance premiums, leading to an increasing burden also for households with modest income.This result can easily be illustrated with a numeric example. Let's assume that in year 0 the sum earmarked for subsidies is 15% of the premiums and that the incidence of the net premium is equal to 8% of disposable income. Now let's envisage a 100% premium increase over a decade, a 100% adjustment of the subsidies distributed also and an increase of "only" 30% in the disposable household incomes (in nominal terms); in this case we would have a significant increase in the incidence of the net premium, coeteris paribus, which would rise from 8% to 12.3%.
Already in previous years, subsidies were administered and distributed by the cantonal authorities, according to local legislation. Despite the federal constraint which committed each canton to the distribution of a minimum amount of subsidies, the different legislations were the source of considerable inequalities; indeed, for the same type of household the burden of compulsory health insurance premiums on disposable income varied significantly depending on the canton in which the household lived.
The scale of this problem is highlighted in the previous figure, which shows the incidence of premiums on disposable income for three types of household after the deduction of earmarked subsidies. From the figure we can observe that
Finally from the first information on the 2007 monitoring, which will soon be published, the trends shown in the figure would seem to be confirmed in 2007 too.
|Qualität||kaum Einfluss||starker Einfluss|
|Gerechtigkeit||System weniger gerecht||System gerechter|
|Kosteneffizienz||sehr gering||sehr hoch|
The amendments introduced to the FHIA in relation to the new financial equalization will only further increase the gap existing among the single cantons. The minor constraints put on the single cantons by the Confederation in the field of premium reduction and the decrease in federal resources earmarked specifically for this aim might push some cantons to use part of the funds for free end-use and part of their own means for other purposes, for example to face the increased need for public expenditure sanctioned by the reform of hospital financing. However, this measure would have significant repercussions of a redistributive nature, with unpleasant results above all for the middle class. In fact, one franc of public money spent for example to co-finance hospital care has a less redistributive impact with respect to one franc spent in premium reduction and will therefore decrease equity of financing.
|A drop of solidarity in a sea of inequity|
Process Stages: Umsetzung, Gesetzgebung
Proof-reading by Mary Ries