International Comparisons of Health Care

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International Comparisons of Health Care

International comparisons are often difficult to interpret because definitions of terms and reliability of data as well as cultures and values differ. What is important in one society may be unimportant or even nonexistent in another. A political or human right that is important in one nation may be meaningless in a neighboring state. Evaluating the quality of health care systems is an example of the difficulties involved in comparing one culture to another.

Even within the United States there are cultural and regional variations in health care delivery. A visit to a busy urban urgent care center might begin with the patient completing a brief medical history, followed by five or ten minutes with a nurse who measures and records the patient's vital signs (pulse, respiration, and temperature), and conclude with a fifteen-minute visit during which the physician diagnoses the problem and prescribes treatment. In contrast, on the islands of Hawaii, a visit with a healer may last several hours and culminate with a prayer, song, or an embrace. Hawaiian healers, called kahunas, are unhurried and offer an array of herbal remedies, bodywork (massage, touch, and manipulative therapies), and talk therapies (counseling and guidance), because they believe that the healing quality of the encounter, independent of any treatment offered, improves health and well-being.

Even though comparing the performance of health care systems and health outcomes (how people fare as a result of receiving health care services) is of benefit to health care planners, administrators, and policy makers, the subjective nature of such assessments should be duly considered.


The Organization for Economic Cooperation and Development (OECD) provides information about, and to, thirty member countries that are governed democratically and participate in the global market economy. It collects and publishes data about a wide range of economic and social issues including health and health care policy. The OECD member nations are generally considered the wealthier, more developed nations in the world. The OECD (2008,,3343,en_2649_34483_1889402_1_1_1_1,00.html) notes that its member countries are Australia, Austria, Belgium, Canada, the Czech Republic, Denmark, Finland, France, Germany, Greece, Hungary, Iceland, Ireland, Italy, Japan, Korea, Luxembourg, Mexico, the Netherlands, New Zealand, Norway, Poland, Portugal, the Slovak Republic, Spain, Sweden, Switzerland, Turkey, the United Kingdom, and the United States.

Percentage of Gross Domestic Product Spent on Health Care

Even though health has always been a concern for Americans, the growth in the health care industry since the mid-1970s has made it a major factor in the U.S. economy. For many years the United States has spent a larger proportion of its gross domestic product (GDP; the total market value of final goods and services produced within an economy in a given year) on health care than have other nations with similar economic development. In 2005 U.S. health expenditures were 15.3% of the GDP, the highest rate in the OECD. (See Figure 7.1.) Other nations that spent large percentages of GDP on health care in 2003 included Switzerland (11.6%), France (11.1%), Germany (10.7%), Belgium (10.3%), Portugal (10.2%), Austria (10.2%), Greece (10.1), Canada (9.8%), Iceland (9.5%), and Australia (9.5%). Of the member nations that reported health care expenditure data in 2005, Korea (6%), Poland (6.2%), Mexico (6.4%), and the Slovak Republic (7.1%) spent the least in the OECD.

Per Capita Spending on Health Care

In 2005 the United States also experienced the highest per capita spending for health care services, spending an average of $6,401 per citizen. (See Figure 7.2.) No other country came close to spending this amount per capita in 2005: Luxembourg spent $5,352 per citizen; Norway, $4,364; Switzerland, $4,177; Austria, $3,519; Iceland, $3,443; Belgium, $3,389; France, $3,374; Canada, $3,326; Germany, $3,287; and Australia, $3,128. In 2005 Turkey spent the least per capita of any OECD nation on health care ($586), followed by Mexico ($675), Poland ($867), and the Slovak Republic ($1,137).

Who Pays for Health Care?

Public expenditures for health care services, as a percentage of GDP, vary widely between the OECD member nations. Public spending on health accounted for about 73% of total health spending on average across OECD countries in 2005, and the remaining 27% of spending was paid by private sources, mainly private insurance and individuals. (See Figure 7.3.) In the United States public funding accounted for 45% of total health spending. By contrast, public sources in Luxembourg and the Czech Republic accounted for 91% and 89%, respectively, of total health spending. Other nations with above-average contributions of public funding to health expenditures included the United Kingdom (87%), Sweden (85%), Denmark (84%), Norway (84%), Iceland (83%), Japan (82%), France (80%), New Zealand (78%), Ireland (78%), Finland (78%), and Germany (77%). Public expenditures on health per capita were lowest in Greece (43%) the United States (45%), Mexico (45%), Korea (53%), and Switzerland (60%).

Of the OECD nations that reported out-of-pocket payments as a share of total health expenditures in 2005, the United States was slightly below average, at 13%. (See Figure 7.4.) In the Netherlands, France, and Luxembourg, out-of-pocket payments as a share of total health expenditures were 10% or less. In contrast, out-of-pocket spending as a share of total health care spending was 57% in Greece and 51% in Mexico. Figure 7.4 reveals that out-of-pocket spending as a share of total health care spending was also high in Korea, Switzerland, Poland, and Hungary.

Private health insurance fills the gap between public expenditures and out-of-pocket costs. Among the OECD countries declaring private insurance as a percentage of total expenditures for health in 2005, the United States far exceeded the others. At 37%, the U.S. private insurance expenditure was nearly two times that of the Netherlands (20%) and far outstripped all other countries. (See Figure 7.4.) Because the United States is the only developed country without a national health care program, U.S. private insurance expenditures cover the costs generally assumed by government programs that finance health care delivery in comparable OECD member nations.

Spending for Hospitalization and Pharmaceutical Drugs

Interestingly, even though the United States spent more on health care than other OECD nations in 2005, it devoted a smaller percentage of total health expenditures (30%) to inpatient curative-rehabilitative care (acute and rehabilitation hospital stays) than all the other countries in 2005. (See Figure 7.5.) This finding is attributable to lower rates of hospitalization, shorter average lengths of stay, and a rise in outpatient hospital and other ambulatory care services in the United States.

In 2005 the United States spent much more per person ($792) on pharmaceutical drugs than any other OECD country. (See Figure 7.6.) Per capita pharmaceutical spending was also high in Canada ($589), France ($554), Spain ($517), Italy ($509), Germany ($498), and Luxembourg ($465). In contrast, Mexico spent $144 and Poland $243 per capita on pharmaceuticals.

Hospital Utilization Statistics

The number of acute hospital beds is a gross measure of resource availability; however, it is important to remember that it does not reflect capacity to provide emergency or outpatient hospital care. In general, it also does not measure the number of beds devoted to nonacute or other long-term care, although it is known that in Japan many of the beds designated as acute care are actually used for long-term care. Of the OECD countries reporting acute care hospital beds per 1,000 population, Japan (8.2), Korea (6.5), Germany (6.4), Austria (6.1), and the Czech Republic (5.7) had the highest number of acute care beds in 2005. (See Figure 7.7.) The United States was among the lowest, at 2.7 beds per 1,000 population in 2005, trailed only by Spain (2.6), Sweden (2.2), Turkey (2), and Mexico (1).

Hospital lengths of stay have consistently declined since 1960, in part because increasing numbers of illnesses can be treated as effectively in outpatient settings and because many countries have reduced inpatient hospitalization rates and average length of stay (ALOS) to control health care costs. In 2005 Japan had the longest acute care ALOS of the OECD nations, at (19.8 days), followed by Korea (10.6 days), and Germany (8.6 days), Switzerland (8.5 days), and the Czech Republic (8 days). (See Figure 7.8.) The shortest hospital stays in 2005 occurred in Denmark (3.5 days), Mexico (4 days), and Sweden (4.6 days). The United States' ALOS was 5.6 days in 2005, which was on par with France and Iceland, both at 5.4 days.

Medical practice, particularly the types and frequency of procedures performed, also varies from one country to another. The OECD looked at rates of cesarean section (delivery of a baby through an incision in the abdomen as opposed to vaginal delivery) per one hundred births and found both growth in the rates of cesarean section (as a percentage of all births) and considerable variation in the rates for this surgical procedure. In 2004 the highest rates for cesarean sections per 100 live births were reported in Mexico (37.9), Italy (37.5), Korea (35.2), Australia (29.1), the United States (29.1), and Luxembourg (27.2). (See Figure 7.9.) Because cesarean section is performed in the hospital and generally involves at least an overnight stay, the frequency with which it and other surgical procedures are performed contributes to hospitalization rates and expenditures.

Physicians' Numbers Are Increasing

Since 1960 the OECD member nations have all enjoyed growing physician populations. In 2005 Greece and Belgium reported the highest ratio of practicing physicians, 4.9 and 4 per 1,000 population, respectively, with most countries ranging between 2 and 4 physicians per 1,000 population. (See Figure 7.10.) The countries that had the fewest practicing physicians were in Turkey (1.5 per 1,000 population), followed by Korea (1.6), Mexico (1.8), and Japan (2). The United States, the United Kingdom, and Finland all reported data showing 2.4 physicians per 1,000 population.

The ratio of physicians to population is a limited measure of health care quality, because many other factors, such as the availability of other health care providers as well as accessibility and affordability of health care services, also influence the quality of health care systems. Furthermore, during the last two decades research has shown that more medical care, in terms of numbers and concentration of health care providers, is not necessarily linked to better health status for the population. John E. Wennberg et al. of the Dartmouth Atlas of Health Care Working Group find in The Care of Patients with Severe Chronic Illness: An Online Report on the Medicare Program by the Dartmouth Atlas Project (2006, that an oversupply of providers may result in unnecessary treatment, procedures, and health care costs. An example of such research is the Dartmouth Atlas Project, which is an ongoing examination of information and analysis about national, regional, and local markets, as well as of individual hospitals and their affiliated physicians, to provide a basis for improving health and health systems. Wennberg et al. find that patients who see more doctors and visit the hospital more often are not more likely to receive better care, have no improvement in survival, and are unlikely to have a better quality of life. The researchers reconfirm the observation that more care does not necessarily ensure better outcomes.


Karen Davis et al. observe in Mirror, Mirror on the Wall: An International Update on the Comparative Performance of American Health Care (May 2007, that despite having the most costly health system in the world, the United States does not compare favorably to other countries on most dimensions of performance.

Davis et al. look at six nations: Australia, Canada, Germany, New Zealand, the United Kingdom, and the United States. They find that the most significant difference between the United States and the five other countries is that the United States does not have universal health insurance coverage. The researchers opine that universal health insurance coverage not only ensures access to care but also fosters improved relationships between patients and the physicians. The lack of universal coverage explains why Americans go without needed health care because of cost more often than people do in the other countries and why, in comparison to the other countries, the United States does not fare well in measures of access to care and equity in health care between high- and low-income populations.

The U.S. health care system earns high marks for preventive care, largely because of the emphasis that managed care plans have placed on preventive medicine. Still, the United States scores poorly on chronic care managementthe ability to provide ongoing, effective treatment for people with chronic diseases such as diabetes, heart disease, and arthritis and its ability to promote healthy lives, and on the provision of care that is safe and coordinated, as well as accessible, efficient, and equitable.

Other key findings include:

  • The other countries are ahead of the United States in using information technology.
  • Germany had the highest scores on access to care, especially on nights and weekends as well as on the ability of primary care practices to make arrangements for patients to receive care after-hours when medical offices are closed.
  • Americans with health insurance have timely access to specialized health care services. In the United Kingdom and Canada, patients often endure long wait times for specialized services. The United States and Canada rank lowest on the prompt scheduling of appointments with physicians, with patients more likely to report waiting six or more days for an appointment.
  • The United States ranks last among the six countries in terms of efficient delivery of health care, with the United Kingdom and New Zealand in first and second place, respectively. Along with poor scores on measures of national health expenditures and administrative costs, the United States lagged behind in its use of multidisciplinary teams to deliver health care services. In Germany and New Zealand, patients who could be treated in a physician's office were less likely to use an emergency room for care than those in the United States.
  • The United States came in last on three key indicators of healthy lives: deaths that could have been prevented with timely, effective care; infant mortality; and healthy life expectancy. The United States and the United Kingdom had much higher death rates from conditions amenable to medical careas much as 25% to 50% higher than Canada and Australia. Australia ranks highest on healthy lives, scoring first or second on all the indicators.

The United States

The U.S. health care financing system is based on the consumer sovereignty, or private insurance, model. Employer-based health insurance is tax subsidizedthat is, health insurance premiums are a tax-deductible business expense and are not generally taxed as employee compensation. The premiums for individually purchased policies purchased by self-employed Americans became fully tax deductible in 2003. Benefits, premiums, and provider reimbursement methods differ among private insurance plans and among public programs as well.

Most physicians who provide both ambulatory care (hospital outpatient service and office visits) and inpatient hospital care are generally reimbursed on either a fee-for-service basis or per capita (literally, per head, but in managed care frequently per member per month), and payment rates vary among insurers. Increasing numbers of physicians are salaried; they are employees of the government, hospital, and health care delivery systems, universities, and private industry.

The nation's hospitals are paid on the basis of charges, costs, negotiated rates, or diagnosis-related groups, depending on the patient's insurer. There are no overall global budgets or expenditure limits. Nevertheless, managed care (oversight by some group or authority to verify the medical necessity of treatments and to control the cost of health care) has assumed an expanding role. Health maintenance organizations, preferred provider organizations, and other managed care plans and payers (government and private health insurance) now exert greater control over the practices of individual health care providers in an effort to control costs. To the extent that they govern reimbursement, managed care organizations are viewed by many physicians and other industry observers as dictating the methods, terms, and quality of health care delivery.

IS THE UNITED STATES SPENDING MORE AND GETTING LESS? A primary indicator of the quality of health care delivery in any nation is the health status of its people. Many factors can affect the health of individuals and populations: heredity, race and ethnicity, gender, income, education, geography, violent crime, environmental agents, and exposure to infectious diseases, as well as access to and availability of health care services.

Still, in the nation that spends the most on the health of its citizens, it seems reasonable to expect to see tangible benefits of expenditures for health carethat is, measurable gains in health status. This section considers three health outcomes (measures used to assess the health of a population)life expectancy at birth, infant mortality, and the incidence of cancerto determine the extent to which U.S. citizens derive health benefits from record-high outlays for medical care.

Overall, life expectancy at birth consistently increased in all thirty OECD member nations since 1960; however, historically, U.S. life expectancy has remained slightly below the OECD median (half were higher and half were lower). (See Figure 7.11.) Infant mortality also declined sharply during this period, but the United States fared far worse than most OECD countriesin 2005 the United States had the fourth-highest infant mortality rate. (See Figure 7.12.) Despite the well-funded U.S. battle against cancer, in 2004 the United States came in seventh for its cancer mortality rates (140 deaths of females and 203 deaths of males per 100,000 population). (See Figure 7.13.) Finally, one OECD finding that is surprising in view of the low rank of the United States on many measures and indicators of health status is that after New Zealand, the United States boasts the highest percentage of adults (89%) who consider themselves to be in good health. (See Figure 7.14.)

Cathy Schoen et al. find in Toward Higher-Performance Health Systems: Adults' Health Care Experiences in Seven Countries, 2007 (Health Affairs vol. 26, no. 6, October 31, 2007), a seven-nation survey of Australia, Canada, Germany, the Netherlands, New Zealand, the United Kingdom, and the United States, wide-ranging differences in access, after-hours care, and coordination but also common concerns.

In 2007 U.S. health care consumers faced the highest out-of-pocket costs, were least able to schedule timely appointments with their physicians, and along with Canadians were the most likely to seek nonemergency care in emergency rooms. They reported the highest rates of safety issues including lab test errors, medical or medication errors, medical record and test delays, perceptions of waste, and excessive time devoted to administrative paperwork. There were also many examples of inefficiencies and uncoordinated, fragmented care including:

  • Twenty-three percent of Americansthe highest rate of any country in the surveysaid they experienced coordination problems, either unavailability of medical records during physician office visits or duplication of tests
  • Twenty percent of Americans recounted instances when physicians recommended treatment they thought had little or no benefit; this rate was also high in Germany
  • Only the Netherlands (31%) surpassed the United States (24%) for patient reports of time spent on paperwork or resolving disputes related to medical bills or insurance. In the other countries, fewer than 15% of patients expressed this concern.

In all the countries surveyed, patients with a primary source of medical care reported significantly more favorable experiences, including spending more time with their physicians, greater involvement in health care decision making, and better coordination of care. These patients were also much less likely to have experienced medical errors, received conflicting information from different doctors, or found that diagnostic tests or medical records were unavailable at the time of care.


The German health care system is based on the social insurance model. Statutory sickness funds and private insurance cover the entire population. In Health Care in Germany (2005,, David G. Green, Ben Irvine, and Ben Cackett state that 90% of the population receives health care through the country's statutory health insurance program. Employees and employers finance these sickness funds through payroll contributions. Nearly all employers, including small businesses and low-wage industries, must participate. The remainder of the population is covered by private health insurance.

During the late 1990s Germany had the second-highest per capita health care expenditures, but by 2005 it ranked tenth in health expenditures per capita. (See Figure 7.2.) Public funds, a combination of social insurance and general government funds, paid for more than three-quarters (77%) of total expenditures for health care. (See Figure 7.3.) According to the OECD, in Health at a Glance: OECD Indicators 2007 (2007,, 79% of all medical care expenditures were publicly funded, as were 73% of pharmaceuticals.

Unlike U.S. health insurance, which is not always portable, losing or changing jobs does not affect health insurance protection in Germany among the sickness fund members. The German government does not require its wealthiest citizens to purchase health insurance, but almost all of them do so voluntarily.

Ambulatory (outpatient) and inpatient care operate in completely separate spheres in the German health care system. German hospitals are public and private, operate for profit and not-for-profit, and generally do not have outpatient departments. Ambulatory care physicians are paid on the basis of fee schedules negotiated between the organizations of sickness funds and organizations of physicians. A separate fee schedule for private patients uses a similar scale.

In 1993 Germany's Health Care Reform Law went into effect. Among its many provisions, the law tied increases in physician, dental, and hospital expenditures to the income growth rate of members of the sickness funds. It also limited the licensing of new ambulatory care physicians (based on the number of physicians already in an area) and set a cap for overall pharmaceutical outlays. Still, in 2005 Germany boasted 3.4 practicing physicians per 1,000 population, a higher ratio than well over half the OECD countries reporting. (See Figure 7.10.) The 1993 legislation also changed the hospital compensation system from per diem (per day) payments to specific fees for individual procedures and conditions.

Other German health care reform measures instituted in the 1990s also served to stimulate competition between sickness funds and improved coordination of inpatient and ambulatory care. During the mid-1990s the government also attempted to control health care costs by reducing health benefits, such as limiting how often patients could visit health spas to recuperate.

The health care reforms were not, however, successful at containing health care costs. Growth in health care spending was attributed to the comparatively high level of health care activity and resources, along with rising pharmaceutical expenditures and efforts to meet the health care needs of an aging population. Discharge rates and selected surgical procedures are higher in Germany than in relation to other OECD countries, and Germany has above-average levels of resources.


The Canadian system has been characterized as a provincial government health insurance model, in which each of the ten provinces operates its own health system under general federal rules and with a fixed federal contribution. All provinces are required to offer insurance coverage for all medically necessary services, including hospital care and physician services. However, additional services and benefits may be offered at the discretion of each province. Most provinces cover preventive services, routine dental care for children, and outpatient drugs for older adults (with a co-payment) and the poor. No restrictions are placed on a patient's choice of physicians.

Canadian citizens have equal access to medical care, regardless of their ability to pay. Entitlement to benefits is linked to residency, and the system is financed through general taxation. Private insurance is prohibited from covering the same benefits covered by the public system, yet a majority of Canadians are covered by private supplemental insurance policies. These policies generally cover services such as adult dental care, cosmetic surgery, and private or semiprivate hospital rooms. Seventy percent of all health expenditures are public, 7% are funded by private health insurance, and consumers pay about 15% of health care expenditures out of pocket. (See Figure 7.3 and Figure 7.4.)

Most hospitals are not-for-profit and are funded on the basis of global institution-specific or regional budgets. (A global institution-specific budget allocates a lump sum of money to a large department or area. Then all the groups in that department or area must negotiate to see how much of the total money each group receives.) Physicians in both inpatient and outpatient settings are paid on a negotiated, fee-for-service basis. The systems vary somewhat from province to province, and certain provinces, such as Quebec, have also established global budgets for physician services. Some provinces, including British Columbia, Alberta, and Ontario, require health care premiums for services; however, the Canada Health Act prohibits denial of health services on the basis of inability to pay premiums. The federal government's contribution to Canada's health care bill has progressively declined in the past two decades. The Canadian Institute for Health Information explains in Exploring the 70/30 Split: How Canada's Health Care System Is Financed (2005, that during the early 1980s the federal government paid a historic high of 50% of the total health care bill, but by 1998 it paid less than 20%. The resulting shift in costs has increased expenditures by the provinces and territories as well as out-of-pocket expenses paid by Canadians. The delivery system is largely composed of community hospitals and self-employed physicians. Nearly all of Canadian hospital beds are public; private hospitals do not participate in the public insurance program.

FINANCIAL PROBLEMS. During the 1990s public revenues did not increase rapidly enough in Canada to cover rising health care costs. The Canadian government attributed many of the financial problems to lower revenue from taxes, higher prices for biomedical technology, and relatively long hospital stays. In 1993, for the first time since Canada instituted universal health insurance twenty-seven years earlier, Canadians were required to pay for common services, such as throat cultures to test for streptococcal infections (the bacterial cause of strep throat).

As a result of cutbacks and inadequate equipment, waiting times for nonemergency surgery, such as hip replacement, and high-technology diagnostic tools, such as computerized tomography scans, could amount to months or even years. Even though Canadians generally still support their present system, physicians and consumers have expressed growing dissatisfaction with the rising costs and long waiting periods for diagnostic tests and nonemergency treatment.

SAFETY VALVE TO THE SOUTH. Some Canadians cross the border to the United States to avoid the waiting lines in their hospitals, clinics, and physicians' offices. Canadian physicians have been known to refer seriously ill patients in need of immediate medical attention to U.S. hospitals in nearby cities such as Buffalo, New York; Cleveland, Ohio; and Detroit, Michigan. In fact, many U.S. hospitals market medical services, most notably cardiac care and addiction treatment, to Canadians. Overall, however, there has been little border crossing to seek health care services. In Phantoms in the Snow: Canadians' Use of Health Care Services in the United States (Health Affairs, vol. 21, no. 3, MayJune 2002), Steven J. Katz et al. indicate that Canadians account for very little U.S. hospital and health care service utilization.

CONTROLLING COSTS. The consensus is that no one wants to disassemble what has become Canada's most popular social program, but most agree that change is inevitable. In Government/Social Health Insurance (June, 14, 2008,, Eco-Santé states that the Ontario Health Insurance Plan insures about 80% of all Ontario residents. It has managed to cut costs in several ways, such as:

  • Reducing fees to commercial laboratories and allowing them to bill patients directly for tests performed
  • Stopping payment for certain services connected with employment; for example, many Canadians must pay out of pocket for preemployment physical examinations
  • Ending coverage of selected services and reviewing coverage of services and procedures such as psychoanalysis, vasectomies, newborn circumcision, in vitro fertilization, as well as chiropractic, podiatric, and osteopathic services
  • Increasing co-paymentsthe amounts patients must pay for prescriptions covered under the Ontario Drug Benefit Plan, which is used mainly by people over age sixty-five

Similarly, in an effort to cut hospital costs, British Columbia prepared health service redesign plans and instituted budget management and health care planning strategies in 2003 and 2004. A variety of initiatives including cutbacks in covered services, caps on physicians' fees and hospital budgets, and controlling the use of expensive medical technology enable this popular system to continue to offer affordable and sustainable health care.

The United Kingdom

The United Kingdom employs the National Health Service (NHS), or Beveridge, model to finance and deliver health care. The entire population is covered under a system that is financed primarily from general taxation. There is minimal cost sharing. In 2005, 87% of all health spending was from public funds. (See Figure 7.3.)

Of the United Kingdom's hospital beds, 90% are public and generally owned by the NHS. In 2005 there were 3.1 beds per 1,000 populationmore than the United States (2.7 per 1,000) but fewer than other European nations including France (3.7) and Italy (3.3). (See Figure 7.7.) Laura Donnelly reports in NHS Hospitals Lose 32,000 Beds in a Decade (Telegraph [London, England], May 25, 2008) that from 1997 to 2007 the number of NHS hospital beds declined from 198,848 to 167,019.

Services are organized and managed by regional and local public authorities. General practitioners serve as primary care physicians and are reimbursed on the basis of a combination of capitation payments (payments for each person served), fee-for-service, and other allowances. Hospitals receive overall budget allotments from district health authorities, and hospital-based physicians are salaried. Private insurance reimburses both physicians and hospitals on a fee-for-service basis.

Self-employed general practitioners are considered independent contractors, and salaried hospital-based physicians are public employees. The United Kingdom continues to face acute physician shortages: there are fewer physicians per capita (2.4 per 1,000 population in 2005) than in most other OECD countries. (See Figure 7.10.) In 1991 it became possible for large physician practices to become budget holders and receive larger capitation payments. Similarly, individual hospitals may become self-governing trust hospitals, enabling them to compete for patients and market their services. Even though emergency health service is immediate, people requiring elective surgery, such as hip replacement, may end up on waiting lists for months or even years.

Since 2000 the NHS has experienced considerable change. The private sector has assumed a role in funding both buildings and services within the NHS. The authority to make decisions about local health care needs, priorities, and budgets has been delegated to local communities in some areas.

The NHS pioneered many cost-containment measures that are currently used by the United States and other countries seeking to slow escalating health care expenditures. These approaches to evaluating and managing health care costs include:

  • Cost-effective analysis: calculated as a ratio, and often expressed as the cost per year per life saved, the cost-effectiveness analysis of a drug or procedure relates the cost of the drug or procedure to the health benefits it produces. This analysis enables delivery of clinically efficient, cost-effective care.
  • Cost-minimization analysis: primarily applied to the pharmaceutical industry, this technique identifies the lowest cost among pharmaceutical alternatives that provide clinically comparable health outcomes.
  • Cost-utility analysis: this measures the costs of therapy or treatment. Economists use the term utility to describe the amount of satisfaction a consumer receives from a given product or service. This analysis measures outcomes in terms of patient preference and is generally expressed as quality-adjusted life years. For example, an analysis of cancer chemotherapy drugs considers the various adverse side effects of these drugs because some patients may prefer a shorter duration of symptom-free survival rather than a longer life span marked by pain, suffering, and dependence on others for care.


The French health care system is based on the social insurance, or Bismarck, model. Virtually the entire population is covered by a legislated, compulsory health insurance plan that is financed through the social security system. Three major programs, and several smaller ones, are quasi-autonomous, nongovernmental bodies. The system is financed through employee and employer payroll tax contributions. In Health at a Glance (2007,, the OECD notes that 87.2% of the population had private health insurance.

The public share of total health spending is 80%, and 7% of expenditures represent direct, out-of-pocket payments. (See Figure 7.3 and Figure 7.4.) Physicians practicing in municipal health centers and public hospitals are salaried, but physicians in private hospitals and in ambulatory care settings are typically paid on a negotiated, feefor-service basis. Public hospitals are granted lump-sum budgets, and private hospitals are paid on the basis of negotiated per diem payment rates. In Health Care Systems: An International Comparison (May 2001,, Strategic Policy and Research Intergovernmental Affairs indicates that 65% of hospital beds are public, and the remaining 35% are private (and equally divided between profit and nonprofit).

In April 1996 the French government announced major reforms aimed at containing rising costs in the national health care system. The new system monitored each patient's total health costs and penalized physicians if they overran their budgets for specific types of care and prescriptions. In addition, French citizens were required to consult general practitioners before going to specialists. Initially, physiciansspecialists, in particular denounced the reforms and warned that they could lead to rationing and compromise the quality of health care. Over time, however, these cost-containment efforts met with less resistance from physicians and consumers. By 2007 physicians and hospitals were generally accepting of moderate fee schedules, cost-sharing arrangements, and global budgeting to control costs.


Japan's health care financing is also based on the social insurance model and, in particular, on the German health care system. Eighty-two percent of health expenditures are from public funds. (See Figure 7.3.) Three general programs cover the entire population: Employee Health Insurance, Community Health Insurance, and Health and Medical Services for the Aged. Adam Dougherty of the Insure the Uninsured Project states in Japan: The Health Care System (July 9, 2008, that 63% of the population obtain coverage through eighteen hundred not-for-profit, nongovernmental, employer-sponsored plans. Small businesses, the self-employed, and farmers are covered through Community Health Insurance, which is administered by a conglomeration of local governmental and private bodies. Older adults are covered by a separate plan that largely pools funds from the other plans. The Japanese health expenditure is below the expected level for a country with Japan's standard of living, and its emphasis is on the government, as opposed to business, bearing the major financial burden for the nation's health care.

The health system is financed through employer and employee income-related premiums. There are different levels of public subsidization of the three different programs. Limited private insurance exists for supplemental coverage, which is purchased by about a third of the population and accounts for 1% of health expenditures, whereas out-of-pocket expenses account for 17%. (See Figure 7.4.)

Physicians and hospitals are paid on the basis of national, negotiated fee schedules. Japan manages with fewer physicians per capita than most OECD countries just two physicians per one thousand population. (See Figure 7.10.) Physicians practicing in public hospitals are salaried, whereas those practicing in physician-owned clinics and private hospitals are reimbursed on a fee-for-service basis. The amount paid for each medical procedure is rigidly controlled. Physicians not only diagnose, treat, and manage illnesses but they also prescribe and dispense pharmaceuticals, and a considerable portion of a physician's income is derived from dispensing prescription drugs.

A close physician-patient relationship is unusual in Japan; the typical physician tries to see as many patients as possible in a day to earn a living. A patient going to a clinic for treatment may have to wait many hours in a crowded facility. As a result, health care is rarely a joint physician-patient effort. Instead, physicians tend to dictate treatment without fully informing patients about their conditions or the tests, drugs, and therapy that have been ordered or prescribed.

According to Dougherty, about 80% of Japan's hospitals are privately operated (and often physician owned) and the remaining 20% are public. Hospitals are paid according to a uniform fee schedule, and for-profit hospitals are prohibited. Even though hospital admissions are less frequent, hospital stays are typically far longer than in the United States or in any other developed member nation of the OECD, allowing hospitals and physicians to overcome the limitations of the fee schedules.

The health status of the Japanese is one of the best in the world. Japanese men and women are among the longest living in the world. In 2005 life expectancy was 82.1 years. (See Figure 7.11.) The Japanese infant and neonatal mortality rate in 2005, at 2.8 deaths per 1,000 live births, was bested only by Iceland, Sweden, and Luxembourg. (See Figure 7.12.) These two statistics are usually considered reliable indicators of a successful health care system. It should be noted, though, that Japan does not have a large impoverished class, as the United States does, and its diet is considered to be among the healthiest in the world.

Even though Japan's health care system has no doubt contributed to this preeminent health status, the current state of research in health economics does not permit the determination of the extent of its contribution. The Japanese system, which is based on social insurance, has provided both basic care and free choice of doctors to every citizen at affordable costs. It has become increasingly clear, however, that the system has not succeeded in its efforts to allocate resources properly, ensure financial equity, and adapt to changing patterns of demand.

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International Comparisons of Health Care

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International Comparisons of Health Care