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Proceedings of the Standing Senate Committee on
Social Affairs, Science and Technology

Issue 15 - Evidence

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OTTAWA, Monday, May 28, 2001

The Standing Senate Committee on Social Affairs, Science and Technology met this day at 9 a.m. to examine the state of the health care system in Canada.

Senator Michael Kirby (Chairman) in the Chair.

[English]

The Chairman: Senators, our first witnesses this morning are Dr. Hugo Hurts, Deputy Director of the Health Insurance Division of the Ministry of Health in the Netherlands, and Dr. James Björkman, a professor at the International Institute of Social Studies in the Netherlands.

Gentlemen, thank you for taking the time to be with us today. We have been briefed in some detail on the nature of the health care system in the Netherlands. It would be helpful to us if you each made a few opening remarks touching on the highlights of the issue, and then we will have a general discussion.

Dr. James Björkman, International Institute of Social Studies (Netherlands): I am pleased to participate in this video conference today. You may know by my accent that I am not Dutch. I grew up on the Canadian border, but on the wrong side, in Minnesota, about 50 miles from Winnipeg. Many things have been done since I was on the farm in Minnesota. I am a generalist, and not only in the Dutch health systems but in health systems across the world. Therefore, I will leave the details of the Dutch system to my esteemed colleague, Dr. Hugo Hurts. My contribution will be broad and comparative and will include some lessons I have learned from looking at other systems.

I have been studying health policy since 1972, when I was on a Yale health policy project. Since then, I have spent over 15 years in the U.K., Sweden, Switzerland and the Netherlands and about 10 years in Asia, mostly India but also Pakistan, Sri Lanka and Nepal.

The Institute of Social Studies deals with developing countries, but my work is comparative across the globe. I have published a half dozen books, including several on health policy, most recently Health Policy Reform, National Variations, and Globaliz ation in 1997 and Health Policy in 1998. Both are edited texts. For the past decade, I have been a professor of Public Policy and Administration at the Institute of Social Studies, as well as Professor of Public Administration and Development at Leiden University.

To begin, I want to make three broad observations about how the health sector is structured and ways to address its policies. I will then ask you a very simple question.

First, there are three levers by which you can put pressure on a health system. You can deal with the problems of the providers of health care, that is, institutional as well as individuals; you can deal with the consumers of health care, the patient in various combinations; and you can deal with the payers for health care, whether through central taxes, insurance premiums or out of pocket. You can focus, therefore, on those who provide, those who receive, or those who pay. I am sure that that is not news to your committee, but it is worth keeping in mind when we look at options in the system.

Second, I will observe that there are three criteria sought by all health systems that I know of. These criteria are summed up in the quest for the highest quality care at the lowest reasonable cost for as many people as possible. In other words, policy-makers seek to improve access and to assure quality at the same time as ensuring cost-effectiveness.

Problematically, however, these three pull in different direc tions - that is, to get more of one usually entails getting less of others. The search is for the right combination appropriate for a particular country at a point in time.

Cost control has been the favourite policy reform during the past decade, given the financial stringencies that exist. The equation I draw to your attention is that the larger the share of any public budget, national or provincial, that is taken by the provisions of health, the higher the political salience of health as an issue. In fact, the higher the share of GNP that is consumed by health expenditures, the more important that field is to public life.

We need only remind ourselves that cost control is a politically two-edged sword. To cite an old economic truism, every expenditure is someone else's income. Therefore, if you talk about cost control you are also talking about income control, and the latter is very much a delicate point.

There is a third subject that I have been researching and writing on for several decades in both developing and developed countries, and that is the policy instruments that can be used. When governments try to influence or shape a health system, they choose from among three methods or combinations of these methods. These methods have many labels, but they fall into three categories. When faced with a problem in health delivery, governments can try to centralize, they can try to decentralize, or they can try to invoke the market mechanism.

What I am saying here is that when I have looked at the real life histories of health systems, I have found the following: the United Kingdom has always sought to tighten up its system, even when installing the so-called internal market; Sweden has always tried to decentralize responsibility to lower levels, sometimes to share the blame for the fact that people often do not get as much as they expect; the United States and its emulators have often advocated the market even when the market is not obviously operable due to the skewed division of resources.

The Netherlands is a small country with much intense interaction among participants, and all three of these policy levers have been proposed at various points in history. In fact, several years ago I worked on a book with a colleague in New York, one chapter of which looks at the historical experiences of the Netherlands with reform. I will be happy to make that available later.

More recently, as information about statistical distribution, morbidity and mortality has become available, and as the technical methods to disseminate and communicate such information has grown, there has been an increasing tendency to think of demonstration effects. They want to see what one country does and hope that another can do it, or what they think another country is doing, because we often talk not only about perceptions, but also about misperceptions.

The committee has undoubtedly already discussed how ideas about different systems have been used, misused and abused, but caution also must also be exercised when one speaks of learning about other systems. In fact, several of our colleagues often distinguish between learning about another system and learning from another system, and perhaps we can discuss that.

After those opening remarks, let me ask the committee, in all honesty and some humility, why or even whether the Canadian system needs any change. One can always tinker with systems, and maybe that is normal for human communities. However, by chance last week, the very day I received the invitation to participate in this video conference, I received an unsolicited report from the Canadian Institute of Health Information. I will quote from the concluding chapter of "Health Care in Canada 2001."

And yet, the more things change, the more they stay the same. Most Canadians continue to enjoy good health. Life expectancies are also improving, although large differences remain within and across communities. The vast majority of Canadians also continue to report being satisfied with the care they personally receive.

Therefore, I ask: What is the goal of the inquiry of this Senate committee other than knowing more about the world, which in itself is a good thing?

I will conclude by mentioning two other experts in comparative inquiry. Perhaps they have already testified before your committee; however, in the event that they have not, I will mention them. They are Professor Carolyn Hughs Tuohy, a professor at the University of Toronto, and Michael Decter, a former civil servant in Manitoba and a consultant on health policy. In 1999, Dr. Tuohy wrote a book entitled Accidental Logics: The Dynamics of Change in the Health Care Arena in the United States, Britain, and Canada. In 2000, Michael Decter published Four Strong Winds: Understanding the Growing Challenges to Health Care.

They are members of an annual conference that looks at four countries and their health policies and reforms. We have been looking at Canada, the United States, Germany and the Netherlands since 1995. The group also includes my colleague Dr. Hurts. In fact, in mid-July of this year, we are reconvening in your lovely country, in Gananoque, Ontario, for another session. Perhaps some of you will be able to join us there.

Dr. Hugo Hurts, Deputy Director, Health Insurance Division, Ministry of Health (Netherlands): I have been employed by the Ministry of Health since 1985. From the start, I have been involved in policy debates about restructuring the health care system in Holland. I was assistant secretary to Mr. Dekker, who was a former Chairman of the Dutch Phillips company. In 1986, he was asked to advise the Dutch government on the new system of health insurance. His advice was issued in 1987. The Dutch government in office at that time decided to accept the advice and tried to come to one insurance system for the whole country. As you may be aware, that drive collapsed after some years. Since about 1993, the Dutch policy debate about reforming the health care system has been in a deadlock and just now, as we are coming up to a general election in May of next year, the debate is returning.

It is widely expected that from next year onward we will try to reform our health care system. We found that operating an insurance system consisting of two-and-a-half social insurance agencies and, at least to European standards, a considerable level of interest for private insurance did not work that well. We are the only country in the European Union that has private insurance for over 30 per cent of its population for acute health care. We had to start regulating that private health care sector about 15 years ago. The only reason it still works - and this is a personal opinion - is that we had heavy regulation for all bad health risks within the private market and as such the rest of the market was able to survive.

Because we operate an insurance system, it is important that the Dutch government is not directly involved in the operation of the health care system in many respects but is indirectly involved in a very detailed way. We have heavy regulation of the insurance system. That regulation goes into much detail with respect to budgeting and tariffing all suppliers of health care and building an investment in health facilities. By using non-governmental bodies to operate these regulations, rather than carrying them out ourselves as a government, we succeeded in steering health care affairs with such great detail that we were successful in cost containment.

On the other hand, the price for that has been great inflexibility. The level of regulation has grown so intense that we have now a true flexibility problem. We are no longer really capable of getting our population what it is entitled to under our social health insurance, and there is a widespread belief that something should be changed. The entitlements of people and their freedom of choice should be enlarged, and we should get rid of the difference that is still there between, on the one hand, uninsured people and, on the other hand, 5 million insured people.

The great question for the next few years is this: are we going to succeed in getting political agreement about that? You have to keep in mind that Holland is always governed by coalition governments. I cannot say that the political differences between the different major political parties are that great, but in health affairs several things may provide intense debate.

We will see what comes about after our next general elections. I expect that we will get back into the discussions of 12 years ago, discussions about building an insurance system for the whole population based on the principle of social health insurance and carried out in the manner of private health insurance.

For the moment, I expect that the expensive chronic health care part of the system - for example, facilities such as nursing homes - will be let out of the debate. We have a separate national insurance for that. After some years, I expect it to enter the debate again, and perhaps we will end up with one national insurance covering the whole health care sector.

I suppose you already have quite a bit of knowledge about these matters. Please feel free to ask any questions you like.

The Chairman: Let me try to respond in a very brief way to Professor Bjorkman's question about why are we doing this. I will give you a response using the description of the health care system as you see it.

As governments decided to cut back on expenditures, it was not clear whether that measure was designed to make the system more cost-effective; it was certainly designed to save the governments money. That appears to have had a significant impact on access - and I say "appears" because this committee has discovered a huge difference between perception and reality in the health care system.

Since this perception was created, public attitude surveys have shown repeatedly that consumers' impressions of the quality of the health care system are enormously better if they have actually been in the system, rather than merely viewing it from the outside.

Nevertheless, consumers became concerned about the issue of access, and consumers equates with voters when it comes to the health care system because the system covers everyone. That issue explains why this problem is a political one, which has, in turn, become a public policy problem.

In addition, our national system has focused almost exclusively on doctors and hospitals. In other words, it is essentially a delivery-driven system, not a system written in patient terms. As a result, access to the system is much less if one is using a different delivery system. For example, access to drug plans and long-term care is different, and access to home care is enormously different.

One of the underlying issues we are trying to confront is whether we broaden the definition of the public health care system to include delivery systems that extend beyond hospitals and doctors. To that extent, therefore, that would be an issue even if we did not have the consumer-voter issue I described. That is the background as to why we are here.

I understood someone being insured by a sickness fund, and I understood someone being insured privately. As I understand it, the sickness funds are funded by contributions from employees and employers and cover those individuals.

What about someone who is retired or someone who is not working? In other words, how is someone covered who is not, I presume, from the definition I saw, a member of the sickness fund because they are not working? What is the mechanism for covering those people?

Dr. Hurts: If you take a look at how the sick fund insurance started, it was originally meant only for workers. After they were pensioned, they stayed in the insurance. Usually, you stay within the system you were a part of at working age. If you had been privately insured at working age, you would remain being privately insured after you got a pension, and the sickness fund system was the same.

If we look at what happened in the past two decades with respect to Dutch insurance policies, the sickness fund could no longer be called only workers' insurance. Many groups had been added. People receiving social benefits, for example, sickness, disability, unemployment, are all under the workers' arrangement of the sickness fund insurance. As long as their total income out of work or social insurance is below a certain income threshold those people will be insured.

We also added a big group of pensioners. A few years ago, we introduced a separate income ceiling for pensioners, so if their total pension income is lower than the different income threshold they will also be insured.

The Chairman: Perhaps I can ask a question about paying for that. Do they pay a premium, or are they simply covered free by the fund?

Dr. Hurts: They all pay a premium.

The Chairman: Even if they are on social assistance?

Dr. Hurts: Right. The body giving the social assistance is regarded as the employer and as such pays the employer's part.

The Chairman: And the employer and the employee pay essentially the same amount?

Dr. Hurts: That is how it started. It was on a 50-50 basis originally. In later years, a flat-rate premium was introduced. It is paid out of the pockets of the people insured directly to the sick fund, so that has been taken off the 50 per cent employee's part. At the moment, it can no longer be called a 50-50 split, but it is still based on that.

Dr. Björkman: What I want to stress is not the technical side but that every Dutch citizen has someone who pays their premium. If the premium is not received via an individual's salary, the state or one of the designated agents will pay it. No one falls through the safety net. That leads to the question of deep values, not can you pay but it must be paid.

The second thing of interest, which Dr. Hurts might explain further, is that larger packages can be bought, if one can afford them. There is a basic level that must be paid. If I am well-paid, I can opt for a higher package with more facilities, but there is a safety net.

The Chairman: Professor Björkman, you said that someone pays it for you. As I understood it, however, you are paying part and someone else is paying part; is that correct?

Dr. Björkman: That is correct. If an individual cannot pay, the other part is always paid by the employer. If an individual cannot pay, then in fact the state will pay it through the insurance system. There is not a separate-tax-financed one, different than the insurance system - which is a point I wish to return to in a minute.

Dr. Hurts: It is important to understand that both the employer's and the employee's contribution is taken out of an individual's salary or social assistance income. The individual will not see it. It will show up on the individual's salary slip at the end of the month. It is not paid directly. The only portion that people pay themselves out of pocket is the primary premium part.

The Chairman: What was the rationale? I cannot conceive of a rationale for it moving from a 50-50 system to one in which part of the individual's 50 per cent is paid by a flat rate. What is the purpose of that? What is the current public policy regarding that?

Dr. Hurts: That had a lot to do with the former system. Following the Dekker commission proposals, we wanted to introduce one national insurance, where, let us say, 60 to 70 per cent of the premium would still be income-related and the other 30 to 40 per cent would be a flat rate, to give people an impression of what the cost of health care is. We did not have that in our system.

The Chairman: Nor do we. Perhaps I could ask you one other question and then turn to my colleagues. On the other end of the spectrum, your Exceptional Medical Expenses Act deals with what we have been euphemistically calling catastrophic insurance, in a sense the end of the spectrum where the costs are such that even if there were a completely privatized system the state would have to protect you at that end. How do you define what comes under what you call exceptional medical expenses or what we would call catastrophic? At what point do you decide that a particular individual has crossed the boundary into that separate, purely publicly funded set of people?

Dr. Hurts: That is a matter of definition. If you have looked at what has happened in our country, you have seen this definition moving over the years. When the exceptional medical accident insurance came into force in 1968, coverage was for catastrophic events such as being treated in a nursing home, having your child staying in some specialized institution for treatment of physical or mental handicaps, serious things like that. Over the years, other things have been added to the benefits package of this insurance, which again led to political debate about whether or not that was a good thing. Facilities have moved from the acute care insurance to the exceptional medical expense insurance and back again.

Dr. Björkman: That raises another good point. There is, of course, political pressure, usually on the administrators - the bureaucrats, if you will - hired by the professionals who say what is good. There is always the ability inside a system to add and subtract, usually add. As you just said, when costs escalate people suddenly pay attention.

Serious political negotiations can be found within the entire Dutch system. I admire the Dutch and those in some other Western European countries for taking a long time to work these issues through. The amount of time spent in discussion is really almost abnormal compared with the rest of the world. Such discussion is important for support for what the Dutch call "dragvlak." It goes back to the issue of culture - and I know they do not always want to talk about culture, but there is a deep value here in solidarity. At the same time, there is a pride in individual capacity. Hence, there is an attempt to marry two contradictory pressures. As manifest periodically in these electoral and political issues, inside the system it is like a juggernaut rolling along. If your value is that no one should be left out, you will err on the side of commission, not omission. You will always include people until you have been told you cannot, as opposed to working it the other way.

Senator Morin: I would like to thank Dr. Hurts and Professor Björkman. By the way, Dr. Björkman, we have used Carolyn Tuohy's material, and it is excellent. We are also aware of the work of Michael Decter. I have several questions that come from the material we had before this meeting.

Dr. Hurts, we are interested in your system because of the importance of private insurance in your system. You are obviously doing something right. You have very few patients on waiting lists, fewer than in Canada, and your health indicators are also excellent. Obviously, you are doing things in a better way than we are in Canada.

If I understand correctly, two thirds of the population are covered by sickness funds and approximately one third is covered by private insurance. As far as the sickness funds are concerned, about 25 of them compete. I was wondering on what basis they compete, why a person would choose one over the other. If the premiums are the same, if the coverage is the same, on what basis can they compete?

Returning to the private insurance, if I understand correctly, the premium and the deductible can vary. Does the coverage vary? Will one plan give more coverage than another? This information was not contained in the material I received. I was under the impression that it was possible by law to be uninsured in Holland, that it was not an obligation.

I will stop there. I have other questions, but those are my questions concerning the private insurance system.

Dr. Hurts: I hope you were right in what you mentioned about the prevalence of waiting lists in Holland because, at the moment, it is a serious problem in this country. The problem has built up in the last few years in a rapid way. The real public debate at the moment is that the greater part of the Dutch population has certain entitlements to health care defined in our Exceptional Medical Expenses Act and in our Sickness Fund Act, even though they cannot always get the services they need and to which they are entitled within reasonable time limits. Thus, there is an ongoing debate as to whether the Dutch government has gone too far in setting budgetary limits on the system. Presently, this is a serious problem in this country, especially in the field of exceptional medical expenses insurance.

Your second question concerned competition between sick funds. Before I can elaborate on that, I have to tell you that before we started our last reform people could only be insured by the sick funds operating in the place where they lived. You had to be insured with the sick funds where you lived. In most parts of the country, there was only one fund. There was no freedom of choice whatsoever.

When reform started, the general idea was that sick funds should enter into competition. Of course, there can be no competition on an income-dependent contribution. However, there can be competition on the fixed-rate part of the contribution. This was one of the reasons we introduced fixed-rate premiums. There may be differences between one sick fund and another when you look at the level of the fixed-rate premiums. Differences are building up.

Another thing you can do is create differences in the level of services you render. For the rest, it is emotion.

Dr. Björkman: It is important to look at history, as well as ethnic identity and regional differences. Is it not true, Dr. Hurts, that there has been a consolidation in a number of sickness funds over the last 20 or 30 years?

Dr. Hurts: No, that is not true. We came down from 50, went back to 20 and then built up to 30. New sick funds have been coming up after the first phases of the reform, and now we see the process merges again.

We have to deal with the question of how many sick funds we need at the lowest possible number to ensure competition in the different parts of country. If there are only two, there will not be much competition. If there are five, perhaps that will be enough. We are still finding out.

There can be differences in premiums; there can be differences in benefits packages. Let us say there are not that many differences in benefits packages. On the whole, the growth of the benefits package in the private health insurance market is very big. It is even bigger than the sick fund insurance. If you take the benefits package of the exceptional medical expenses insurance and the sickness fund insurance together, almost everything is covered. Only for those procedures that are considered a luxury can an individual take out extra insurance.

There is a tendency that, on average, the benefits package of private health insurance is even better than the sickness fund insurance. There is a general agreement that has not been forced by government, but the private insurance companies agreed among themselves to always include general practitioners and the drugs they prescribe within the benefits package. That was not the case 20 years ago, but now it is.

Indeed, it is possible to be not insured for acute care in Holland. One is always insured under the Exceptional Medical Expenses Act, whether one likes it or not. If an individual belongs to the group of people having to take out compulsory sickness fund insurance, there is no choice. However, if someone is privately insured, he or she may decide not to take private insurance. There are people who do that, but the number is relatively small.

Senator Morin: I would like to move to hospitals now. If I understand correctly, in your country most hospitals are private but not-for-profit. Also if I understand correctly, most of them are affiliated with religious orders. Are there non-religious hospitals? Is there a possibility of having a private for-profit hospital?

My second question deals with what we in North America call "clinics." Clinics are facilities where outpatients can have treatment. Services such as surgery, imaging, ultrasound, even nuclear magnetic resonance are offered in clinics. Clinics are self-contained. In this country, most clinics are not-for-profit; however, there are a number of for-profit clinics springing up.

I was wondering if the experience is the same in your country.

Dr. Hurts: Almost all of our hospitals are private institutions. There were never that many government hospitals, but nowadays there are almost none left. There may be one or two psychiatric hospitals that are still in provincial hands. On the whole, however, most hospitals are private. Even our sick funds are private organizations. They are non-governmental bodies.

The matter of profit making is a very sensitive one in this country. Normal hospitals operating within the official system cannot be for-profit. We have, however, a growing list of private hospitals. In order to operate under the social health insurance system, a private hospital has to have an agreement with one of the official hospitals, has to be linked to an official hospital to remain operational. Until now, private hospitals have not been allowed to make any profits.

Oddly enough, over the years the doctors working in these hospitals have always had the possibility of making large profits. We call it income, but you might just as well call it profit. We have never had a problem with that, but when it comes to institutional care, it is always a big problem. This will be one of the debates in the next few years.

In the current debates going on within our government, the issue of profit making is a very important one. The liberal party especially will argue that profit making should be admitted. Generally, the social democrats would say no to profit making.

Then, of course, we still have special ways of admitting profits. Even sick funds currently can make profits, but they cannot spend them. The only thing a sick fund can do with profits is reinvest them in the system or create financial reserves that they can later reinvest in the system.

Dr. Björkman: Non-profit is similar to Blue Cross and Blue Shield, which can certainly make internal profits that cannot go to stockholders. There is a delicate line between profit and income. In fact, it turns out that a number of the hospitals may have started out as religious, even charitable, hospitals, but to my understanding they are all basically corporations, general hospitals that do not provide profit for shareholders. They have to compete with one another to get the doctors and to have the services and the clients. Not only is there competition at the insurance sector, there is competition at the provider sector.

The Dutch have attempted - and Dekker was trying it in part of the reforms - to introduce more competition throughout the system. Although it is not necessary to pass a law that makes competition mandatory, the anticipation of people who want it will make it possible for them to shift their behaviour. It is like the law of anticipated reaction - in other words, although the Dekker system is technically dead, it actually is manifested in the Dutch system.

Senator Morin: Do you have any clinics?

Dr. Hurts: It is hard to make a real comparison. It would be the same as you mentioned.

Dr. Björkman: You have free-standing clinics, which can in fact charge and make money. Here, such clinics have to work as hospitals, which cannot make the profits. There is a proviso that hospitals cannot make a profit. Who actually performs the services? Various professionals perform the services, and they have a proper income, not a profit.

The Chairman: I would like to ask two follow-up questions, one of which touches on your last point. If a private hospital, for example, were owned by the doctors, it seems to me that it would be possible to avoid the profit question entirely by simply flowing through extra moneys to the doctors who happen to own the hospital. In other words, rather than issuing dividends, all moneys could arbitrarily flow through to the doctors who own the hospital; those moneys could be deemed income.

Dr. Björkman: If that were to happen, there would be sufficient information flow for the public system to begin asking whether that is the right thing to do. Consequently, we would have a form of regulation for it.

Dr. Hurts: We do have that form of regulation under our balancing and budgeting law because for all medical services rendered there is an official tariff. It might be quite high for cardiology and quite low for specialized care for children, as is the case in this country, but cardiologists in Amsterdam cannot charge a higher tariff than in another city. There is always a standard for the whole country. At the moment, under current regulation, such a thing as you mentioned cannot happen.

The Chairman: I have another question, going back to Dr. Hurts' first comment. When you said you were having trouble, particularly under your Exceptional Medical Expenses Act, wherein people were entitled to services they were not receiving, I understood you to say that people were not receiving those services within the time frame they regarded as appropriate. Is that right?

Dr. Hurts: Yes. The services may be quite heavy. If one of your parents has to be treated in a nursing home, he or she may be on a waiting list for two or three years, with a worsening condition.

The Chairman: Is there an objective measure as to whether people are receiving exceptional services in a time frame that is "reasonable," or is that time frame essentially arbitrary, in which case, frankly, from the point of view of the consumer it should probably be zero?

Dr. Hurts: Actually, it is zero. If you look at how the entitlements of our population are defined in the Exceptional Medical Expenses Act and, by the same argument, in the Sickness Fund Act, you will see that these are absolute entitlements. An individual is entitled to services the moment those services are needed. The moment a specialized doctor - or, as we call them, indication bodies - says that an individual needs this or that service the individual is entitled to receive that service.

Our law does not take into account such a thing as reasonable waiting time. Nevertheless, at the moment, a large public debate is taking place. Our sick fund and private health insurance companies, together with suppliers of care, are attempting to find out norms, criteria, for reasonable waiting times.

Perhaps in a few years we will have an option such as reasonable waiting time, but currently the entitlement to service is absolute.

The Chairman: That means that at the moment, I presume, with virtually every case you are violating the law in the sense that unless there is a complete emergency nobody gets zero waiting time; correct? Therefore, it seems to me that an objective measure of what is reasonable would help the system considerably. Is that right?

Dr. Hurts: Yes. I suppose that will be the case. The difficulty has always been in deciding who was guilty for not providing enough services. If you do not get what you need, the first place you go is to your insurer, your sick funds or your private insurer, and say, "I am entitled to this or that and I cannot get it; I have to wait two years." This insurance company will say, "I would be glad to help you but I cannot. Because the government regulates the supply and the demand is so heavy there is not enough capacity to treat you."

Then who is responsible for capacity? It is the government again. Try to take that case to court and say, "The government has to supply me with this or that." The government will say, "It is not up to us; it is your insurance company that has to do that."

It took a lot of time before the right cases were brought before court. Only two years ago, we had the first couple of court decisions. They said, "Get rid of all this nonsense. These people are entitled to such and such type of care. If the sick funds or the insurance company has done everything it could to provide the care but there simply was not enough capacity, the government is responsible." That is why we are now doing something.

Dr. Björkman: It is like passing hot potatoes around, which is normal. Who is responsible? What is interesting to me, as your colleague pointed out, is that the waiting periods are quite short. I keep telling my Dutch friends that if they were to make a comparison, they would find that the system is not really broken, that not much has to be fixed. They disagree, however.

We have to keep in mind the "grumble factor." Everyone is going to complain about certain things. I do not know anybody who waits two years for a particular medical service here. If that were the case, they would go somewhere else for the service.

The Chairman: Instead of calling it a hot potato, the general description we would give in this country is to say that politics is the art of shifting the blame. That appears to be what is going on in your case. That is something we fully understand.

Senator Graham: Thank you, gentlemen, for a very interesting, if not provocative, discussion.

Perhaps you can clear up one aspect of confusion for me.

The sickness fund membership I understand is mandatory for those who earn less than 64,600 Dutch guilders, an amount that is roughly Can. $42,000. It is not mandatory for higher-income citizens, who are entitled to purchase insurance.

My understanding is that the sickness fund membership is not mandatory for higher-income citizens, which would represent 31 per cent of the Dutch population, who are entitled to purchase or belong to insurance programs.

Dr. Hurts: There are only private insurance programs. Either an individual is in or he is out. If an individual's income is above the income threshold you mentioned, that individual can never be sick-fund insured. If an individual wants to have health insurance for acute care, he or she has to take private insurance. There is no other way. The individual can decide to take insurance or not to take insurance; however, by far, the greater part of the population does choose to take insurance, but that can never be sick fund insurance.

Senator Graham: So it is not mandatory?

Dr. Hurts: It is for people who are on the list of mandatory people. If you are not on this list, you can never be sick-fund insured. I hope that is clear.

Senator Graham: I am surprised. What would be the percentage of people in the Netherlands who do not have any kind of insurance?

Dr. Hurts: That is a very small amount.

Dr. Björkman: Not even 2 per cent?

Dr. Hurts: Behind the dots.

Dr. Björkman: Less than 1 per cent. It would be foolish not to, given the probability of illness. People who know the possibilities are going to take up the chance. From my personal experience, most of our private insurance is quite equitable. It is not a matter of gouging out premiums. You get value for money.

Senator Graham: In Canada, we have 2.1 practising physicians per thousand population. Could you tell us how many there are in the Netherlands?

Dr. Hurts: I do not have that figure.

Dr. Björkman: I do not know that off the top of my head, I am sorry. I could look that up. I do not think it would not be far off that, however. I say that partly because the public expenditure is roughly the same.

Dr. Hurts: There are some special features within the Dutch system. We have a comparatively well-provided sector of family doctors, general practitioners. Every Dutch citizen has a family doctor, a GP. We have a low number of specialized doctors. For example, in the neighbouring countries of Belgium and Germany, there are far more specialized doctors, and people tend to go directly to hospitals and specialized doctors if they need anything. In Holland, one must have a referral by a GP to get to a specialized doctor or a hospital.

Senator Graham: Do you have any form of home care in the Netherlands?

Dr. Hurts: Yes, we do. It is covered under the exceptional medical expenses insurance. The greater part of home care is consumed by elderly people. However, if an individual needs home care after treatment in hospital, it is covered under the exceptional medical expenses insurance, even though expendi tures like those cannot be regarded as exceptional.

Senator Graham: Is there anything in the Canadian health care system that you would like to have adopted in the Netherlands?

Dr. Björkman: Not off the top of my head. However, I do know something about the central payer system in your division, and it is a fairly equitable one. Nonetheless, it strikes me that there is perhaps more conflict now in the Canadian system than here. So it is hard to think that I would float the payment system or the allocation of responsibilities.

Senator Graham: Less than 10 per cent of the total health care spending in the Netherlands is raised through general taxation, yet we are told that the role of the government in regulating the health care system is significant. The national government has responsibility for and financial control over most aspects of the health care system. Is that through regulation?

Dr. Hurts: It is difficult to explain and hard to understand for people from other countries, because little direct government money is involved in the system. The greater part of the revenue comes out of insurance premiums. It is outside the government budget, even though there is budgetary control of the entire sector.

Social insurance and private insurance are put together. If the Dutch government discovers that total expenditure in the health care system is higher than expected, next year the government will begin to lower hospital budgets, dampening the growth rates of income of all doctors. That can be done in a very detailed way. For example, if one specialization within hospitals has become more expensive than expected, next year their tariffs will be lowered. If less than expected was spent in a certain sector, next year tariffs will be raised.

There is a very tight control on what is spent in all different subsectors of the health care system, even though no direct government money is involved.

Senator Graham: The hospital budgets must be approved by government. Is that correct?

Dr. Björkman: The Dutch have a unitary state, yet they do not have direct provision of services. What they have - and it is not only in the health sector but also across other policy sectors - is something called steering or guiding. In fact, even when one uses the word "control," it certainly guides behaviour, and there can be penalties, it does not have that same feeling of lockstep control because there is so much persuasion involved in the system. As Dr. Hurts says, if the government notices a pattern shifting, it will think about the impact of that and then tinker with ways to raise or lower that pattern.

I keep joking that it is like trying to drive a car from the back seat. You are doing a lot of jawboning, you are doing a lot of backseat driving, but you are not directly holding the steering wheel. The car is still moving in the direction you expect. The backseat driver would kill the driver if it reversed. There is a great deal of solidarity here of what is appropriate.

The point also to be made, which is hard for even the British to understand about the Dutch, is that they have applications through their ministry, their departments, their agencies, which have a great deal of autonomy. They are not the providers. Dr. Hurts spoke of a number of semi-autonomous and autonomous agencies that regulate tariffs. It is not done by legislation or directly in law. It is done by professionals and bureaucrats who say what they think is appropriate for the next two or three years. The fine tuning is more than we are used to in North America.

Senator Graham: If the backseat driver is going down a one-way street the wrong way, the government has the right to turn the driver around?

Dr. Björkman: Yes.

Dr. Hurts: The backseat driver is the government.

Dr. Björkman: The government is not unitary. It is multiple.

The Chairman: We have often thought or been told that one of the great efficiencies of the Canadian system is that we have a single-payer model at the provincial level, and therefore we have the presumed efficiencies that come with that type of administration. Your system is a multiple-payer system with heavy government regulation.

Has there been an attempt to look at the pros and cons from a cost-benefit standpoint, moving more toward a single-payer model in your current system?

Dr. Hurts: Yes, there have been such debates over the years, but most of the time only on the outside lines of the system, not the hard core of the insurance system. Perhaps the relative weakness of our provincial governments is a point in this. We have 12 provinces, but they are very small - we are a very small country - and they are not accustomed to tasks like these. They do not have the bodies to carry out these tasks properly. It is not a serious matter in this country.

Perhaps for some things between social welfare and parts of the exceptional medical expenses insurance, there may be some exchange between the insurance system and what local governments are able to do. However, it is not a very serious debate.

The Chairman: The other comment you made that quite stunned me, when, Dr. Hurts, you were commenting in response to Senator Graham, that if a particular procedure were found to be too expensive in a hospital, running over the forecast amount, you would simply lower the tariff. You said that almost as if that were a non-event. Attempting to lower the tariff of the Ontario Medical Association or the Nova Scotia Medical Association, for example, would be analogous to nuclear war on our side of the system.

I am interested to know how your medical profession accepts what I inferred was relatively unilateral tinkering with the tariff system by the government. It is a wonderful thing to have. I am curious to find out if it is as simple as I understood it to be.

Dr. Hurts: You have to keep in mind that all our hospitals have budgetary certainty. At the start of the year, they know what their budget will be, and they are entitled to receive that budget. They receive these budgets by tariffing. The main tariff of each hospital will be the tariff for a day of stay in hospital, but there may be several side tariffs for special treatments or services rendered by specialized doctors who have their own tariffs.

At the end of the year, a calculation is made as to whether the sum of all these tariffs mounts up to the total of the budget. They will always be, and remain to be, entitled to receive their budget. If the total sum of their tariffs this year is less than the budget to which they were entitled, then they will have a higher tariff next year in order to have the possibility of earning the remaining part of the budget to which they were entitled. If the total sum of all their tariffs had been higher than the budget, next year the tariff will be lower in order to pay back what they were overpaid.

There is always budgetary certainty. They will know what they will be getting.

Dr. Björkman: Mr. Chairman, you are also asking about the professionals and how they could be disciplined. Those professionals are also advising the parts of the community that set the tariffs. It is not just a question of telling them what to do; there is a sharing of that point.

Every so often, our medical associations do rise up. Recently, we had a small, very dignified strike by the house doctors. It was done in a gentlemanly fashion. There was no disruption. They were just pointing out that, ultimately, health care of a medical fact is provided by a provider and that as such there must be reasonableness about what they, as providers, require.

I cannot emphasize enough the amount of discussion and the amount of information that goes into the system that Dr. Hurts is describing. In fact, there is a lot of discussion about what is and is not accurate information. When you turn to methodologies, you end up dealing with internal professionals, things that the politicians at large do not have do worry about. They leave it to the experts. Only when that tab becomes unbearable will the experts be chastised a little bit. This is a closed system, if you will, operating in a type of equilibrium, and it is getting value for money. That is why the Dutch do not go for single-payer systems. To them, that would be too monopolistic.

Dr. Hurts: On the other hand, if you were to hear us speaking about things we are debating, you may get the feeling that many professionals in the health care sector have been getting involved more and more in administrative procedures and are not able to do their jobs. There is a rising tendency at the moment in health policies in this country to create more flexibility, to decentralize decision making procedures in order to give professionals their profession again. They are the ones who will make the decisions, not the administrators and bureaucrats. That is the idea behind the operation of the system at the moment.

Senator Keon: I would like both of you to comment on two general areas, if you would. First, I would like to bring you back to the multiple insurers. I would like you to tell me how much flexibility they have. If I draw an analogy with the HMOs, the health management organizations, in America, how much flexibility do the multiple insurers have in the selection of doctors, hospitals, institutions and standards of care?

The second area I would like to explore with you is the following. In Canada, we have a very good handle on our medical care and our hospital care. However, if you take the example of a cancer patient who is first treated in hospital, who then requires some kind of home care for a short period of time and who then requires chronic care for a period of time, followed by hospice care or some kind of terminal care, in Canada we have not been able to cover the cracks. People are now getting caught out with very serious financial problems as they move through the system, which is not seamless. There are bumps and gaps along the road as far as coverage is concerned.

I would like you to lead me through the events that occur in the life cycle of a cancer patient in your system and tell me what prevents that patient and his family from incurring huge financial burdens.

Dr. Hurts: I will try to explain. I hope I can.

Your first question had to do with how much flexibility insurance agencies have in contracting with suppliers of care. It is important to note that in our Exceptional Medical Expenses Act, as well as in our Sick Fund Act, there is a mandatory system of contracting for insurers. Thus, every sick fund in this country has to offer every hospital and every other institution a contract. Thus, there is no flexibility. Every institution should be under contract with every insurer.

It is not the same for individual providers of care. It was the same 15 years ago, but we changed it, so there is some flexibility there. Every insurer is free to decide whether or not to have individual providers under contract. However, on average, they still would offer everyone who has the necessary papers a contract. So there is some flexibility in individual provision. There is not in institutional care, but there will be.

One of the next changes in our law will create flexibility in contracting possibilities. If that is to be the case, then you might expect to get a build-up of HMO-like insurers as there are in the U.S.A. We do not have them at the moment.

As to what will happen to a cancer patient after having been treated in hospital, the difficulty in our system is that as long as you are treated in hospital or treated by your GP or any specialized doctor you will be in the acute care part of the system, which might involve sick fund insurance or private insurance. The moment you need home care or treatment in any catastrophic facility, then you move to the exceptional medical expenses insurance. That is carried by your same private insurance company, which will also have to provide you with the facilities under the exceptional medical expenses insurance. However, there may be capacity problems there, and then we will also run into difficulties, as you described happens in your country.

We do not know of many cases where people have to pay large amounts out of their own pockets to provide necessary care. I am sure there will be some. Some arrangements have been made whereby if people have to wait too long because of a lack of capacity in exceptional medical expenses insurance facilities then the acute care insurance has to provide money to buy the necessary care on a private basis.

We really suffer from the split between these two insurance types. The situation would definitely be better if all facilities were under one insurance, but on average it works.

Dr. Björkman: Let me add one more thing. You describe the cracks that people fall through, because of changing demography and an aging system. After the acute care phase of the cancer patient, you get into chronic care and terminal care. You are emphasizing care, not cure. In fact, in many ways the Dutch system is also attempting to cope with and to find ways to finance that caring function. My expectation is that ways will be found to ensure that no one will ever slip through the cracks. If that were to happen, there are people who would blow the whistle and call attention.

I will be surprised if Dr. Hurts' prediction comes true, about a law creating flexibility in contracting possibilities. As I have said, the Dutch are extremely conscious of equity and fairness, and so you cannot have people skimming off the top.

If in the U.S. the HMOs had to deal with all of the population, the medicare eligibles and so forth, I suspect they would not show the profit margins they do and the rest. It is rather shameful that the U.S. segments its own system so much that there are multiple health systems.

Senator Robertson: Thank you, gentlemen, for helping us this morning to understand your system. It is a bit difficult and it seems quite complicated. I am looking at your system through the eyes of the consumer. You have advised us that there is a small percentage of cost to the federal government, that most of the costs are the burden of the insuring companies.

I will work in Canadian dollars and you can perhaps translate. I want to look at percentages for a moment.

Below the income of Can. $42,000, people are looked after totally. If I were a Dutch citizen earning Can. $42,000, what percentage of my income would I be paying for all taxes, including federal, provincial, as well as the cost of my health system?

First, let us talk about what it would cost me to have that health protection. What percentage of that Can. $42,000 would go to governments or insurers for all health matters? I should also like to have those comparisons for Can. $75,000 and Can. $100,000. I am interested in your tax systems in addition to what your health system is costing through the insurers. What is an average cost?

Dr. Björkman: It is roughly 50 per cent. Roughly half, maybe a little bit more, goes into the taxes that are paid for all the services including health. However, when it comes down to the breakdown in finance, Dr. Hurts may be on top of this.

Dr. Hurts: Indeed, there is an important relation between the taxation system and the levying of premiums for social insurances that cover the whole population. Actually, the income-dependent contributions, the premium for the exceptional medical expenses insurance, are part of the income tax.

We have an income tax system of four layers. An individual who does not have a very high income will only be in the first or the second layer of the income tax system. That person will then pay a certain percentage of his or her income - 10.5 per cent leverage is the premium rate for the exceptional medical expenses insurance, and that has been stable over the last few years. If I recall correctly, it is 10.25 per cent.

Another important contribution one must pay is the premium for the state pension. That is about 16 per cent of one's income. Also, only with respect to the first two layers of the income tax, if one's income rises over the next years one will not pay any of these premiums; one will only pay income tax.

The highest level of taxation at the moment, in the third and fourth layer of our income taxation, is somewhere around 55 per cent. That is the highest percentage one will ever have to pay. Then one's premium for the exceptional medical expenses insurance will be included.

Separate is the premium for the sick fund insurance. At the moment, that is 7.6 per cent of one's wage. That is deducted from one's wage. One receives net wages and from that this 7.6 per cent is deducted. Although it depends on the size of the family, an average family privately insured will pay let us say 3,000 to 4,000 guilders per year. Most of the time, one only has to pay for the first few children, sometimes for the first three children. If there are further children, one will not have to pay for them, but these are, of course, flat-rate premiums.

The rest of the tax burden will be in indirect taxes such as our value-added tax, which is fairly high at the moment. It is almost 20 per cent on everything one buys.

I would have to look up and send you the information for these income levels you mentioned. If you want to know exact figures, I cannot give them here.

Senator Robertson: Thank you. Those figures would be helpful.

If I understood you correctly, sir, you said that about 55 per cent of income of a certain level would go for taxation and premiums, but then I believe you said the sickness premium would add another 7.6 per cent to that 55 per cent; is that correct?

Dr. Hurts: Exactly. The sick fund insurance is not an insurance for the whole population, so the premium for that is not considered to be part of the income tax. The exceptional medical expenses premium is, so it is part of income tax. That will come on top of all taxes paid.

These percentages of 55 are, of course, marginal tariffs. They are only over the total-year income. The average tariff will be lower. That is why it can be the case that, overall, the burden of collective expenditure may be around 50 per cent at the moment in all of them. I am not sure what the exact figure is, but I can provide you the details at a later stage.

Senator Robertson: How many of your procedures or processes have user fees?

Dr. Hurts: That is a sensitive element in Dutch health policies. We almost only have user fees in the exceptional medical expenses insurance. We have no user fees in the sick fund insurance. We have tried several times, but time and again it appears there is so much political emotion about that that once we brought them into being one or two years later they are removed again.

Hence, we are not very good in user fees and co-payments. It is strange that in counties quite near, like Belgium, the whole population is perfectly used to user fees and we are not.

The Chairman: In health care services there is strong opposition in this country to user fees as well. In some ways, however, your flat payment is not a user fee because it is made whether you use the system or not. The flat payment is essentially an insurance premium that you might not use at all for several years and then use it frequently.

Dr. Hurts: That is right.

The Chairman: Do you have any way of letting people know how much cost they have put on the health care system in a given year? Let me give you an example. One of the ideas that is being floated in Canada is that at the end of a year every individual taxpayer will receive a statement from the government setting out the total amount of cost they imposed on the health care system. They would not be required to pay that cost. It would be some way of communicating to people that they are in fact costing the system money.

One of the arguments against that has been that, once you start telling people that, you are one short step away from saying, "They ought to pay some small portion of it."

However, is there any direct feedback mechanism in your country to consumers vis-à-vis how much of a burden they put on the system in a given year?

Dr. Hurts: It is only there in that part of the market where people have to pay themselves and get refunds, or otherwise get information because of their deductibles. In the sickness fund insurance, as well as in the exceptional medical expenses insurance, people do not receive any money. They are entitled to the care they need in kind. There is no separate administration concerning the consumption of individuals. We would have to set up a separate administration about what people consume before we could give them that information. I am sure many political decision-makers in this country would like an idea like that.

Dr. Björkman: The transaction costs would be high. On top of that, you would rapidly deaden any attention if you were told this information on a regular basis. The individual will not keep track except, perhaps, as a matter of pride.

There is a small amount of co-payment or deductible in the different insurance plans but it is really minuscule. We can speak from personal experience. You do pay fees for seeing your doctor or a specialist. Drugs are free over the counter. However, you get most of that money returned to you.

It is a delicate issue also as to whether or not you want to personalize health costs for an individual as compared to what the Dutch do, even at a collective level.

I may add that even now almost every year the whole system of health expenditures presses against the budgetary limits that have been set for the country. Every year, there are special arrange ments made to pay a little bit over the top that you did not expect. If you will, the collective public is aware that there are more expenditures in health care; however, that is not the case for individuals.

The Chairman: On the other side of that, is there any incentive or reward, depending whether you prefer a carrot or a stick, to individuals to lead a more healthy lifestyle? For example, do chronic smokers pay the same amount into a sickness fund as those who do not smoke at all?

Dr. Hurts: Yes, they do. There is no difference.

The Chairman: So there is no reward for good behaviour in your system, then? There is not in ours, either, by the way. Some of us think there should be.

Dr. Hurts: There are strong disincentives in private disability insurances. There you will see a big difference between smokers and nonsmokers, but not in health.

The Chairman: Yet, it is on the health care system that they impose the biggest cost.

Senator Robertson: Did I understand you to say that you cover all the pharmaceutical costs for your population?

Dr. Hurts: Yes.

Senator Robertson: We have a stir going on in Canada because the cost of pharmaceuticals is now as much or more than the cost for physician services in our country. What is the ratio in your country between the cost of pharmaceuticals and the cost of physicians?

Dr. Björkman: Pharmaceuticals are, indeed, more than physicians. Physicians probably account for 15 to 20 per cent of the total health budget, if you start breaking it down.

When I arrived in the Netherlands, we also paid for our drug prescriptions, for which we were reimbursed. About seven to eight years ago, it was decided that those transaction costs were ludicrous and that it was just as well to pay them through the insurance companies directly rather than getting the person involved.

I must say that as a user it has been much appreciated, and I do not hear any complaints about that.

Dr. Hurts: The problem with the cost of pharmaceuticals is that the annual rate of growth of expenditures is a lot higher than all other medical services. That is the main reason that the Dutch government decided two or three years ago that there should be a change in the way our system is tiered, because they could not get a firm grip on the annual growth rate of expenditures for pharmaceuticals.

The Chairman: With respect to pharmaceuticals, I have two questions. First, is there a national formulary? Second, can pharmaceutical companies advertise, for prescription drugs?

Dr. Hurts: We do not have a formulary list, but there is a very elaborate law on the pricing of pharmaceuticals. Pharmaceuticals can only be admitted to the market if the European Union bodies that make those decisions decide that a particular pharmaceutical may be on the European market. The Dutch government cannot have its own policy on that, but we may set prices for groups of pharmaceuticals. Therefore, we tried to group all pharmaceuticals on the European market in certain groups of look-alike pharmaceuticals. We then picked the European average price, or in some groups even picked the lowest price, and set that as a standard for refunds through the insurance system. Therefore, although we have very detailed price regulations for pharmaceuticals we do not yet have a formulary. We are working on that and hope to get agreements between the organization of hospitals and the organization of doctors to enter into a common understanding on formularies such as you mentioned.

The Chairman: Is advertising not really an issue because you are essentially operating off the European Community list?

Dr. Hurts: Yes. Of course, there is heavy advertising between the pharmaceutical industry and doctors, but there may be no direct advertising to the general public.

The Chairman: Finally, as I understood your description of the pricing system, the government fundamentally sets the price for drugs.

Dr. Hurts: Yes, you may say so.

The Chairman: I know that you probably do not call it that and would prefer that it not be called that, but I am just trying to understand the mechanics.

Senator Fairbairn: Thank you very much for being with us.

I would like to talk about waiting lists. We have that problem in Canada. We have vast a geography to work with and not a huge population. This has become an increasingly difficult problem.

What is the cause of the increased waiting lists in your country? Is it due to greater populations, changes in demo graphics, or perhaps the earlier detection of certain diseases? Is it due to a shortage of some of the new equipment that is so much in demand, such as MRIs? Is it due to shortages of doctors, nurses or technicians to run the equipment? All of those are dimensions of the problem here in Canada. We do have a shortage of doctors and particularly of nurses.

You mentioned that everyone has access to a family doctor but that there might be a shortage of specialists in Holland. Does your insurance program cover out-of-country specialist services that are not commonly provided in Holland? That, too, is a difficulty here in Canada.

Dr. Björkman: On the first broad question, probably all of the factors you mentioned will impact on what I perceive to be a mild increase in waiting lists due to the changing population and the new technologies. The government has attempted to be very careful not to overbuild, to limit supply to what is necessary and to get good value for money. That pushes up because, after all, waiting lists are another form of rationing.

However, my hunch is that the Dutch are well-served in terms even of waiting times with regard to the tasks they have before them. I understand that Canada, with its size and diversity, has much more variation in its system from one coast to the other than does this country, with most of its population located in an area with a higher population density than Bangladesh.

With regard to details, I did not think we could get treatment outside the country, but Dr. Hurts can respond to that.

Dr. Hurts: Yes, we can. The European competition law plays an ever-growing part in the operation of our health care system. Due to the system of compulsory contracting between insurers and suppliers of care, you may find that you only contract with Dutch providers and leave out providers from Germany, Belgium or Spain. In fact, we are no longer allowed to do that because we have one European market and there should be equal access, even to the Dutch health market, for providers from other countries.

Therefore, if there are shortages of supply in this country and a hospital from Germany argues that they can just as well treat patients who are on a waiting list in Holland, that German hospital can apply for a contract with Dutch insurers. At the moment, there is a growing tendency for Dutch insurers to seek contracts outside of the country. If indeed certain kinds of care cannot be obtained inside the country, people are entitled to go outside and have it paid for by social insurance.

Currently, there are special facilities in Spain, with a nice sunny atmosphere, where elderly people go to be treated during our wet and cold winters. It is even cheaper to fly them there and back and have them treated there.

We had our heart surgery airlifts to the United States and Britain several years ago. However, at the moment there is enough capacity for procedures like that in Holland. Most people still like to be treated near their homes.

Senator Fairbairn: Of course. That is very interesting because we sometimes have cases here in Canada, for all the reasons that I mentioned, where there is a desire to go to the United States, and sometimes that is not so easily done.

Dr. Hurts: There is presently a negotiated result between the organization of insurers and the organization of hospitals. There is a national Internet site that people can go to to determine what the waiting lists are at various hospitals for a variety of procedures. If the waiting lists are too long in the place they live, they may choose to go elsewhere. However, most people do not take advantage of it; they prefer to stay at home.

Dr. Björkman: Information is going to change even this system. Europe may learn something from North America when it starts to include 16 or 20 countries. There is already a huge variation of morbidity, mortality and usage rates on this continent. When the Europeans finally fulfil their single-market system, they may look enviously at what is happening in Canada because there are differences between Greece, Portugal, Germany and the Netherlands. However, that is a different issue for a different study.

Senator Fairbairn: I was taken with your description of "dignified strike" in your country. We have quite lively ones here, all of them underlining, particularly with the nurses, the difficulties that have developed through cutbacks of some years ago. We are now feeling the pain of those.

The question was raised about prescriptions. In the material that we received here, there was reference to a new drug prescription formulary in Holland, developed by the Dutch Medical Association, and it deals with a system of electronic prescriptions that is becoming popular. I wonder if you could explain that to us.

Dr. Hurts: I wish it would have become popular. This again was a negotiated result between the organization of our GPs and the Dutch government that every GP would use this electronic prescription system in his or her practice. Technically speaking, the facilities are there; every Dutch GP seems to have a computer, has the program, but only a small percentage really use the system. I must say that this is not a good thing. Much energy has been put into it and the result is very disappointing.

Dr. Björkman: Of course, it may take a while for that to be played out, in all fairness. Any technology, including the one we are using today, takes times to get people used to it. The idea has been around for some time - and I know my own physician uses it. I watch what he does and can calculate. Give it a little time, I suppose. I am not quite as pessimistic.

Senator Fairbairn: I presume the purpose is to try to enhance efficiency. Does it also have an impact on costs?

Dr. Hurts: It is expected to have an measurable impact on costs but it is still not proven.

Senator LeBreton: Thank you very much for your time today. I wish to go back to the Sick Fund Act and the Exceptional Medical Expenses Act. I am not clear as to who sets the premiums and what is the relation between the government and these private funds. I was prompted to ask this question after Senator Kirby's question about smokers. Are there set premiums? Are the premiums universal across the country, or are they on a sliding scale? How does that all relate to the government? How is that controlled?

Dr. Hurts: That is simple. For the sickness fund insurance as well as the exceptional medical expenses insurance, the annual premium rates, that is to say the income-dependent premium, is set by government. It is nationwide, there is no difference. The money is centrally collected and put into two separate central funds. Hence, the exceptional medical expenses insurance has a central fund, administered by a non-governmental but official body, and the sick fund insurance has a separate central fund administered as well by a non-government separate body. With respect to the exceptional medical expenses insurance, the fund is used to refund all expenditures made. In the sick fund insurance, the central fund is used to pay risk-adjusted budgets to the sick funds. Out of these risk-adjusted budgets, sick funds are expected to pay their expenditures. What they lack, they have to ask for from their insured by way of the flat-rate premium, and the level of that flat rate premium they may set themselves.

Senator LeBreton: How often have the premiums been adjusted over the last five or six years? Can it be done on an annual basis. How is it decided that the premiums should go up or down? Mostly up, I suppose.

Dr. Hurts: It depends a lot on the economic situation. In the last few years, we had relatively prosperous economic growth. As such, the average level of incomes has risen and we did not have to raise the premium percentages. They could even come down for sick fund insurance and still more money flows in.

However, the first thing we are looking at is the development of total expenditures, then we look at what we need to finance that, look at the development of the average income of sick fund insured people, and then set the premium percentage, so it is an annual calculation. If I look at the last four years, the percentage has been fairly stable, although expenditures have risen a lot.

Senator Morin: I have three supplementary questions in relation to the points my colleagues have touched on.

I should like to deal with the setting of physician fees. If I understand correctly, GPs are on a capitation basis, and the level is fixed whether the patient is under the sickness funds or private insurance. I would like to come to specialist fees. From the material we have, the fee schedule is different, depending on whether the patient is covered by the sickness fund or whether he is covered by private insurance. If the fees are different - a variable fee means variable services for the same procedure, if that is a fact.

Dr. Hurts: To start with GPs, the capitation system is only for sick fund insured. Private insured people pay a fee for service and there is a tariff for that and that is reimbursed by the insurance. The difference between sick fund tariffs and private tariffs for specialized care has been there but is no longer there.

Senator Morin: Is overbilling permitted under Dutch law, a supplementary fee that is paid by the patient?

Dr. Björkman: No, it is not permitted.

The Chairman: Can a doctor collect X-amount of money from the insurance and bill the patient separately?

Dr. Björkman: No.

Dr. Hurts: It is an economic crime if they do that.

The Chairman: Do you mean that it is illegal?

Dr. Björkman: It is illegal, yes.

The Chairman: To follow up on that point, is there anything in the system that motivates a specialist to prefer to deal with the private insurance company rather than with the sickness fund? In other words, how do you avoid a system in which, for example, the very best cardiologist in the country only deals with patients who contribute to the private insurance fund rather than patients from the sickness funds?

Dr. Hurts: There is not a real incentive at the moment because the fees are all the same. When they were different, there may have been an incentive to prefer to treat privately insured patients. It is no longer there. We sometimes even hear from doctors that they prefer to treat sick fund insured people because then they get their payments on time. Many privately insured people only start paying their bills after some months and as a result doctors encounter problems collecting the money they are entitled to; as such, some prefer to have sick fund patients.

Dr. Björkman: If I am not mistaken, the services are delivered through the hospital that the specialist is working in. The hospital is the one that has the global budget, so you do not really have an individual provider to the insurance fund. You have the insurance fund to the hospitals and then to that provider specialist.

The Chairman: What that says to me is that essentially the specialist is completely indifferent as to where the hospital gets its money, since the specialist's source of funds is the hospital.

Dr. Björkman: Right.

Dr. Hurts: The other thing is that in recent years not only our hospitals but even our specialized doctors are on a budget. They know in advance what their income will be so there is no production incentive any more.

The Chairman: That essentially amounts to income controls on physicians, is that right? Again, I know you do not want to call it that, but that is what it is.

Dr. Hurts: On the other hand, please keep in mind that most Dutch doctors regard themselves as self-employed entrepreneurs.

Dr. Björkman: And at good levels of income. There is nothing shameful at all about the income levels of GPs or specialists. It is prestigious.

Senator Keon: I would like to touch the problem of movement within the European Community. In Canada, when we get a fluctuation in physician income, we sometimes have movement to America. Do you experience any movement of physicians within the EC? Is everybody happy?

Dr. Hurts: No, although I would like to answer that that is the case. We have tried experiments to attract GPs to our inner cities, such as The Hague. We tried to attract 20 GPs from Belgium to work in The Hague. The income of a GP in Holland is much higher than in Belgium. However, the attempt was a total disaster because these people did not want to work here because of the levels of regulation. They were not even interested in the higher income. They were discouraged by the detailed regulation. After a year, they all moved out. These physicians even speak our language.

The Chairman: With regard to the Canadian-U.S. situation, the perception would be that one gets both higher incomes and less regulation. Therefore, there is a huge benefit on the U.S. side.

Senator Morin: To come back to the matter of price setting on drugs by the Dutch state, if I understand correctly an individual can still purchase with his own money, if he wants to, more expensive drugs. Can an individual purchase through private insurance a more expensive drug than what is permitted?

Dr. Hurts: If his or her insurance covers it, yes.

Senator Morin: Is there a two-tiered system vis-à-vis drugs between the sickness fund and the private insurance?

Dr. Hurts: No, that does not necessarily have to be the case because sick-fund insured people can take free additional insurance. Part of the additional insurance might be extra coverage for expensive drugs that are not paid for by the system.

Senator Morin: Finally, I realize that your health costs have remained stable over the last 20 years, but I believe that the absolute numbers have increased by 20 per cent from 1990. In the material you have received from us, Professor Björkman, you will see that there has been a large increase in health costs over the last two years, both in absolute numbers and in relation to GNP. Have you noticed this to be the case in Holland also?

Dr. Björkman: No, we have not really noticed that. We hear that on the North American side for some reason the pressures keep mounting. I wonder myself if a lot of that is demonstration that information is flowing, as one of your colleagues said, not only about now but the potential, what will happen in future.

Here it seems to be quite accepted that we will invest this proportion of our GDP. I have not seen the figure pushing up. As I mentioned, though, every year there is a little to-do about expenditures in health being little higher than have been allocated. When I say "a little more," I can be talking about billions of guilders, but still it is a fraction of the total budget.

I am amazed at the amount of stability in the Dutch system, although your colleague might wonder what happens when it Europeanizes, as we start to get regulations across the whole continent.

Dr. Hurts: The real debate is whether, if we loosen up these detailed regulations and leave market forces to do their work, consumer preferences might prove that our population does not want to spend 8 per cent of GDP on health but, rather, 10 or 11 per cent. The big question will then be what our reaction will be.

Senator Morin: Most of it here has been manpower and drugs. These are the two main factors that have increased medical costs in Canada and the U.S.

Dr. Björkman: It is a labour-intensive field, and not just the specialist physicians who get so much attention but all the other people involved. I keep pointing out that the health system is 5 per cent of the entire workforce. A lot of people earn their income from it.

Your colleague mentioned nurses, who have been underfunded for years. Even to bring nurses up to a modest level one suddenly starts to see that financial bulge.

There is also another issue, which is perhaps no longer so popular, but we can choose to spend more on health or on education to have a better quality of life. That is perfectly reasonable. It is not a question of benefiting from having the lowest possible denominator; it is a question of choice. When we move to just a market, I am afraid we miss the point that we can choose how we want to allocate our resources.

Senator Morin: That is a very good point.

Senator Robertson: What will be the effect of the EU on the care that you give in your system? Will there be an eventual commonality of salaries in the EU for nurses, for instance, and other workers in the health system, or will you be allowed to go your own way?

Dr. Hurts: This is again a sensitive matter. In the European treaty, which is the basis for the European Union, social policies, including health care, are set aside for national policies. There is no European policy for the health care sector.

What market forces, for example, in remuneration of services will prove to do I cannot say. I do not expect movement will be very quick in this area. Differences between countries remain large. Sometimes they even grow larger. In other respects, countries are growing closer, but it is a very difficult picture.

As in your country, we have a large shortage of nurses in our hospitals. We tried to bring in nurses from South Africa and Indonesia, but that did not prove to be the solution. We cannot find them in other European countries at the moment. We are still a long way from a European labour market.

Dr. Björkman: A very important point - and I say this for our European friends, too - is that we have to talk in decades and we have to watch big systems like yours or even that of the U.S that have much variation within the same system. An important question is how much variation Holland will accept. We drive towards standardization for some type of equalization but not at the point of equality of service, a point I tried to raise much earlier.

It strikes me that the Europeans have made a mission of trying to raise everyone to a good quality level but have never talked about the possibility that there might be some parts of the system that reduce services. Again, as soon as that happens, one has political dynamite. The European Union properly is moving very slowly, but in a direction that is working towards, over a generation of 20, 30 years, of having more exchange, although we will have language problems and culture problems. Even when talking about the Belgians and the Dutch, one cannot cross the border easily, as easily as one can move from Vancouver to St. John's.

The Chairman: Just as a supplementary comment on dynamite. Essentially, the dynamite in our system has resulted from using waiting lines as the rationing system. Once the waiting-line issue became large enough to be noticeable, partly because of high-profile cases and partly because more and more people knew friends and relatives who were subjected to what was viewed as an intolerable waiting line, there was never any expectation that the waiting line would be zero. Equally, although there is no publicly stated objective of what a reasonable waiting line is, the dynamite here occurred as the waiting lines became noticeable to the average person. Therefore, the rationing system became real as simply a news story about cutting money.

Senator Graham: A number of witnesses who have come before the committee have advocated more spending on preventive programs. Can you explain to us what the situation in that respect might be in the Netherlands, and if so where the money would come from?

Dr. Björkman: I will begin, and then Dr. Hurts can correct me with more facts. The Dutch system, like the European and the North American, puts precious little money into preventive care and health education. Part of the pressure comes from acute care, chronic care and the various forms of immediate use where at least 90 or 95 per cent of the money goes. Of course, anyone who is aware that all people will ultimately die but can be given a quality of life in the interim will begin to put their emphasis on early screening, anticipating and telling people about proper diet, all to go into preventive medicine. It is like the homily in Sunday morning church - you know it is the right thing to do. However, when it comes to week-a-day practice, one has to attend to the immediate tasks, which is caring for people and attempting to cure them or attempting to cope with them.

My hunch is that if we look at preventive figures in the Netherlands, it will be a fraction higher than in North America, but it will not be dramatic because the organized interests that we have been discussing for the last couple of hours will keep putting pressure on using available money to provide direct care. When we talk about prevention in health, we are talking about long-range issues. At that point, you enter housing, proper employment, all the issues of a quality life, because those affect health.

Dr. Hurts: The other problem is that it is somewhat difficult to bring in the right incentives for preventive measures in an insurance system. What would be the interest of an insurer to finance preventive measures?

Part of our prevention programs are financed through the exceptional medical expenses insurance and are therefore access ible for the whole population. That is more or less the traditional part of prevention.

Senator Graham: So there is no push in the Netherlands for more preventive health care programs, is there?

Dr. Hurts: Not as much as we would like.

Dr. Björkman: I recall some hideous statistic in the U.S. that something like one half of all health dollars are spent in the last year of a person's life - a heavy impact at the end of the life cycle. That might be quite appropriate because that is both your due and a proper social gesture. If you directed even a fraction of that money toward prevention, you may not only provide quality life for people longer, but also provide those elderly with a better chance to face the terminal end of life. These are really big questions. The only answer I see is not through an insurance company and premiums, but rather whether one chooses politically to make that a policy, one you are willing to implement and not just espouse.

Senator Graham: To come back for a moment to the cost of pharmaceuticals, is there a problem of overprescribing in your country? Is there a check on physicians in this respect?

For example, there might be a situation where a general practitioner would have many patients and be pressed by the parent or the individual for some drug for a child or for a senior citizen. Is there any check on this problem, if it is a problem?

Dr. Hurts: Yes, it is a problem, I suppose. I do not know exactly how big it is. No, there is no check on it. There is a special problem in our bigger cities where many foreigners live. We have many people from countries like Turkey, Tunisia and Morocco working in our country and living here. In the elder generations of these people, most do not speak very much Dutch. Thus their contact with their GP is not that good. Even if they get a prescription, there is a good chance they will never take the drugs. There are now some experiments going on in Rotterdam where special interpreters are added to the practice of the GP in order to prepare these people to pose their questions to the doctor. They help the doctor to communicate with these people. They give information about pharmaceuticals prescribed, which results in more of these people taking their medicine. The health results coming out are far better. The total costs are lower than if they do not do it.

Dr. Björkman: It is like the dog that does not bark in the night. If one looks at newspaper reports of investigative journalism, I do not recall hearing in 10 years any dramatic story of people who have overprescribed. I have a sense that the providing community, that is, the professional, does a certain amount of self-policing to ensure that people do not just pill-pop. As far as I know, there has not been any incentive not to do that; but if it had been happening, I trust the investigative journalists to have found it out.

Senator Graham: I was only asking the question in the sense of overprescribing and driving health care costs upwards.

Dr. Hurts: There is no incentive for governments to do a thing like that. What we hope will happen in our system is that the pharmacist would have a certain control over what patients are taking for drugs, especially if they are treated by several doctors at one time. However, on average, that does not work that well. Elderly people sometimes have 10, 12 or 16 different types of medicine to take. There is not really a firm control on whether that is a wise thing to do or not. Sometimes their GP will assist with the control, sometimes their pharmacists will do it. Many times, it will not happen and there is no control.

Senator Keon: In Canada, at least some of us are hoping that we are evolving to a national health information system. You have before you the blue book from CIHI, which is an attempt in the last couple of years to provide at least some of the data we have available. From a national health information system, if we ever get it up and running, we will have outcomes information and population health information. We would then be able to target our major health problems on a health population basis and direct our expenditures to the control and elimination of some of the major health problems that confront us.

Where are you going in this direction? The British, for example, are ahead of us in this direction. Could you describe to us where you are in relation to this?

Dr. Hurts: I am afraid we are lagging a bit behind in these developments. What is realized at the moment is that as the Dutch system is going to move into a direction of more responsibilities for insurers and suppliers of care and less government involve ment everyone agrees that there should be more information on the outcome of the system. In other words, what are the results of the money brought into the system? At the moment, we would like to know a lot more about that. We are aware that there are other countries producing better results. This is really an area in which we should do a lot of work.

Dr. Björkman: It is true that there are now waiting lists by institutions posted on the Internet. Waves of information are becoming accessible. In fact, as health services research works it through, you do find value for money and the outcomes of that particular investment. I want to endorse what you were saying in the sense that if you have information and if you can access it properly, you target well. If you target well, then you get that return on your investment. I believe very strongly in a solid information base. It cannot be the only thing, but like every data system, garbage in, garbage out. It is a question of the quality of the information, so then you are actually using it well.

I have discovered that my professional friends often disagree about what is proper information, what is usable and not. In concept, it is absolutely right; in practice, there is a lot discussion about what is appropriate.

The Chairman: My question goes back to the beginning when we talked about whether you are likely to move more in the direction of a competitive market system. It is my impression that you are not looking at the kinds of changes that have taken place in the U.K., for example, where there have been deliberate attempts by the government to set up a competitive market. Is it a fair conclusion that you are happy with the competition that exists between sickness funds and so on and that moving to a more direct market-based system is not on your agenda?

Dr. Björkman: I would say yes. About eight years ago, I was asked to do a quick scan of the issues we are talking about today. After doing that, I concluded that if it is not broke we should not fix it. It turns out that the system has built in a variety of competitions in the payers, the providers, the institutions, and even in the information we were just speaking about. Therefore, why would one attempt to revolutionize any of it? I would say, rather, let it play itself out.

I give the Dutch system very high marks in my comparative terms. Of course, more is not enough. You can always do more. However, looking at the world scale, this is a very healthy system.

Dr. Hurts: I think there is much that can be improved in our system. Our national cultural needs and wants are such that we will never have true market forces in our health insurance system. I believe that there will be more market-like incentives brought into the system, without having a true market system. We will always keep things like solidarity very high on our list of national wishes so we will always end up with mixed systems. I think there will be a shift in the direction of market-oriented incentives in every part of the system.

The Chairman: Thank you very much for taking the time to be with us. We appreciate it very much; it has been extremely helpful. We hope to meet you face to face some time.

The committee adjourned.

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