Proceedings of the Standing Senate Committee on
Social Affairs, Science and Technology
Issue 20 - Evidence
OTTAWA, Monday, June 11, 2001
The Standing Senate Committee on Social Affairs, Science and Technology met this
day at 9:08 a.m. to examine the state of the health care system in Canada.
Senator Michael Kirby
) in the Chair.
I thank all of you for taking the time to be with us this
We have a panel of witnesses, via video conference, from the German Health
Ministry. I would ask the first witness to begin. It would be helpful if each of
you could give us a brief overview of the German system. We will then proceed to
ask our questions and try to explain to you the issues that most interest us.
Mr. Georg Baum, Director General, Head of Directorate, Health Care, German
It is an honour to be asked to give evidence about our
experience dealing with health care reform processes in Germany. We have been in
a steady health care reform process in our country since the late 1980s. Since
that time, we have introduced five major laws. I will give you a brief overview.
You may know that the German statutory health care system is part of the German
social security system. It works on the same principle as the pension system and
the unemployment system. This means that the financing of the system works on
the basis of contributions. Contribution rates are carried by employees and
employers, each carrying half of the contribution. When people retire, the
contribution is paid from the pension system.
We have a system that is financed without taxes. It is financed on a
contribution base. This is very important. It is a system that is organized by
law but is not run by the government. Our system is different from the typical
national health care system.
This system is carried by the sickness funds. The sickness funds are not
government parts. They are not private companies. I would describe them as
non-profit institutions which work on the basis of federal law but have their
own contribution rates. In the system, at the moment, we have approximately 400
individual sickness funds, but the figure seems to be more disordered than it is
because we have special kinds of sickness funds.
One kind of sickness fund is the company sickness fund. As we have many types of
industry, such as insurance or banking, we have many sickness funds belonging to
If you reduce this to types of sickness funds, we have several different kinds
of sickness funds. They are regionally organized in every state of Germany. We
have six regional sickness funds. Then we have sickness funds that operate in
the handicraft sector, and we have sickness funds that operate in the smaller,
more historical division of the labour force, in the white collar and blue
If you reduce sickness funds into different types, there are seven kinds of
sickness funds. One is responsible for agricultural people, which is smaller, as
well as one that is responsible for the mine workers. It is also small. We have
400 individual sickness funds and 400 individual contribution rates, but these
contribution rates are based on the same benefits.
These sickness funds must provide for the insured people. The benefits are the
same. Therefore, the contribution rates of the sickness funds are very close
together. However, we do have a spread, of course, and we have competition
between the sickness funds because insured people who have access to the
sickness funds can choose their sickness fund. For instance, a white collar
worker can be insured in a company sickness fund if the sickness fund is open to
the public, or a worker can be insured in a white collar sickness fund.
Therefore, the sickness funds compete to insure people.
Approximately 90 per cent of the population is insured in one of these federal
health care system funds and 10 per cent of the population has private coverage.
Workers must contribute to the public sickness funds up to an income that at the
moment is about 6,500 Deutschmarks per month. We have an income ceiling for
contributions to the sickness fund and this income ceiling is also the ceiling
to determine which people must contribute to the sickness fund. If workers earn
more than 6,500 Deutschmarks they can choose to go outside the system or whether
they will have any insurance. Most people, of course, choose private insurance.
Also, people who are part of the ministry staff have coverage from the private
sector and there is a special system in the civil service sector.
The sickness funds provide coverage for about 90 per cent of the population
within the health care system. People receive a very widespread catalogue of
benefits. To make it simple, everyone who is ill can get healthy, with all the
benefits available from the insurance system, without the need for additional
insurance. The system gives people everything they need if they are ill. We have
only a small number of co-payment arrangements, which are not high and are added
to by a helping social system. Those who do not earn enough money, of course,
will be exempt from this co-payment system.
People in Germany get all the kinds of benefits that are expected of a system.
This means hospital treatment, outpatient treatment, drugs and high-tech
medicine, if, for instance, one requires transplantation. All these benefits are
covered by the federal health care system. We spend a large amount of money on
the system. At the moment, approximately 260 billion Deutschmarks are funded by
the sickness funds through the contributions. Like all other sickness fund
systems in the western world, we have problems dealing with medical progress and
problems we will have in future with democratic development.
Let me make a few remarks on the supply system. As I said, the system works free
from the government. The supply side is primarily organized privately. These are
all private bodies. The individual out-patient doctor works on his own bill.
Pharmacologists work on their own bills. Hospitals, however, are run either by
local communities or by the state. For instance, university hospitals are run by
the state. Germany has 36 medical schools which are university hospitals run by
About one-third of hospital capacity is run by the state. A little more than
one-third of hospital capacity is run by social welfare institutions like the
Red Cross or the Catholic or Protestant churches. Then we have a quota of
private hospitals which are run by private companies. This last sector is
growing and is expected to continue to grow in the future.
All these bodies that supply health care to people who have benefits are linked
to the social security funds by contracts under the federal law framework. For
instance, there are contracts between panal doctors and sickness funds on the
federal level and on the state level.
In the way our hospitals are financed, we can use the contracts to make cost
containments. The budget of an individual hospital must be negotiated between
the sickness funds and the individual hospital, and that budget is allowed to
grow annually only at the same rate as the national wage growth. With such
rules, we try to strengthen the system by federal law, but all the primary
decisions on how the framework funding will be used are negotiated between the
sickness funds and, for the most part, the suppliers' association.
We call this system a "self-administrative system" or a
"self-government system." The federal law only sets the framework. We
can further discuss our system and our past successes in the context of your
questions because the issues are often related to instruments of cost
containment, budget, quality assurance and so on.
Dr. Margot Faelker, Deputy-Director, Section Financial Issues of Statutory
Health Insurance, German Health Ministry:
Mr. Baum has given the main points
on the framework and how the system functions. It will be useful now to discuss
I understand how the sickness funds work, but what is the
role of private insurance? Why would people buy private insurance if they can
contribute to the sickness fund through their employer? What is the role of the
private insurance sector in this area?
In the context of the European countries and Germany, private
insurance has an important role because it offers whole coverage. Since 10 per
cent of the population is in the private system, people compare it with other
European countries. A private insurance contract allows you to choose the
benefits you want insured. Most people who earn more than 6,500 Deutchmarks are
voluntarily in the private system. They can buy an insurance package which is
comparable with those in the federal health care system.
Within the statutory health insurance, 90 per cent of the
population is insured. The private health insurance system covers only 10 per
cent of the population. As Mr. Baum explained to you when giving the framework,
people can decide to enter the private system when their income reaches the
threshold limit of 6,500 German marks.
If you want to evaluate the relevance of the private health insurance, you must
take into account that most people are insured in the statutory health insurance
system. There are differences in the coverage of benefits. If you choose private
health insurance, you have to decide on a certain catalogue of benefits. When
you are a member of the statutory health insurance, you have a comprehensive
benefit package which every health insurance fund offers.
Why would an individual prefer the private system to the
sickness fund system? What would motivate someone with a high income to go into
the private system?
It is an individual decision. The contribution rate for the
private insurance system is calculated on individual risk. Most university
graduates in academic jobs reach the high-income level within a few years of
graduation. Because the contribution rate is calculated on individual risk, the
private insurance system offers these young people a very good price at the
start, compared to the contribution rate which they must pay in the federal
health care system. If your earnings are at the ceiling, of course, you must pay
the highest contribution rates. For the young, it is an economic decision. Not
all young people leave the federal health care system though, because they know
that it can be very difficult to get back in.
Because the contribution rate in the private insurance system is calculated on
individual risk, only the individual risk is insured. In the federal health care
system the risk of the whole family is insured. In families where one of the
partners stays at home to mind the children, each child is insured without
additional contribution to the health care system. Thus, couples must calculate
for more than one, two or ten years because they both must follow a lifelong
decision. There are good reasons to stay in the federal health care system.
Is it not a decision that a person could make at the age of
25 and then easily change at the age of 50?
It was easily changed in the past, but we closed the holes in
the legislation. Under certain conditions, a person may re-qualify for the
federal health care system. However, it is not so easy to do.
I have one last question on the private health care system.
As I understand it, physicians are paid more for performing the same procedure
if the individual is privately insured than if insured under a sickness fund. Is
that true? If that is true, does it follow that in the private system an
individual automatically receives preferential treatment - speed and quality of
service - because the physician wants to make more money?
I would say that the medicine is the same under private
insurance and the social security system. The prices paid for the medicine are
different. For people under the private care system there is a special
fee-for-service guide set out by the ministry. We are responsible for setting
these fees at the federal health care system. In the federal health care system
the fees are negotiated between the sickness funds and the doctors associations.
The price difference is 100 per cent; if the doctor treats a patient under the
private system, he receives double the income that he would receive under the
federal health care system.
We oversee the system, so privately-insured people will not receive better
medicine. The private system will be required to conform to the federal system.
Some may feel more comfortable in the private system, but when the kinds of
treatment - especially high-tech medicine - are examined, there really is no
difference in the treatment received. An ill patient need not be privately
insured to become healthy again. That is not necessary.
Mr. Baum, in your opening remarks, if I heard you
correctly, you said that the system was financed without taxes and that it was
controlled by law, but not run by the government. Is that correct?
That is correct.
Your system is financed without taxes and it is
controlled by law, but not actually run by the government. If that is the case,
how are the sickness funds accountable to government? Are the sickness funds
accountable to the federal government, to the lander or to both?
We have two kinds of sickness funds in this context. One is the
local sickness funds - most of the company sickness funds. They are under the
supervision of the state government - the state, "lander". Those
sickness funds that are at the federal level are the former white collar
sickness funds. We call them nation-wide sickness funds. These sickness funds
fall under the supervision of an agency of the federal government.
On the one side, there is the lander supervision system and, on the other side,
there is the federal supervision system. Those two systems control the sickness
funds; they control their households. If they plan to increase the contribution
rate, they have to ask for it. That decision is accompanied by the supervision
system. If insured people do not feel comfortable with benefit decisions, they
can appeal to these institutions. In this way they are controlled.
Are the sickness funds permitted to incur debts or to
These are non-profit organizations. Only the private insurance
works on a profit basis.
Are they permitted to incur debts?
Yes, but there is a debt limitation. They can incur debt if
there is the prospect that revenues will increase over the course of the year.
We have exceptions for that which we introduced as we integrated the eastern
part of the country. However, the law says that every sickness fund must
maintain a minimum balance of one and one-half months' income in reserve. If
they fail to do that, action will be taken.
For a short time, they can have debt, but if that debt continues over the year,
then contribution rates must be increased. That is an interesting question
because, as I mentioned, there is competition between the sickness funds. Some
sickness funds try not to increase their contribution rate, but they go into
debt. That then causes the supervision system to take action.
If the sickness fund earns a profit, would it be retained
against the possibility of future debts?
The health funds have the right and the necessity to
maintain reserves, as Mr. Baum told you. Within their financing plans, they are
required to show to the authorities that control the health funds what the time
frame required to spend those profits will be. If the profits exceed one year,
then the contribution rates must be lowered. It is an issue of the calculation,
the financial plans of the insurance funds and the supervision by the
That is interesting. My other question relates to
administrative costs. What proportion or what percentage of total health care
spending in Germany is devoted to administrative costs, and how does this
proportion compare to other European health care systems?
The proportion of administrative costs in the system of the
statutory health insurance is very low. It is approximately 5.6 per cent of all
spending on health insurance. This proportion has been constant through many
years. In international comparison, the administrative costs of the system are
very low. To give you a comparison, similar costs in the private health
insurance are about at 12.5 per cent of the whole spending of the private health
Thank you very much for your presentation.
I would like to address the matter of the costs of the health care system in
Germany. The costs are higher in Germany than they are in other countries and
higher than in Canada. Have they increased in the last two years, as they have
increased here in North America? Do you think these costs are too high?
Also, I would like to follow up on the question of Senator Graham. Canada and
many other countries have a single payer, while in Germany there are more than
multiple payers. The number is in the hundreds, if not more. Does having
multiple payers increase the administrative costs? For us, 5 per cent is a bit
high compared to the private system. Administrative costs of the Canadian system
are lower than 5 per cent. I do not have the figure at the tip of my fingers,
but it is around 2 per cent. Does having multiple payers in Germany increase the
total costs, or are there other factors that explain why there are higher costs
for health care in Germany than in other European countries, Canada or
It has to be noted that the benefit package that is covered
by the statutory health insurance is quite comprehensive. In comparison to other
countries, it is a larger. Within the package there are many inpatient and
outpatient treatments. As Mr. Baum already stated, even high-tech medicine is
financed and covered. Dentures, drugs, remedies, medical aids, transportation
costs and even sickness payments are all covered. We have a large system of
rehabilitation and spa facilities. Not many countries have such a system and
that is one reason why the system is so expensive.
On the other side of the coin, we know that there are inefficiencies in the
system. The senator is correct in assuming that the multiple payer system
partially contributes to such inefficiencies. However, on the whole, I think
that it is the large benefit package that is responsible for the high costs. To
make the system more efficient, an advisory council will identify areas of
over-use, under-use and misuse of treatments. We expect the report of the
advisory council at the end of the year.
Let me address the multiple payer system of which you spoke.
The sickness funds do not receive contribution money directly from
individually-insured people. That is only the exception. In the mass field, the
employer finances both parts. It is a payroll tax which is directly brought from
the company to the sickness funds. There are no direct financial relations
between insured people concerning the contribution to the sickness funds, but
only people who are not in the employment system, people who are not in the
pension system - and this is the majority in the system - have a direct
financial relationship with the sickness fund. This is important in the system.
Dr. Rudolf Vollmer, Director-General, Head of Directorate Long-Term Nursing
I apologize for being late, but we had a delegation from the
OECD from Paris.
We have to avoid the impression that the contribution is not paid by the
workers. It is deducted by the employer. It is important to note that half is
deducted from the wages of the employee. It is a pay-as-you-go system. The
current expenditure is paid for by current contributions. Although we have
multiple health insurance funds, they all apply the same law, which means that
they cannot really have competition as far as services are concerned.
When I was referring to the cost of health care, I was
referring to total cost, both public and private.
I would like to move to the private-for-profit hospitals. I understand that in
Germany, at the present time, one hospital in five is operated for profit. Are
these hospitals owned by companies? Must they, by law, be German companies or
could they be European companies, such as French or British? Are some of them
owned by doctors? What types of procedures are performed in these private
hospitals? Do they perform cardiac surgery or cancer treatment, or are there
relatively minor procedures carried out in those hospitals?
It does not matter whether I speak of private hospitals, public
hospitals, or welfare-carried hospitals, all the hospitals, which have the right
to provide treatment to people and that are insured in the statutory health care
system, work on the same basis. It does not matter whether it is privately or
publicly-run, if the hospital is one of the 2,250 hospitals that are introduced
in one of the lander hospital plans, because we have a lander-wide hospital
planning system, it has a contract with the sickness fund.
Perhaps only 50 to 100 hospitals in Germany work on a private basis where people
from the statutory health care system cannot be treated. However, hospitals in
Germany are eager to get contracts for people in the social security system. In
our system, a privately-carried hospital means the same thing as public
hospital. They all have the different programs. Parts of the university are
carried by private people. We have big private hospitals in high-tech medicine
for cancer. There is no difference in this program.
You have to differentiate between the kind of private program which has no
access to the social security system. However, those are in the minority and it
makes no sense to speak much about them because they play no great role in our
system. It does not depend on whether it is an American company or a German
company. Capital companies that have stocks are owners of hospitals.
International companies on the medicare market have access to the German
hospital market now.
Is there a problem in Germany with the waiting time for
diagnostic or surgical procedures? How important is that, or does that exist?
It is not a public discussion. For major surgeries, hip
surgeries, cardiologic surgeries, or cancer diagnostics, for example, we have no
discussion about waiting lists in the country. There is the possibility that
people prefer to go to a specific hospital in a region. If it is an elective
surgery, someone might say, for example, he or she will have a hip in eight
weeks, but this is due to preferences for a specific hospital. In general, we
will not have an emergency case situation in the whole country for any kind of
surgery that people have. For a time we had a discussion about specific
cardiology surgeries, but then the lander organized a system to monitor free
capacity and the problem was solved.
Why have you not had a waiting line problem? Other
countries with which we have had discussion have experimented with various ways
of dealing with the waiting line problem. Our data shows you have significantly
more physicians per 1,000 of population than most countries, and you have
probably double the number of acute care beds that most countries have. Is that
the reason? Is it that fundamentally you just have such a large supply? If that
is the reason, I am surprised that you are able to financially sustain that
amount of supply because it is the cost of supply that has curtailed the supply
in many other western countries.
Yes, it is. We are speaking from a general over-capacity
program in the German health care system, especially in the hospital field. If
you examine the ratio of beds to population, we are at the top, compared with
the United States or many other countries. The Austrians have a similar rate to
ours. This capacity is expensive and we are trying to reduce it.
We have too many outpatient doctors. Therefore, in 1993 we introduced a planning
system for outpatient doctors. Unless there is a demand for a specific kind of
doctor, for example, a family doctor or an eye doctor, within a county where
there is a special ratio between the population and doctors, then it is not
possible for a new doctor to enter the outpatient system. We tried to solve the
problem of an oversupplied system.
At this point we believe that we have a total cost containment reversal. In
hospitals, for instance, we are now introducing a Diagnostic Related System,
DRG, in which there will be a built-in process to reach the capacity we need. We
have a longer length of stay in the hospital, 10.4 days on average, in
comparison with the systems in North America or in France. In France, they have
close to half of that.
What did you call that system?
It is called the DRG system, Diagnostic Related Group, for
financing the hospital treatment.
have your attempts to curtail the entrance of
new physicians into the market done to your enrolment in medical schools? Are
you simply producing doctors for other countries in Europe?
This is one of our greatest political problems. The federal
government is interested in reducing the current number of about 10,000 or
11,000 doctors graduating every year from our medical schools. We do not need
11,000 doctors every year in Europe. There are different political levels.
Universities are run by the lander and these are run by the ministry of culture
and education. We are working on the side of the health care people. If you try
to make a shortage for a university, you are working in its field and it is very
difficult to mandate the universities by federal law to reduce their capacity
because every leader of a university defines himself by the science he has. It
is a very difficult discussion we are having in the country.
With our reform act of 1992, we introduced an age limit of
68 years for doctors in outpatient care. In the year 2000, for the first time,
the number of outpatient doctors who left the system was higher than the number
of doctors who entered it. In the long term we hope to reduce the oversupply of
Certainly your health care system is very broad indeed;
it covers a lot of services.
You mentioned user fees. What about nursing care at home? I assume that is
covered under the sickness funds, but is there a user fee?
We have two sectors of nursing at home. They are part of the
nursing services that are financed by sickness funds. Those are the services one
needs to prevent a hospital stay or to leave the hospital earlier. I would call
that the short-term nursing system.
People who have a long-term demand are the responsibility of my colleague, Dr.
As part of the health care insurance system, we cover
professional home care according to care levels. Certain limits are in place. We
pay home care according to 20 defined service complexes. For example, a person
who needs help in getting ready in the morning, help in getting up and being
dressed, et cetera, would be one kind of service complex. The amount of money
paid is according to three care levels. At level one, we pay about 750 marks,
which is about $250 at present. At care level two, we pay 1800 marks, which is
about U.S. $900. At care level three, 2,800 marks per month can be used for home
care services. Care is provided in the fields of nutrition, mobility, personal
hygiene and household help.
What about nursing homes? Who pays for someone to live
in a nursing home?
I would have to explain to you the care system. We
introduced care insurance in 1994 and it is fully effective now.
In nursing home care, the care insurance again pays according to different
levels. We pay between 2,000 marks at care level one, 2,500 marks in care level
two and 2,800 marks in care level three. If you divide the number of marks by
half, you will have the equivalent sum in U.S. dollars.
Of course, those amounts do not suffice to pay for institutional care, which is
extremely high - up to 10,000 marks per month. The average cost is around 7,000
or 8,000 marks. The individual must pay the differential. If he or she cannot
pay, then supplementary social benefits are available. In institutions, about 35
per cent of people are dependent, according to a means test, on social welfare
or supplementary benefits.
To continue with Senator Callbeck's line of
questioning, where is most of your primary care delivered - in the hospital, in
the community, in the home or in the workplace?
Most primary care is delivered by outpatient physicians - by
family doctors or general practitioners and specialists. A German specialty is
that we have specialists in the outpatient area and in the hospitals. If a
patient needs a specialist, he or she need not go to a hospital, as is the case
in many other national health services.
If I understand you correctly, your primary care
patients are not admitted to the structural hospital?
These patients need not be admitted to hospital unless their
disease is very severe. We have a rule that everything that can be treated on an
outpatient basis should be treated on an outpatient basis. We have facilities in
the outpatient area and in the hospital sector. Patients are only admitted to
the hospital if necessary.
The hospitals, by law, are not allowed to give general
treatment or diagnostic treatment which is possible in the outpatient system.
People must have a prescription for a stay in a hospital. That is the rule. Of
course, in the case of emergency, a patient can go directly to the hospital and
The outpatient system is very sophisticated with specialists and 100,000 doctors
who organize outpatient treatment. Our budget shows that one-third of total
spending, $260 billion Deutschmarks, is spent for hospital stays and $40 billion
Deutschmarks are fees for the outpatient doctors. About 40 billion Deutschmarks
are spent on drugs and other services which are bought outside. The outpatient
system is a very dominant system in our country.
What percentage of the German population is comprised
of senior citizens? Do you consider a senior to be 65 years of age or over?
While Dr. Faelker is looking that up, I will ask another question. You mentioned
in the beginning that your health system is part of the social security system
of Germany. Is there a point where the health system integrates with other
social security services or payments?
It is not a question of linking the services. It is more a
question of the principle of how people in the country are protected in old age,
in the pension system, in the unemployment system, in the long-term nursing
system and in the health care system. We have four divisions of social security.
The common sense of these systems is that the financing works on a solidarity
basis. A person who has a high income makes a high contribution to the system.
That person receives the same benefits as those who have low incomes. We define
them as part of the social security system by the way in which we finance the
system, which is solidarity financing. That is why they are integrated into the
social security system.
You mentioned that the health benefits for long-term
care for a senior citizen, perhaps in a nursing home, are not crossed or
confused with other social benefits. Does each one always stand alone?
Care really means long-term, non-medical care; you have to
be either ill or handicapped. Long-term care provided in a nursing home is
basically non-medical care, apart from the nursing care that is ordered by a
doctor. Of course, if the resident falls ill in a long-term nursing home, they
will receive treatment by doctors, possibly in a hospital. That is an example of
a combination of both systems.
In that case, of course, the health insurance will pay. If a patient requires
hospitalization, a consultation, a family doctor, or medication, that will be
covered by the health insurance.
Did you ascertain the percentage of the population who
We currently have about 19.1 million people over the age of
60. That will rise, by the year 2010, to 21 million, which is about 26 per cent
of the population. Between 2010 and 2030, the number of people in this age group
will rise by another 6.7 million to 27.2 million. Over the same period of time,
the total population will decrease from 84 million to 77 million inhabitants. As
a result, by 2030, every third person living in Germany - 35 per cent, to be
exact - will be over the age of 60.
Examining the senior population is a factor for us,
because in Canada, it is a problem to try to find appropriate care for our
senior citizens that does not break the bank. Most of them have major health
problems by the time they require a nursing home.
In respect of your "split system" of that block of senior citizens,
what percentage is accommodated in nursing homes? What percentage is
accommodated in the home because of the financial support in the home, which we
do not have?
We have about 1.9 million senior citizens in the long-term
care system. However, you must understand that we have an artificial definition
that is governed by the contribution rate of 1.7 per cent. If you compare us
with England, you will find that it has about 5 million people who are regarded
as dependent. We have a narrow definition. From those 1.9 million people, about
500 live in a nursing home and 1.3 million are cared for at home, either by
family or by professional nursing care. Women constitute 70 per cent of the
people in need of care, and 70 per cent of the caregivers are women, which
demonstrates a problem.
The other problem we have is that we have just come out with a bill in respect
of dementia care. In nursing homes, about 70 per cent of the residents have some
kind of cognitive impairment. Of those, 70 per cent have Alzheimer's and 20 per
cent suffer from vascular dementia. In home care, cognitive impairment is about
50 per cent. Of the 1.9 million people in care, we have about 1 million who are
demented. That is a huge problem, as you can imagine.
Currently, Japan, Italy and Germany have the oldest people in the world. The
older we get, the more we will be afflicted with the problems of dementia. That
is a result that is stressing home care. The average entry age into
institutional care is approaching 85 years. The average length of stay for a man
in a care home is about 13 months.
I will ask about the sickness fund again because I am
seeking clarification. I believe that the sickness funds set their own
contribution rates? Is that correct?
That being the case, is there any control over these
rates exercised by the lander? Is there a great difference between one sickness
fund and another? If the rates are higher in some than others, how do you avoid
people jumping from one fund to another to pay a lower rate?
That does happen. People can choose their sickness funds, in
consideration of their contribution rates. They do that. The contribution rate,
on average, is 13.5, which has been stable for four years. We are proud to have
succeeded in stabilizing the contribution rate for four years. The difference
between the sickness funds is that the least costly sickness fund is at a rate
of about 11.5, and the most expensive sickness fund is at a rate of about 14.9.
There is a spread in the rates, but the sickness funds have their own
contribution on the one side, and on the other side there is the financial
equalizing system that underlies the sickness funds. That means that if there is
a financially stable sickness fund, it is required to relinquish funds to assist
the sickness funds that are not as stable and have bad loans because they have a
We have an equalizing financial distribution system between the sickness funds.
With this instrument, we are able to balance the contributions so they are more
equal. At the moment, we are making additional efforts to create a more
sophisticated money distribution system between the sickness funds.
We have four factors. They are income, which is one aspect of money
distribution; sex: male or female; the number of people insured by one
contribution payer - we have the family system, and age. Those are the four
relevant factors for one sickness fund to pay into another sickness fund.
Of course, you can well imagine that one of the major factors defining the
spending of the sickness funds means that the morbidity rate must also be
considered. At the moment, we are changing the legislation to introduce an
additional factor, or to bring a new important factor into the account - the
morbidity rate. Thus, sickness funds that consist of many people with a high
morbidity indicator will receive more money from other sickness funds that have
a reduced morbidity factor.
Is the distribution system that you just described
directly controlled by the lander?
Yes, of course. As we said, the contribution rate, which the
individual sickness fund sets, is controlled by the lander, if the sickness fund
is organized on the lander level. As I explained, for those sickness funds that
are organized on a national level, their contribution behaviour is controlled on
the state level. However, the financial distributing system is organized on the
Are people who are covered by the sickness funds
allowed to buy additional insurance from private insurance companies?
Yes, of course. No one is forbidden to make a private insurance
Would one take private insurance to get increased
services over what is provided by the sickness funds?
In the field of prosthetic supply, dental prosthetics have a
relatively high co-payment where people pay 50 per cent of dental prosthetics
from their own pockets. In this field, there is additional private insurance
which covers that.
There is also additional private insurance in hospitals. But
this is primarily for better hotel accommodation. People buy the right to be
treated by the chief of the hospital. There are some people who like alternative
medicine and additional private insurance can also be bought for those
With regard to people who are covered only by private
insurance, do they have a choice of hospitals, whether they go to a
publicly-funded or private hospital?
Are there situations where people jump the line or
perhaps they are covered by a private insurer with a wider range of services?
Someone said doctors are paid more on the private side, so do they jump the line
over people who are covered only by sickness funds?
Yes. First, it could be said that people who are organized in
the private system have more freedom of choice. I told you that hospitals are
only allowed to perform inpatient treatments. If you are in the private plan,
you can go, without a doctor's recommendation, to the hospital for outpatient
treatment. The hospital can be used like an outpatient doctor. As stated by my
colleague, people have more comfortable rooms. If you are in a private plan, the
rule is that you stay in a one-bed or two-bed hospital room. Most hospitals are
being organized to be more modern, so it is underway that the two-bed room will
be standard in the whole system and then there will not be great additional
There are more possibilities to choose from, but it is not that a higher quality
of medicine must be chosen. If you need a hip, it does not matter whether you
are in the social security system or in a private system. The same medical
product is used for both kinds of insured people. The quality of medicine is not
divided between the private and social security system.
It is the comfort, perhaps a better standard, a better position that you may
have. But as there is overcapacity, it is not necessary to have a special
position in the system to get treatment or to get a diagnosis. There are only
very small differences. You could discuss it as an advantage, but it is not an
advantage as you compare it with the whole medical possibility.
So is there not the problem of people who are covered
privately jumping the line?
There has been no discussion in the country that people outside
the social security system feel discriminated against in comparison to people in
the private system. There has been no media discussion on this issue.
Before turning to Senator Keon, I was curious about your
response to Senator LeBreton in the way you described the sickness funds
operations. Effectively, if the sickness fund has a difficult sample of the
population, you will underlie that with an element of redistribution from one
sickness fund to another. That prompts me to ask why you have more than one
sickness fund. It seems that what you are doing is attempting to equalize
differences and therefore would the system not be simpler to either have one
national fund, or, at the very worst, only one fund per lander?
We have the philosophy that competition between the sickness
funds leads to better care and better services for the patients than one
sickness fund could provide. If there is no competition at all between the
sickness funds, there is no incentive to give very good service to the patient.
That is the reason there is a large number of sickness funds. The other side of
the coin is that sickness funds should get an incentive for effective
contracting with the health care providers and not for risk-skimming on
patients. With the equalization schemes we introduced into the system, we want
to make sure that sickness funds compete for good service and good contracting
and not compete for good risks. Therefore, we need these equalization
mechanisms. It works very well because as a result of the introduction of these
risk equalization mechanisms, contribution rates got closer together.
Right. I understand the point you are making. It just seems
to me that in the end, if the rates are essentially identical, I am not sure
that the benefits that normally go with competition are still there. That was my
It has to be noted that this system has historical reasons.
When health insurance was introduced in 1883 by Bismarck, it was not started
from scratch but was built on the institutions which existed at the time. The
local health insurance funds have existed for 500 to 800 years in German
history, as have the funds for craftsmen and for miners. That is one of the
reasons why we have so many different health insurance funds which all apply the
same law. It is extremely difficult to get rid of all the institutions which
have proved their case over the century. When I started in health 20 years ago,
we still had approximately 1,200 funds or more and now we are down to 600.
We can understand the difficulty of changing institutions
that began in 1967. With that history, trying to change institutions that began
300 or 400 years ago is an even more difficult problem.
I want to pursue further what Dr. Faelker was attempting to
address, the efficiency in your system. I am always amazed when I visit your
country at what you are able to deliver compared to us and the United States,
for example. It is true you spend about 1 per cent more of your GDP than we do,
but you spend about 3.5 per cent less than the Americans, yet you are way out in
front in a number of areas. For example, at the Heart Institute Berlin, the last
time I was there, about 30 patients were on artificial heart and assist devices,
which is about half the patients of the entire world on these devices. There is
no question that the hospitals and rehabilitation centres that you have are the
You are able to achieve all this by spending only 10 per cent or 10.5 per cent
of your GDP. It is my impression you must have tremendous efficiencies
somewhere. None of us is really sure what our overheads are in Canada or
America, but we kind of accept the fact that we live with about 30 per cent. You
must be pulling out many more efficiencies between the actual funds going to
care for the patients and the actual funds you have in the bank, in your various
insurances and so forth.
Have you any idea what your overhead is? When you go right down through the
system of paying your physicians, running your hospitals, running your rehab
centres and clinics, have you any idea what your ballpark figure is?
We call the system we have a self-governed system. The directly
involved bodies make contracts, and fee-for-service arrangements are made
between these bodies. In hospitals we have a financing system which causes both
sides, the sickness funds on the one side, which are eager to provide their
people with the maximum of medical technique, and on the other side, the rules
on how we negotiate hospital budgets, the system of self-government,
self-defining prices and rules. That is one part of the efficiency we have.
It is difficult, for instance, if we make a change in the fee-for-service
catalogue for private doctors, to find the right price, but in the collective
organized system of statutory sickness funds and associations of doctors,
associations of the hospital, there is a higher possibility for a rational
financing system and procedures and control systems. For instance, there is
self-set control system for the panel doctors. The association of the panel
doctors controls the private doctors. In addition, over these 14 years since
1987, we have been in a health care reform process where we introduced many new
things such as in the drug sector. We introduced two planning instruments like
those described for the panel doctors and the planning system for hospitals. We
introduced budget cuts for hospitals. We introduced, some years ago, a drug
budget. This means, if the panel doctors need more money than the budget allows
at the state level, they have to finance the difference from their own income.
We have such a system. We reduced, by law, the prices for drugs by 5 per cent
for one year as a specific measure. We have to discuss our activities in health
care reform and health care cost containment to explain part of this story.
If you do not consider the cost, just the efficiency, we
have one advantage compared with the United States or Canada. Germany, with its
80 million people, is as large as Lake Ontario, which means, having produced
more doctors over the years than the United States, we have immediate access to
doctors in Germany. In a little place in a wine valley doctors are like sand at
the sea. The question is not whether the doctor has time for you. The question
is really whether you have time for the doctor. You can have immediate access to
consultants and hospitals, et cetera. The immediate access and free choice of
consultants or family doctors and hospitals makes part of the efficiency. I do
not know how long we can afford to finance it, but that is one of the natural
conditions we have in our country.
In different areas, the different providers in parts of the
benefit package do not work together enough. We have the problem that sometimes
diagnostic measures are taken two or three times. If you first go to the general
practitioner, for example, he makes a diagnosis. If he admits you to the
hospital, it can happen that the hospital repeats the diagnostic measure. There
are many points where integration between inpatient and outpatient care and
long-term care and rehabilitation must be improved.
This is the sector in which we have a chance to improve in the
future. I think your question was about why the system is so efficient in
providing people with all this medicine, and these are the resources we need to
be successful in the future. This is part of the future of health care reform.
We have started discussions for the next step of health care reform. We have
general federal elections next year in the autumn, and we will be in a health
care reform draft discussion, or, at the latest, one year later. Then we will
start reforming health care to bring all these sectors together and to make an
integrated supply, as we call it, to bring the outpatient doctors, the
outpatient system and the hospital system together in the sense of a common
medicine. The reform will also solve limitations we have in the different
systems, to enhance aspects of quality insurance in the medical system, and to
collect resources we will have in these fields.
This is a fascinating discussion, particularly the point
that Dr. Vollmer just made. If you consider both ends of your system, you have
more doctors than any other country. Therefore, patients can get into the system
more rapidly, I suspect, than any other place in the world.
You expended enormous resources on your rehabilitation program, and they are
coming out of the other end quickly and going back to work. It is curious that
here, a few years ago, we reduced the number of doctors because we thought we
could curtail the cost of health care. Maybe we are doing it backwards.
I would like to ask about your social code book because there is tremendous
interest in America now about the Patients' Bill of Rights. I spent last week at
a conference there. Have you considered the drafts and the preliminary
information coming out of that to compare it with your social code book?
We also have patients' right discussions, but not in the
fundamental and severe sense you have it in North America. If we discuss
patients' rights, we are discussing a better introduction of the individual
patient into the process of treatment. That means more transparency in the
system for the patient or more information for the patient. Our system works on
the basis of service in kind. People do not know what comprises the fees for the
doctors' service because the doctor is financed directly by the associations of
doctors and they are financed by the sickness funds. People do not know what
their medicine costs are. They do not know what a day in hospital costs. When we
discuss patients' rights, we discuss patient information and patient
participation to ultimately create more transparent and efficient treatment.
In this field, at the moment, we are organizing a political process, for when
there is an accident in a hospital, such as a patient being given the wrong
medicine or a mistake in surgery, particularly for the civil rights of the
patient. These are not so transparent in our system. It sometimes takes two or
three or four years for people to get their rights because they must go into the
civil court system.
In this bill we are discussing reforms, but not in the sense of the American
managed care system where insurers are defining good medicine for people. This
is one advantage of our system. The sickness funds do not define which medicine
is good for people. It is a progressive system. If progress is made in a
particular treatment, no sickness fund would prevent the insured from access to
this progress. There is a great difference in the discussion of patient rights.
In this country, as in America and Canada, we are concerned
with patients' rights. More important, though, in the field of care, I am
convinced that after about five or ten years time, even earlier, we might have a
cut-off of rights and freedoms of patients to care. At present, the care
insurance has completely changed the mentality of the people. As long as they
were independent on the system, they did not dare to complain. Now, since they
have benefits in their own right, they are asking, "What do I get for my
money?" We are discovering that we have a quality problem which we are just
detecting by a major care quality act. They are asking, "What do we get as
consumers? How will I be treated in an old patient's home?"
It is a completely different situation. If you are ill or injured, it may not
seem so important because, if you go to a hospital, you are normally out in 10
days and your doctors will achieve that if they have to fight the devil or
death. In long term care, that is not the case. The only way to get out after a
short stay is with your feet in front of you. Therefore, it is very important to
know your rights and the kind of treatment you get. We are discovering that in
our case, like in other countries, in long term care people are still objects of
care and not subjects of care. This will completely change - partly due to
influence from England and the Scandinavian countries.
It is worthwhile to read the charters of rights of dependent people. On the
health side, we have an organization that is trying to promote the rights and
freedoms of patients, particularly of people dependent on long term care.
Thank you for taking the time to appear before us this
Those of us sitting around the table are envious of the fact that you have too
many doctors in your system. You have mentioned that, in itself, can cause
problems. I wonder whether you also have too many other health care
professionals or health care providers in your country. In the past, were
deliberate measures taken by your country to ensure that people who entered the
health care profession would remain? In Canada, we have large numbers of people
leaving the health care profession, either leaving the country to go to the U.S.
or leaving the health care profession for other careers.
In Germany there is a big exchange, especially in the field of
nurses. In some areas we will have a shortage of nursing staff. For instance, in
Munich or the big cities, we already have problems. One day, one of the factors
that will cause us to lessen the capacities we have in some fields will be that
there are not enough nurses in the country. It may be a more severe problem in
Beyond the doctor system, if we consider pharmacists, we have 20,000 outpatient
pharmacists. In German cities, you will find more working pharmacists than you
will jobs for supplying food. In most fields, apart from the nursing field, we
will have also this overcapacity situation in the future.
In the field of care, we have a problem. I think you
referred to the burn-out effect. It is chic to work in an operating theatre
because you can achieve some kind of success. If you are in an old age nursing
home, it is pretty terrible for nurses to look after people who they watch
getting worse and worse from day to day. We have a very high fluctuation of
nurses, which means we have the wrong kind of personnel management principle.
You cannot have nurses working all the time with the same patients or working at
the front. We need new management so we can centralize the nurses and send them
in from the organizations which run the long term places to avoid the burn-out
We have a shortage, and I could almost say we are a developing country in the
question of geriatric psychiatric nursing. That applies to other European
countries as well. We have a real shortage, and the few people we produce, for
instance in Schleswig-Holstein in the north of Germany, are immediately hired by
Scandinavian countries. In the field of geriatric psychiatric nursing in nursing
homes, we have a serious problem at present. That applies to the quantity of
nurses and, in particular, to the quality.
In Canada, the public gets irate, to say the least, as
soon as we bring up the topic of user charges. What is the reaction of the
German people to user charges? Does a user charge cause a reduction in the usage
of health services? A fee can be a positive thing if it means people do not use
the service when they should not. Can patients be denied service if they are
unable to pay the user charge?
In Germany, users are not charged for attending a panel
doctor, for example. Charges for a hospital stay are only 25 German marks per
day for a maximum of a fortnight.
Other types of services require a co-payment with the amount depending on the
kind of service. For example, we request different co-payments for drugs, for
remedies or medical aids, dentures or for transportation.
People under a certain level of income fall under the hardship clause and need
not pay the co-payment. Children and people who live on social welfare do not
pay any co-payments in our system. In international comparisons, Germany has the
lowest rate of co-payments.
There are user fees only in the field of dental procedures. In
most other health systems, dental prosthetics are not included. There we have a
high co-payment of approximately 50 per cent. As we introduced it, in addition
to a specific kind of direct payment, there was a deep decline in the use of
dental prosthetics from one year to the next, of more than 20 per cent.
In the field of drugs, the lowest co-payment is 8 Deutschmarks per unit; the
highest possible co-payment is 11 Deutschmarks per unit.
You asked if anyone is prevented from receiving a service because of co-payment
requirements. A hospital will admit a patient who cannot pay the co-payment
because the co-payment, in the end, is paid to the sickness fund and not to the
hospital. If a patient cannot pay when admitted to the hospital, the hospital
will tell the patient to clear it up with the sickness fund directly. No one is
prevented from receiving services because of inability to finance the
Thank you for your testimony. You have been very helpful.
Welcome to our next witnesses. Thank you for taking the time to be with us
I would like to have the witnesses identify themselves. I have the list but I
cannot tell who is who. As I understand it, you would like to give us a brief
overview of the British system and then we will turn to honourable senators to
Professor Julian LeGrand, Richard Titmuss Professor of Social Policy, London
School of Economics:
I cannot give a full overview of the British system,
but I will tell you where my areas of expertise lie, such as they are.
During the 1990s, the previous government introduced an internal quasi-market
system into the British system which divided purchasers and providers and set up
a number of different kinds of purchasers, including primary care practices and
district health authorities, and, at the same time, let hospitals go, and
hospitals became kind of semi-independent agencies that contracted with the
purchasers. I did quite a lot of research on the relative success or failure of
that system and I will be happy to talk about it.
The second area in which I have a strong interest is that the new government has
set up a regulatory agency called the Commission for Health Improvement, the
task of which is to visit every National Health System institution - hospitals,
health authorities, primary care groups - to monitor, in some senses, their
activities. I am on the board of that commission and so have some expertise in
that kind of regulatory area. Perhaps expertise is a little strong because it is
not functioning to the full extent yet, but I can talk about that. On either of
those areas I would be happy to answer any questions of the committee.
Thank you. Mr. Smee.
Mr. Clive Smee, Chief Economic Adviser, Department of Health, Economic and
Operational Research Division of the United Kingdom:
I have been the Chief
Economic Advisor in the Department of Health and its predecessor, the Department
of Health and Social Security, since 1984. I suppose my major contribution is, I
can take a long-term perspective of the changes over the last 17 years. I am not
sure that I can claim any particular area as one in which I have unique
knowledge relative to my colleagues, because my responsibilities and those of my
staff extend to advising on the whole of the department's responsibilities and I
must put my efforts where ministers want a particular push or change.
However, I have always been very interested in international comparisons. I had
the privilege of working in the Canadian federal Department of Health and
Welfare for six months in 1979 and I visited Canada in 1996 - when we were
preparing for an expected change in the government here from Conservative to
Labour - to help identify areas where we were, as we would say, "off the
pace" relative to you, the United States, Australia and New Zealand. Some
of the ideas I brought back from that visit have now borne fruit here. For
example, an area I have always been particularly concerned about and interested
in is how to make a system like ours more patient-responsive. You had in those
days regular surveys of patient views on the health care system and since then
we have introduced national patient experience surveys.
indicators and the use of performance measures for performance management is
another area in which I have a particular interest and as an economist I was
also heavily involved, like Mr. LeGrand, in the establishment of the internal
market here and in trying - not always successfully - to get it evaluated.
Professor Ham, do you have any opening comments?
Mr. Chris Ham, Director, Health Services Management Centre, University of
I am a health service researcher from the University of
Birmingham. I have recently decamped into government where I have been working
on secondment for the last year or so. My interests are in trends in health care
reform in different countries, making comparisons to determine what lessons can
be learned. My specific interest is in health care rationing, or priority
setting, defining the benefits package and making decisions about coverage.
I will make a few observations, partly formed in the week I recently spent in
Vancouver learning about developments in health policy in British Columbia and
by having visited Canada on three or four prior occasions. I would say that the
U.K. and Canada share many of the same objectives in health policy - to deliver
universal services which are comprehensive and accessible - and share many of
the same problems in achieving those objectives. I was struck by the
similarities between our two systems. Overcrowded, overpressured emergency rooms
in hospitals, lengthening waiting lists and waiting times for non-urgent
treatments, increasing shortages of key groups of staff like doctors and nurses
and increasing professional criticism of the performance of services and
declining public confidence. It seems to me that many of the issues are similar
between our two jurisdictions.
One of the big differences is that traditionally Canada spends a lot more, as a
share of national income, on health care. The current figure is over 9 per cent
of GDP, whereas in the U.K. we have always been parsimonious at less than 7 per
cent of GDP still. One of the conclusions that reinforces this point, from a
U.K. perspective, is that we probably must spend more money on health care, but
more investment alone will not solve the problems which are common to both
countries. You have the same problems, despite your high levels of expenditure.
We need to reform our two systems to get better performance and increased
I wish to comment now on the briefing given to us about the U.K. experience. The
headline points that are important is that the U.K. has been very good at cost
containment in health care. To provide universal and more or less comprehensive
services for less than 7 per cent of GDP is a bargain buy. It is value for
money, if you compare the performance of different countries. We have achieved
that for two reasons. The first is very strict government control, a single
payer system with one tap through which resources flow into health care, a tap
which treasury keeps a strong hand on and regulates expenditure on health care.
The second main reason is, we have a strong primary care system in the U.K. -
one of the interesting points of contrast between Canada and this country - with
general practitioners acting as gatekeepers, with patient registration, with
rostering and with a system that is now very well established.
Another reason that we have good cost containment is that government has
controlled wage rates and salaries for all key groups of staff in the U.K. That
traditionally has been seen as a strength because of the bargaining power of
government. Now perhaps it is seen as both strength and weakness because of the
difficulty of attracting key groups of staff in the competitive labour market
and the greater attractions for some staff to work in other sectors where the
rewards may be higher and the flexibilities greater.
In the U.K., the emphasis is now on increasing expenditure, more investment to
overcome some of the problems of cost containment, more money which will buy a
few more acute care hospital beds, reversing the decline that we have
experienced over many years to give us more slack and more capacity and more
money to increase staffing numbers. We are trying to recruit internationally as
well as to do better in this country to retain and recruit our own staff, more
money to modernize equipment and hospital buildings.
The big question that is being raised internally within the Department of Health
and externally is, will this be sufficient? We have a national health service
that is also a nationalized health service, government owned and run hospitals,
a major role for government at all levels in regulating how the system is run.
We are trying to achieve these changes not by going back to the internal market
model because the internal market, to a large extent, is now dead and buried,
even though there are still some remnants of it around. Competition and choice
have been rejected by the Blair government and it is attempting to achieve
improvements in performance through government control and intervention, setting
national standards for performance, using organizations like the Commission for
Health Improvement to inspect and visit hospitals, driving up change through a
number of new mechanisms like the moderization agency for the health service,
which is there to identify and spread good practice and to overcome some of the
variations in performance.
The last thing I would say, by way of introduction, is that my reading of the
international evidence is that Canada and the U.K. are not alone in experiencing
a perceived crisis of performance and being subject to increasing public concern
and media criticism.
In the evidence from the Commonwealth Fund on its recent studies of professional
attitudes toward the performance of health care, it is reporting broadly similar
findings in a variety of different countries such as Australia and New Zealand,
as well as Canada and the U.K. The problems of health policy are pretty
intractable and, at worse, insoluble. The issue is the least bad solution rather
than most perfect.
On that encouraging note, you will understand why we are
here doing what we are doing.
Before turning to my colleagues I will ask the question of Professor Ham, but I
invite all to chime it. I understand that the internal market is, in Professor
Ham's words, "dead and buried." Was that purely for political
ideological reasons, in which case we do not need to pursue it, or was there
some evidence that the internal market structure was not working anyway?
Some people would say it was never properly tried and tested. I
suspect that might be the view of Mr. LeGrand when we bring him into the
conversation. Of course, when you get two or three academics, you get four or
five different opinions, so we are in for a lively session.
I should tell you that we have two doctors, so we can
certainly match you in a multitude of opinions.
I would say "internal market" was always a bit of a
misnomer in our case. I would say, it was a managed market and it turned out to
be a heavily politically-managed market. It was introduced by Margaret Thatcher,
who had a certain belief in the value of competition and choice in health care
as in other sectors. When it was implemented, John Major became Prime Minister
and there was a change of health minister at the same time. It might be argued
that they did not have the courage of their predecessors' convictions. They did
not actually implement the internal market as it was intended from the
beginning, so in practice I would say there was not ever a great deal of
competition between hospitals and other health care providers and to that extent
the so-called internal market experiment was never tested in the way that was
intended at the outset.
I would agree with that. Many of us who supported the idea
of the internal market were disappointed with the consequences. It neither
really failed, nor did it really succeed. There were no massive changes of the
kind that some of us had hoped to see and some of us had feared. There were two
reasons for that. One was because the consensus was too weak and the constraints
were too strong. There were not any dramatic incentives. Hospitals rarely did
well, but if they did do well, any surplus they made would be taken away in the
following year. If they failed on the whole, they were bailed out by the
government. The actual incentive for a hospital to perform well at both ends was
At the same time, as Professor Ham said, there was a fairly dramatic degree of
central government control which found it fairly difficult to let go of the
health care market, as it would have had to do for health care to have worked
properly. Therefore, the incentive was too weak and the constraints were too
There might have been a mistake in terms of the fundamental degree of
motivation. For a market to work properly, the individuals concerned must be
motivated to respond to market signals. They must be motivated, in the crudest
sense, to make a profit. In many cases, the key agents in the market were
doctors and hospital specialists, whose motivations are not necessarily either
to make a massive profit for themselves or for the institutions for which they
work. Motivations might be patient welfare or professional status. There could
be a whole variety of different motivations, but not necessarily ones that are
suitable for the kind of market arrangements that were set up. That is another
reason why, at the end of the day, the internal market was not perhaps the
success that people had expected.
There is nothing that I have heard so far that I would strongly
disagree with, but one should remember there are important legacies from the
period known as the internal market and I would identify three. First, we
continue to separate the purchasing, or what is now called commissioning role,
from the provider role. One of the critiques of the National Health Service,
NHS, before the so-called internal market was introduced was that the same
bodies' health authorities were meant to be commissioning, or purchasing,
services on behalf of the local populations, but at the same time they were
running the local hospitals. Thus, they had a pronounced conflict of interest
aimed at protecting those hospitals.
This government has continued with the idea that to have a body, or bodies,
acting primarily, or solely, as the agent for the consumer in the health system
is a system that we want to maintain. We have a strong distinction between the
people who receive the money - the health authorities now and, increasingly in
the future, the primary care groups or trusts in the future - and the providers
proper, particularly the secondary care providers - the hospitals - and they are
not under the same direct management. That idea has survived.
The second idea that survived came out of the internal market more by chance
than by design. Probably the best agents for the public in terms of
commissioning or purchasing services are primary care groups of some kind. We
had the GP or general practitioner fund-holders set up in the original model,
and they became the commissioners of choice, usurping that role from the health
authorities. The current government built on that and said that it recognized
that GPs and the primary care team more generally appear to be, on balance, the
most effective agents that it could identify in the health care system, in terms
of commissioning services for the bulk of the population of the country.
Therefore, it would put them together into primary care groups that will evolve
into primary care trusts. There is a continuity between the current status and
the internal market.
The third area is that, when we decided that we had to commission services, we
had to start pricing services properly. We had to start asking questions about
quality as well as costs. This government has been able to build on much of the
work set up under the internal market in terms of improving performance
information and performance measures. Before the internal market, because we
were not purchasing, commissioning, or contracting for
services to any
large extent, we had far less information on costs and, increasingly, on
outcomes. In the internal market, at least in theory, when trying to drive costs
down, you rapidly realize you need information on quality to ensure that you are
not simply cutting costs all the time and the quality is going out the window.
There is a kind of continuity in improving the information we have for measuring
what is happening in the health care systems and in using those measures to
promote improvement across the piece.
Senator Kirby made reference to the fact that we have the
luxury of having two distinguished people from the medical profession with us on
the committee: Senator Morin, who is the former Dean of Medicine of one of our
great universities and Senator Keon, who is Canada's most famous heart
In reviewing the material for this meeting, I came across an interesting
statistic: in England and Wales in 1986, the figure that was given for the
number of coronary bypass graphs performed there was 929. Six years later, in
1992, the figure had grown to 6,463. I do not know whether that is due to
declining health or growing expertise. Perhaps you would like to comment on
While I am on that point, are your university medical students encouraged or
directed to enrol or study a particular discipline or specialty to ensure that
there are sufficient doctors in all specialized fields?
What you are giving is a particular example of the general issue
of the system that has very strictly contained costs in the past. One way in
which that has been expressed is relative under-provision and under-investment
in services like coronary artery bypass grafting.
If you examine the comparative figures in all years, for North America, France
and Germany, the U.K. tends to do fewer of these procedures in relation to the
population than are done elsewhere. In the last three or four years, government
has said that we actually perform too few of those operations. Thus, the
investment now being made is directed at developing services in the fields of
cancer, coronary heart disease and mental health to bring levels of provision
and intervention more in line with what you would expect to find elsewhere.
It is the supply side constraints that explain the difference you are pointing
to, rather than any major variations in demand among that population group.
Could you tell us how much emphasis is placed on
preventive health care programs?
There is a lot of work being done to give priority to preventive
health care programs. At the moment, they take a number of forms. I mentioned
the differences between our two systems in primary care during my opening
remarks. One of the main strengths of our primary care system is that there are
patients who register with a family physician or use a group of family
physicians. Therefore, there is a continuity of relationships between patients
and doctors that you do not find in other systems.
The group of family physicians have continuing responsibility for a given
population, usually responsible for a whole family, and as part of that they
will give priority to vaccinations and immunizations among the children in the
practice population. They will also have responsibility for certain screening
programs, for example, for cervical cancer screening. They will, in various
other ways, give advice on giving up smoking, adopting healthy life styles,
nutrition, diet and so on. Primary care is an important focus for us in relation
At a national level, there are population health targets that both this
government and the previous Conservative government have set for improving the
health of the population. Typically, this focuses on the major causes of
mortality and morbidity such as cancers, stroke, heart disease, suicides and
mental health. The government establishes targets, 10 to 15 years hence, for how
it wants to see population health improve in relation to each of those areas.
Those targets are then translated at the local level into each health authority
having responsibility for its population and agreeing on local programs of
prevention and health promotion, often working in partnership with local
On the point about medical schools,
there is a system
for agreeing with the Royal Colleges, our major professional association, on the
number of training posts beyond the undergraduate level. If we thought there
would be a need for more gynaecologists in five or ten or fifteen years, there
could be agreement with the Royal Colleges that there should be more registrar
or senior house officer posts in those specialties.
I think one would
have to say the process has not worked terribly well, given that the same
specialties have been marked by scarcities in terms of waiting times for many
One could say more about the prevention issue as well. The
potential, when you have a purchaser-provider split, of focusing more on
prevention is clearly there and there were one or two interesting examples or
stories. One health authority deliberately decided to spend its money on putting
in what we call in Britain "sleeping policemen" - you might call them
speed bumps - in a local public housing estate, the idea being to bring down the
number of accidents.
Do you have any further comments on Senator Graham's
I was telling a story about a purchaser-provider split and
prevention. The point was simply that, in theory at least, if you had a
purchaser-provider split, the purchaser could spend money on prevention in a way
that is much more difficult if the whole system is an integrated one. I must say
in practice, other than the stories we heard, the acute hospital sector was
still very good at gobbling up much of the money, as these types of centres
I have a specific question for Professor LeGrand. You
talked in your introductory remarks about a Commission for Health Improvement,
and you talked about it monitoring activities. When was this established? What
is its mandate? How broad a scope do you have? What powers do you have to affect
change? It sounds like a tall order. It certainly would be if there were such an
agency in Canada.
Those of us working in it feel the same way. It has a number
of functions. One of its functions - my colleagues would kill me for this,
because I am not using the jargon - is basically to monitor performance and
quality and the procedures that have been set up within the system, particularly
with an emphasis on clinical arrangements for performance and monitoring.
Another role is to undertake specific investigations that have been asked for by
the secretary of state or, indeed, by others. We are open to requests from other
parts of the health service to undertake specific investigations into specific
indicators, or specific instances, I should say, or examples of system failure
we have been asked to investigate.
Third, we have a general performance monitoring role. We are, in conjunction
with other agencies of government, putting out a number of performance
indicators that look at national performance of the system relative to certain
We have only been in operation for a year or so. We have undertaken a number of
specific investigations during that time, cases of abuse of elderly patients,
for instance, in one particular hospital trust, and the case of a surgeon making
a mistake and taking out the wrong kidney in another hospital trust.
We have also begun a process of visiting. We have visited now 20 or 30 of the
500 NHS institutions that we are supposed to visit on a regular basis - once
every four years for the ones that are doing all right and once every two years
for those not doing well. We are supposed to produce a report on these
institutions. That report is sent to the regional office. If there are
recommendations for action in that report, the regional office of the National
Health Service is supposed to follow up on those actions. As yet, it is early
days to say whether that is the way it will work in practice, but that, at
least, is the theory.
How large a staff do you have working for this
It is rising exponentially. At last count, it was in the
order of 250. That is the staff of the home base. To undertake the reviews
themselves, we call upon a wide range of reviewers. People are seconded, usually
from the health service itself, and we include a doctor, a nurse, a medical
manager and a lay person as reviewers. These people are seconded and trained by
us and then undertake the review specifically for that purpose.
The beneficiaries of this, of course, would be the
public in terms of the knowledge and the profession in terms of performance. Do
you get involved in legal implications? You talked about the gentleman with the
wrong kidney removed.
We certainly do.
How do you handle that?
As always in legal matters, with great difficulty.
In our first report, which was the case of abuse of elderly patients, we went
through endless contortions trying to decide if we could name a particular
individual who we thought bore a heavy responsibility for this particular abuse.
We consulted a variety of government solicitors. We consulted the treasury
solicitors, although I cannot remember why, and they gave advice that we could
not name the individual concerned. My understanding was that the Department of
Health was rather impatient with us and told us we ought to get another
solicitor. We do tread that particular path with extreme care because, clearly,
we can get into legal issues quickly.
I have another question on the issue of private
insurers. I read somewhere that in the U.K. more people were starting to turn to
private insurers. I think the figure was growing. Does that then cause
additional stress on the system if people have private insurance? I believe the
U.K. has similar problems to Canada in terms of waits and line-ups. Is there a
danger that people covered by private insurance can jump the line and get care
to which the general public does not have access?
The history on the scale of private health insurance is that it
rose rapidly in the 1980s, up until around 1989, if I remember correctly, when
it reached 10 per cent of the population that had private insurance. It then
stuck at that level all the way through the 1990s until 2000 when the most
recent figures have shown again a significant increase. However, this increase
of around 5 per cent, or in that order, is the first of significance in a
The interesting aspect for us is why private insurance apparently remained
static for the better part of a decade. We now think that around 12 per cent of
the population is covered by private insurance. The distinction is made between
those covered by their employer's schemes - and those who have been expanding -
and those covered by personal private insurance that individuals buy directly
themselves rather than obtaining as an employment perk. The company schemes have
tended to be expanding over most of the period and have been offset for much of
that period by a decline in private payments. The fastest growing part, in terms
of private coverage at the moment, is out-of-pocket payments - people not using
either private insurance or employer insurance, but simply paying for elective
operations, when they need them, out of their own pockets.
In terms of jumping queues, yes it happens. One of the major reasons given by
people who take private insurance is they want the peace of mind of being able
to have elective operations for themselves or their families more quickly or at
more convenient times than if they must depend on the National Health Service.
That is seen, of course, as a cause of unfairness, which is one of the reasons
that the government is committed to bringing down waiting times for National
Health Service patients as rapidly as it can.
You do not have any laws, then, that would intervene,
so there is a potential for this activity to increase, particularly with the
employee and employer plans. Why would people get into them unless they thought
there was some real benefit? Is there any way that the government is expected to
control the use of private insurance in the system?
The government believes that the NHS, if it is adequately
funded and of adequate quality, will be able to remain the service of choice for
the great majority of the population. Its aim is, I suppose, to make it the
choice for more of the population. It hopes that the NHS plan, and the reforms
following on from that, will lead to fewer people deciding they may need private
health care insurance.
There are other reasons for getting private insurance. You can get faster
treatments for certain things in some parts of the country. If you have private
insurance you can get faster access to a specialist as an outpatient and then
you get your operation done more quickly. The government is trying to narrow
that gap and at the moment is making progress in that regard.
People may also take private insurance because they want to have a higher level
of "hotel services" in the hospital. They may want not only their own
room but their own television, and so on, or they may want a particular
consultant. In private insurance you normally get access to a consultant, while
in the National Health Service you may find, although your case may be under the
overall supervision of a consultant, you may actually be operated on by a more
junior member of staff. The government does not, at the moment, restrict access
to private insurance and it does not see any reason to give incentives for
people to obtain private insurance. It has withdrawn all obvious tax incentives
or subsidies that encourage people to obtain private insurance.
I would like to address my first question to Professor
Ham, who has spent six months in Vancouver. Am I right in saying that?
I wish it had been six months. It was only a week.
I see. You know the Canadian system, however, and you know
there are similarities between the British and the Canadian systems. There are
major differences as well. In its electoral platform, the Labour government has
promised that it will increase spending by one-third, while we are fighting
desperately to maintain costs. Do you have views on what Canada can learn from
the NHS and its recent reforms after your visit to Vancouver?
As I indicated in my opening comments, I was struck by many of
the similarities between our two systems. We have similar objectives, but also
very similar problems. I am also conscious, in all the work I have done in
examining how different countries pay for and provide health services, that the
value of each system is so important in shaping what is possible to do and that
ideas do not always transfer easily across international borders. What may work
best in the U.K. system may not work very well elsewhere.
I would say that the strongest features of the National Health Service are the
primary care foundations, upon which the rest of the system is based. If you
consider the international evidence, the work of Barbara Starfield at Johns
Hopkins University shows that countries that have stronger primary care tend to
get better population health outcomes. They tend to get better value for money
and they tend to have populations that are more satisfied with the performance
of health services. Ms Starfield also demonstrates in her comparison that the
U.K. probably comes out above all other countries in the strength of the primary
care orientation in the health care system.
I would not want to give you the impression that we have everything right with
our primary care arrangements, but with the principle of having patients
register with a family physician and that physician being responsible for
providing continuity of care, we do not have a system of doctor shopping in the
U.K. We expect a family to return to the same group of doctors for its care.
With the building up of that relationship over time, physicians have the ability
to take responsibility for the whole of that population to give priority to
preventive medicine and to give health advice. Those are all positive features,
not just for the U.K. but for any health care system that is trying to improve
A second feature, which is increasingly salient here, is that we are considering
not just how the medical system can be developed and strengthened, but how the
social and economic determinants of health can be acted upon to improve health.
Since the Blair government was first elected four years ago, we have seen a
range of social policies tackling child poverty and inequality in society, which
the previous government found difficult to recognize explicitly. There is more
emphasis now on improving conditions outside the health care sector in the
belief , which I think is well-founded if you look at the research evidence,
that will, in the longer-term, improve population health. We look to Canada as
the home of the Lalonde report in 1974, for inspiration going back some years in
this respect. We have not got it right, but we are trying for a better balance
between the health agenda and the medical agenda.
Am I right in understanding that NHS is thinking of
turning more to privately run hospitals?
Yes. The NHS has always made some use of privately run
hospitals, but during the recent election campaign - this may be what you are
referring to - the Blair government made a commitment to be pragmatic after the
election as to whether private or public hospitals should be used to treat
National Health Service patients. Those patients would be treated free at the
point of use of those services, whether public or private. That is to try to
bring down the waiting lists and waiting times, particularly for non-urgent
medical treatments, and to help achieve the targets set by the government. That
is quite a shift compared to, traditionally, how Labour governments have seen
these issues. The Blair government claims to be new Labour, not old Labour,
being much more pragmatic about where the care is provided, as long as it is
free for the patients.
What would be the effect of devolution or decentralization
of health care delivery to Scotland and Wales? Would primary care fall under the
responsibilities of these states?
Yes. There are differences between the four parts of the U.K.
Scotland has the greatest measure of devolution. Scotland has elected a
parliament that has some tax-raising powers. Neither the Welsh Assembly nor the
Northern Island Assembly can raise taxation. They have limited legislative
powers. In the last two years into the process of devolution, the most
significant issue so far has been the funding of long-term care, by which I mean
usually non-medical care for older people, dependent people, who no longer need
to be looked after by the National Health Service, who no longer need medical
support. The proposal in Scotland is that all aspects of long-term care should
be fully funded by government. The proposal in England is that only some aspects
of long-term care should be funded by government and the rest paid for directly
by patients and their relatives. That is one indication of how devolution over
time may result in four different versions of the National Health Service, even
though we think of it as one model.
On the issue of devolution, it is worth bearing in mind that my
department, which you are now talking about, the Department of Health, has
always been responsible only for England. We have not had responsibility for the
health care system of Scotland, Wales or Northern Ireland for the last 20 or 30
years, if not since the health service was established. There has always been
some scope for Wales, Northern Ireland and Scotland to go their own way. Wales
was earlier than we were in terms of setting health targets. Scotland was never
so keen on the internal market as England was. Now, of course, because the
Scottish have tax-raising powers, they can plan for larger divergence in the
health care system by building on what has been there for many years.
I have two comments on the cost containment issue and the
use of private hospitals. I have one point to make about relating those two. One
reason Britain has been successful at cost containment is its ability to keep
down the incomes of doctors and other medical professionals. The argument has
been that is because many hospital specialists and nurses are paid on a salary
basis, employed by the National Health Service and not by the employer, and we
have been able to control the salaries of doctors and nurses. One of the effects
of moving toward a system of relying more heavily on private hospitals may well
be to break that kind of monopoly.
I am actually sitting on the commission recommending this move, or at least
recommending some move in that direction. It is fairly clear that it is quite
possible that if hospital staff move to actually being employed by the private
sector or working more on a freelance basis, we might see an upward pressure on
costs as a consequence of such a move, which is one argument often made against
this particular idea. I think those on the commission feel it should have
beneficial effects on the other ways.
Was the report of that commission published? Is it
It is due to be published on June 25.
We would appreciate receiving a copy, if possible.
We will try to arrange for that to happen.
Thank you very much, gentlemen, for taking the time to be
I want to cover two areas. One is the impact of your health research policy and
expenditure, which you are to be very much commended on, and the other is the
health industry that has emerged in Great Britain partly because Heathrow is a
bit like the centre of the universe.
First, I will address the effect of your health research organization policy and
expenditure. Investment in basic research is difficult to measure, and things
that fall out through the bottom of the funnel will, on occasion, have enormous
impact. In your investment in outcomes research, population health research, in
cost containment research and so forth, you are probably the world leaders in
this area. Are you getting measurable results from this now, for example, in the
way you manage patients with prostate cancer, or are you not quite far enough
down the road to use this information effectively? Could you address that?
The United Kingdom has a long tradition of health service
research, outcomes research, going back to investments in randomized control
trials, establishment of the Cochrane Centre, indeed Cochrane's work itself. I
think you are right in making that observation. Over the last 10, 15, 20 years,
we have been developing a strong health economic capacity in a number of
different centres based in universities around the U.K. to bring the economic
evaluation perspective much closer to the clinical outcome analysis. There is a
network of researchers in different parts of the country now that is working
very much on the agenda you have described. That has been very much facilitated
by a national commitment, both Conservative and Labour, so that there is a
cross-party commitment to putting funding into research and development in
support of the National Health Service.
Researchers such as Mr. LeGrand and I have been beneficiaries of that.
Therefore, we have to declare an interest and that we think it is a good thing.
However, that research is not being translated into action as much as we would
like at this stage. That is a one of the global challenges with which we are
There is a lot that we now know about cost and outcomes. Getting
to act on the evidence is a more difficult challenge and we are struggling
with that as much as other countries.
It might be worth mentioning the National Institute for
Clinical Excellence, NICE, in this context. Its terms of reference are to try to
transmit some of this evidence to the service and, indeed, to have it
implemented. One of the tasks of the Commission for Health Improvement is to
check on whether the practitioners are actually using the guidelines that have
been promulgated by NICE to try to promote good practice in this area.
The difference between now and five years ago is not so much
the growth in the scale of our research or, indeed, of the subject matter,
although that is changing, but that we now have institutional mechanisms, as Mr.
Ham and Mr. LeGrand indicated, for using that research to impact directly on
The National Institute of Clinical Excellence is one example and that is meant
to set the standards
that the Commission for Health Improvement monitors
and raises questions about. We have a series of initiatives, called National
Service Frameworks, covering the basic major disease areas. These initiatives
set standards of care linked to objectives for improving clinical health
outcomes 10 years or so in the future.
For example, a National Service Framework for coronary heart disease starts from
objectives about reducing mortality rates from coronary heart disease by 2010.
In a sense, it works back from that date: What do we have to do to improve the
quality and availability of care, and what scale of coronary artery bypass
grafting should we be contemplating or moving towards? In that way, we can
provide world class quality of care for patients with coronary problems in order
to hit these improved targets for health outcomes.
That whole program is meant to be evidence-based. Therefore, it drew heavily on
research and on drawing together the areas from research programs, because, of
course, we identified a whole series of new issues on which we would need more
research to ensure the success of these programs. I understand that is the big
We now have these institutional, policy-related, central-to-policy mechanisms
that tie in the research in a much closer way than ever before. It was rather
like spreading bread on water: you never knew what would sink and what would
Now, we are making sure that the bread is focused much more - I
think my metaphor will fail here - on the boats or certainly something that will
That was a clear answer.
Let me shift to something that has always fascinated me, which is the health
care industry that has existed in Britain for some time. It is quite different
from any other country in the world. America has a large private sector health
care industry, which is sustained internally, by Americans, largely. The UK's
health care industry has been sustained, to a large degree, by people outside
Britain, particularly from the Middle East, Africa and parts of Europe that are
not as well developed.
I have always wondered if the fact that you have been able to hold your
expenditure on health down below 7 per cent of the GDP was in some way related
to this. There is no question that some of your outstanding specialists and some
of your outstanding specialty hospitals are sustained by this industry, in my
You have stumped us all with that one. It is not often that we
are at a loss for words, as you can tell. There was a time when there was an
influx, to answer one of your specific points, of patients from other countries
to the U.K., particularly from the Middle East. That has really stopped over the
last few years because countries like Saudi Arabia have built up their own
infrastructure and expertise. They are treating more patients closer to home,
rather than sending them to the U.K. I do not think that is a significant
It is also fair to say that U.K. governments, over the history of the health
service, have been reluctant to pay for National Health Service patients who go
overseas for treatment. Although it is interesting for us, in the European
context, that our much richer German neighbours, who have a well-funded and
quite efficient health care system with surplus capacity, are now trying to
market that surplus capacity to the U.K. to help us reduce our waiting times and
achieve our targets. Within the European context there is more portability and
perhaps a little more competition, but the government is not encouraging that.
It is trying to deal with the problems of the U.K. within the U.K.
Some people believe that the private sector, in general, or
the fact that National Health Service specialists can bolster their incomes in
the private sector is an important part of keeping morale high - higher than it
otherwise would be in the health service.
It is interesting - and I would be interested in my colleagues' reaction to this
- that the government has actually proposed banning hospital specialists from
practising privately for seven years after they are promoted to the specialist
grade. This has aroused enormous hostility among junior doctors who have not yet
been promoted. Even junior doctors are not likely to benefit greatly from this
because not all specialities engage in private practice. I must say that I have
been surprised at the degree of hostility that it has promoted. It does seem to
relate to this more fundamental point that, if you run a system that is
essentially salaried, where the top consultants are salaried, having a private
system alongside is a sort of safety valve or device for keeping morale up and
keeping the specialists happy, which the purely public system would not.
If you are interested, senator, we could try to provide facts
on what proportion of private health care expenditure derives from foreign
visitors to this country.
I agree entirely with Professor Ham that the
proportion is small. It was larger, but it has been declining, as Mr. Ham
implied, for some years.
If it is of interest, I would be surprised if it were more than 10 per cent, or
in that order. It may be more important in one or two specialized hospitals that
have worldwide reputations for cancer care or for children's services. However,
across the health care system as a whole, it is a tiny factor.
When the senator mentioned that we had a successful health care industry, I
thought that he would refer to our pharmaceutical industry. That is what we
normally refer to as our "Health Care Industry."
I thought I heard Professor Ham make an observation a
minute ago about waiting line targets. Do you have, Sweden for example, explicit
waiting line targets?
Yes, we do.
Are there targets for different procedures? What is the
penalty to the institutions for failing to meet the targets? Alternatively, what
other options for the patient open up if the targets are not met, or is it
essentially a no-penalty system?
At this point, we scrub lunch and set aside more time - to
answer your simple question which has an amazingly complex answer. Shall I give
you the headlines?
We are politicians, so we are quite happy to just read the
We have moved recently from targets expressed as a reduction in
waiting list numbers. That was the target which the Blair government set in
1997. The last four years have been spent demonstrating that government can
deliver - and can deliver a reduction in the numbers on waiting lists. That was
a target to reduce the numbers by 100,000. You must understand that the overall
number on the waiting list at any one time is over 1 million, so it was slightly
less than a 10 per cent reduction of the number of people on waiting lists. That
has been achieved and the government has now put its hand up and said, "We
have made a mistake, we should not have set the target as a waiting list
reduction, it should be a waiting time reduction." That is what we are now
There are targets for the maximum - and that is how it is established - such as
the maximum time to wait for an inpatient elective procedure, the maximum time
to wait for an outpatient specialist consultation, and yes, there is
discrimination depending on the procedure involved. Much more challenging
targets have been set in relation to some forms of cancer treatment, which is
seen as a high priority, to get quick diagnosis for cancer or potential cancers
than for other treatments.
Targets have also been set in the NHS plan for maximum waiting times to see a
general practitioner in primary care. The target there is that no patient should
have to wait longer than 48 hours to see a general practitioner. Some currently
wait a lot less than that, some wait a lot longer, but that is the target for
the health service as a whole.
Let us suppose the target for something is three weeks. If
at the end of three weeks a patient has not received service, do I then have the
right to go somewhere else and the NHS or someone will pay for it? Or is it,
"That is too bad, we tried to help you within the time limit, but we
cannot?" I am trying to understand where the penalties are in the system.
I have to say that three weeks would be a very short waiting
time for most of our patients.
I understand that. Let us make it three months.
Within our system at the moment, patients have very few rights
in those circumstances. The only right that is now being established is if a
patient has a date for an operation and that operation is cancelled on the day
of the operation, then it has to be rearranged within 28 days or the patient can
go anywhere at the expense of the hospital or the health authority.
I would like to return to the three-month topic. I am
trying to understand how to induce behavioural change in the health care systems
of every country if there are not either clear rewards or clear penalties, or
both, for failing to meet targets.
The incentives are not so much on the patient side, they are on
the hospital side. If a hospital does not hit its targets, it will be penalized
by those up the management line by budget reductions, or no budget additions.
That is the sort of discipline that is built into the system.
I sat on a hospital board and it was very interesting
watching the reactions of the hospital getting the targets set and also during
the year when it looked as though we would not meet those targets. Anxiety
levels rose dramatically, particularly those of the chief executive. The
implication was that the chief executive or the chair of the hospital board
might well lose their jobs if they systematically and consistently failed to
meet their waiting list targets. I suspect that failing to meet them once would
not result in that, but if there was a consistent pattern of failing to meet the
targets, it would be regarded as a serious management failure and the jobs of
some of the key people involved would be on the line.
I would like to discuss the problem of nurse shortages.
In Canada we have a shortage of nurses and we heard that other countries, such
as Germany, are facing the same difficulty. I was wondering if you have a
shortage of nurses and what is the cause? We know that here nurses are
overworked and are suffering from burnout. Also, the work environment is
deteriorating. I wonder if you are facing the same difficulty?
It was mentioned earlier that nurses may be going to work in the private sector
and you control the salaries of doctors and nurses. So if they switch to the
private sector, will they have an increase of salary and will the work
environment be better? What is the situation and how do you see it?
We do have a shortage of nurses, particularly given the
ambition of the NHS plan. We have a very large potential shortage for several
reasons. As was the case with some other countries, in the 1990s, we reduced the
training of nurses. There were two reasons. One was that numbers of hospital
beds were falling rapidly, lengths of stay for acute care were falling and
people tended to assume that those trends would continue and concluded that we
would need fewer nurses. Another factor was that with the internal market, the
planning of nurse training was decentralized and everybody tended to look at his
or her own particular patch and forget what was going on in the wider field. In
a sense, the Department of Health moved out of nurse planning, did not keep its
eye on the ball, and the ball, in a sense, got away. For those two reasons at
least, the numbers in training fell quite sharply and we saw some fall in the
number of nurses in the total health care system.
We are now expecting to increase services very rapidly and a key constraint is
the number of nurses, along with the number of doctors. The first thing the
government is doing is recruiting more nurses from other countries, wherever it
can find them.
Second, the government is increasing the number of training courses and
providing various incentives to encourage more young people to go into those
Third, the government is making nursing more attractive to the large number of
ex-nurses who have left the profession for one reason or another or who may be
interested in moving from part-time to full-time work. The issue is not just
salaries and pay, although that is one part; there are also the issues of
working conditions, flexibility of hours and those things.
We are trying to work on all these fronts at the same time. These shortages of
nurses and doctors are seen as the critical constraints on the government's
ambitions for the NHS. How do we push the numbers up rapidly along with the
It seems governments everywhere ask the same question. I
have a question on a different subject, and that is palliative care.
Do your medical students and nurses receive special training for palliative
care? Are palliative services offered in special hospitals or at home? How is it
I do not know what the training is for palliative care. In our
system, hospices play a big role in palliative and end-of-life care. Hospices
here are not usually a formal part of the health service. They are usually run
by voluntary, community, not- for-profit organizations, although much of their
funding may come from the National Health Service. The trend at the moment is a
shift away from institutional hospice care into home care and to support people
who wish to live out their final days comfortably in the home and in the family
There are also some experiments called "hospital at
home" where a large part of treatment, not just terminal care, is taking
place. Other forms of care, including post-operative care, can be undertaken in
the home rather than in the hospital.
These experiments have been evaluated and I understand they are very popular
with patients, not surprisingly. They are not very popular with families,
perhaps not surprisingly. These programs cost a lot of money, but, on the whole,
they are regarded as successful.
We are facing a similar difficulty. Our Senate studied
palliative care and found that more and more people want to have those services
at home. We found that the level of service and medication available differs
depending on the region where a patient lives. We also discovered that only
three universities provide training in palliative care to doctors. That is why I
was wondered if you are facing the same problem.
The medication issue is different between our two systems
because the cost of pharmaceuticals comes within our benefits package.
The issue of palliative care was raised by a French team
visiting Britain about a year ago. I remember being surprised at how much
material we had available in the department about which I knew nothing. May I
suggest that we send you some material on our policies in this area?
Yes, thank you.
To return to the waiting line problem, you indicated a couple of times that the
shortages of nurses and doctors is a big constraint on the system. You also
seemed to indicate that it is possible, by setting maximum waiting line times
and by putting pressure on institutional administrators, to shorten waiting
lines successfully. That success suggests to me that, even though you clearly
want more physicians and nurses, there are possible efficiency changes in the
way institutions are run that can shorten waiting lines, even if the shortages
of nurses and doctors continue. Is that right?
That is absolutely right.
It is certainly possible to have short-term improvements;
indeed, that is what happened. To try to meet our waiting list targets on the
hospital board, we contracted out a number of operations to the private sector.
Our consultants came in on Saturdays and Sundays to reduce the list. We tried to
recruit nurses from everywhere, even from South Africa against the wishes of
Generally, there was an elaborate short-term operation to meet the targets. I am
more pessimistic about our success in the long term. Many of the arrangements
did not seem to be sustainable in the longer term.
One of my Birmingham colleagues, John Yates, is a researcher who
has been working on waiting lists for longer than he cares to admit or remember.
He has about six things that really matter in terms of improving performance in
relation to waiting lists. The first is to validate the waiting list at regular
intervals. In the U.K., about 20 per cent of patients on any waiting list no
longer require the appointment or the operation because they had the procedure
done elsewhere or for some other reason. That is an immediate 20 per cent
improvement. Perhaps that could be one of your recommendations and you could
become popular with that one.
Second, he suggests continuing the push to have elective operations done as day
cases where appropriate. Our rates are now up to about 60 per cent to 70 per
cent. There is no reason why it cannot go even higher than that.
Third, we will look at variations in surgical productivity. In any surgical
speciality, big differences exist between surgeons in how many operations of a
certain kind they are able to do with the time and resources available to them.
We now have evidence on this.
When I was in Vancouver, I picked up a fascinating research study done by
Charles Wright at Vancouver General Hospital, which examined patient
satisfaction with elective surgery. As I recall the findings, cataract
operations made up two-thirds of the overall operations in his study. Over
one-quarter of the patients who had cataract surgery in Vancouver felt their
sight was worse after the operation than before, so apart from considering
productivity, we must ask the more fundamental questions as to whether these
things are necessary in the first place. It is an effectiveness issue, not just
an efficiency issue.
I am impressed with what you have said so far about
the improvements you have made to primary care. Should you have any other
literature on that, it would be helpful for the committee to have it.
May I ask you a direct question? Could each of you tell us what you perceive to
be the largest, most worrisome problem that you have with your system? Could you
advise us of the most successful improvements or change that you have had in
The biggest problem - and I can see no easy of solving it in
the short-term - is the sheer size of the organization.
We are trying to run, what some people argue is the largest organization in
Western Europe, largely through a centrally-managed targeted system that relies
on performance targets and managerial incentives. It may just be possible that
we will succeed. With many of the improvements that we have just been talking
about being put in place, it may work. However, as the economist said the other
day, if targets and managerial incentives were the way to run a large
organization the Soviet Union would now be the most efficient society in the
world. This is a major issue that we have not yet succeeded in cracking. We may,
but that is the problem that will confront us over the next few years.
What is the most successful innovation? I was a great supporter of the GP fund
holding scheme, which is the idea that primary care practitioners hold a budget
very close to secondary care. The successes of the GP fund holding scheme is the
primary care group that is currently being implemented. It has its strengths and
weaknesses, but I certainly would think that is the thing that I would regard as
the greatest potential for trying to improve the system over the next few years.
Our biggest problem is in relation to the health service
workforce. Health care is a people business. We serve people through people. If
we do not have a sufficient number of well-trained doctors, nurses, porters,
receptionists and clerks who feel valued, who feel motivated, who feel
supported, who feel they have the resources needed to do the job they trained
for, then patients will not get the quality of service that we expect and there
will be declining public confidence and patient experience in the health care
system. My point really is, we neglect our staff and our workforce at our peril.
If we get that right, then many other things will follow. If we get it wrong, we
will always be playing catch-up.
The best example of things we are doing in the U.K. is the much stronger
emphasis on trying to do things differently, not just investing and doing more
of the same. There is work being led by the new modernization agency for the
health service, using support and advice from Don Berwick of the Institute for
Healthcare Improvement in Boston. We are using some of the breakthrough
techniques in working with doctors, nurses and clinical teams, helping them to
redesign how care is delivered to patients. In the early work that is being
carried out involving cancer services, trying to tackle problems of waiting
lists and moving more towards booked hospital appointments, pioneers in the
health service are achieving some impressive results. Doing things differently,
for us, must be as much part of the equation as doing more of the same. The
question mark I would add there is that it is all very well to do that early on
with the pioneers, with additional money, but can you sustain that change over
time and can you spread it to people who may not be as naturally enthusiastic to
redesign and re-examine their care.
I would very much agree with Mr. Ham's statement that the
health service workforce is probably the key constraint. If you would like a
third key problem, I would say it is a tendency to set too many targets and
objectives to be achieved at once, which is a joint product of pressure from the
public, very high expectations and a willingness of political masters to meet
those pressures. That would be very much second to the health service workforce
issue that Mr. Ham has mentioned.
In terms of biggest improvements I would address a small one, but I think it
actually suggests that in the National Health System you can move rapidly in an
area that is probably quite important if you get things right. That is the
launching and the universalism of the NHS Direct, which is the telephone nurse
help line that is now available for everyone, 24 hours a day, in the whole of
England, but which is not yet in all the adjacent countries. This system is
being expanded, in a number of experiments, to being a booking system and it has
a whole range of other add-ons. It has an Internet site. It will be linked into
digital TV experiments which are already underway. In terms of improving access,
this has made a substantial contribution already.
On the longer term and a more fundamental change, I would agree with the points
of both Dr. LeGrand and Dr. Ham and I would add a third;
that is, the
willingness for the first time in NHS to actually set measurable standards in
clinical care levels that we are determined to hit. It does not seem to me that
you can have performance improvement unless you have performance measurement,
and you cannot make much sense of performance measures until you have set
standards. With national service frameworks, with the National Institute for
Clinical Excellence and so on, we are, for the first time that I can remember,
setting specific targets for clinical quality of care that we are determined to
I should like to thank the witnesses for a very informative
I would also like to follow through on a supplementary from Senator Kirby's
dialogue with you, where you say day surgery has brought an efficiency into the
system. What program or support system do you have for the client who returns
home after day surgery?
Our National Health Service covers the full range of health and
medical care: hospital services, doctor services and also primary care and
community health services. That would include providing care in patients' own
homes. Usually the care will be provided by the family doctor, by the GP with
whom the patient is registered. In our system, that doctor - and I think this is
different from most parts of Canada - will work as part of a primary health care
team. The doctor will have available a number of nurses working with children or
with older people and community nurses who will work in peoples' homes providing
support. They may be able to access pieces of equipment or other support
services that patients of families require. It is this full range, from home
through primary care and intermediate care, that we also give high priority to
now, as well as the hospital and specialist services. I will not say, again,
that we always get that right, but we are getting better at trying to integrate
the different components, from the patient's point of view.
We have not talked about mental illness. How do you deliver
that discipline within the system that we are talking about this morning? In my
province, about 10 years ago, there was a concerted attempt to
de-institutionalize mental health patients and integrate them into the
community. How do you deal with that particular discipline in your country?
There is a slight passing of the buck going on at this end of
the link that would suggest that possibly none of us feel tremendously
well-informed on this. There has been a national service framework announced,
which I referred to before, part of which is for mental health. There is a
strategy now for mental health and there have been various government papers. It
would probably be best for us to send those to you.
The major weakness here, and, as you imply, possibly in Canada and many other
countries, is that we ran down the institutional support faster than we ran up
domiciliary care in the community.
We are now trying to address that
imbalance as fast as we can, but it gets back to the same issues of human
resources shortages and skill shortages that we referred to more generally.
There are now specific programs of action. We are trying to ensure that when
patients have been discharged from large institutional care, they receive much
more support in the community.
To add a couple of points to that, in considering the statistics
in the longer term, we have seen a major reduction in the number of hospital
beds for people with mental illness, particularly beds in psychiatric hospitals
- the former asylums, as we once called them. We still have beds in that kind of
specialty facility, but the number is currently lower than it was 10 or 15 years
We usually have an acute mental health facility that would be part of the local
general hospital to integrate mental health services with physical health
services. However, increasingly, as Mr. Smee indicated, the move has been toward
community-based care, having teams of mental health specialists to provide
services to people who are living at home, or who have just been discharged from
a hospital environment.
Our mental health pressure groups will, I suspect, say many of the same things
to which you have alluded. We have had a policy of community care, which too
often has seemed to be a policy of community neglect. People have been
discharged without the degree of support they need to live independently and
effectively in a community setting. There has been some move back in the
You have all been informative and eloquent.
My final question has to do with administrative costs. Could you please give us
an idea of the proportion or the percentage of total health care spending in the
U.K. that is devoted to administrative costs?
We sound like politicians when we answer this kind of question:
It all depends.
Let me give you an idea. We had representatives from
Germany earlier, and I believe the figure they used was in the area of 5.6 per
cent. In Canada, it is in the area of 2 to 3 per cent. In the United States, it
is much higher. Could you give us an idea what the percentage is in the U.K.?
Ours is in the low end of the range. I would say that ours is
around 5 per cent, or less. The reason for the hesitation is that it does depend
on what you count and how you count it, particularly if you have doctors or
nurses who are taking on management roles in hospitals and primary care. Would
you add that to your administrative cost total, or would you consider that as
being clinical time? The general picture in the U.K. is that we are well below
the U.S. figure of 20 per cent, which is often quoted. We are much closer to the
European figures that you mentioned.
This is an issue that we have been asked about by our ministers
on many occasions, to my certain knowledge, over the last 20 years. I am afraid
the truthful answer is that there are no good international comparisons of
administrative costs. There is no agreement across countries as to what should
be called "administrative" or "management" costs. The OECD
has tried to do this. They actually published tables that showed these figures,
but one has only to cast one's eye down at them to know that they are a load of
nonsense. There are no good international studies. There have been one or two
small-scale studies that compared the U.S. and Canada, which were done by
Himmelstein and Woolhandler, that showed that Canadian costs, by any set of
definitions, are much lower than those of the U.S.
We tried to do a comparison of hospital administrative costs directly, drawing
on some detailed work in the U.S., about four or five years ago. Depending on
one's definitions, we came out with considerably lower costs than the U.S.
However, it was of the order then for hospitals to wonder whether you include
information technology under administrative or clinical costs. If it were
included as an administrative cost, then 20 per cent of the American hospital
costs could be deemed administrative, and the U.K.'s were at about 12 per cent.
We have other figures from our National Audit Office and Audit Commission that
give much lower figures - around the 5 per cent level.
Another more detailed study I can remember was done by the McKinsey's, the
Four years ago, they attempted to do a detailed
study of costs and outcomes of the U.S., the U.K. and the German health care
systems. I do not believe that Canada was in the comparison. The study examined
three or four particular specialities. They concluded that the U.K. and the
German costs were pretty even, but again, they made them much higher than the
figures you quoted and the figures we would normally quote - about 12 per cent.
The U.S. was in a different ball game with well over 20 per cent. There is a
agreement that the European countries, in general, along with Canada, have lower
administrative costs than the U.S. has. I doubt, if there is any agreement
across Europe, as to which has the lowest administrative costs, because we have
not managed to agree on our definitions.
As a supplementary, from my experience, the part of the budget
that goes into administration increased when we were in the internal market
experiment. That was to be expected because you needed to hire more people to
negotiate contracts, monitor them and send out all the pieces of paper. There
was a price to be paid for operating that system, compared with a non-market
The other comment is a casual, empirical observation. On my visits to Canada,
when I have had the opportunity to examine your health care system, it has felt
very management light compared with the U.K. system. I provide that as a
descriptive comment, because we may have too much management and regulation in
our system, rather than Canada having too little. However, it was interesting to
I have a question about political will. I have been
impressed with several things: your moves on accountability, your moves to set
targets of various kinds, the focus on population health programs and the
setting up of a pretty impressive institutional infrastructure to try to improve
quality and efficiency. All of those things cost money on a budget that is
already, by your standards, low. You indicated, in Professor Ham's opening
comments, that there were a whole host of new areas where money needed to be
How do you get political approval to spend money on the kinds of things that you
talked about? All the political pressure, at least in Canada, is to spend money
on items that are directly patient-related. In that way, we would be able to
indicate to the public that, for example, we have opened 10 new MRI machines or
a new radiation lab for cancer. Even though, in the long run, the kinds of
things you talked about clearly would have a better long-term cost benefit, how
do you get around dealing with the short-term problem to put some resources into
the long-term problem?
We would understand and sympathize entirely with the imperatives
that you describe. They are evidenced in our health care system too. The drive,
alongside what we have been discussing, is to get more money into direct patient
care. Our Prime Minister has talked at some length in the recent campaign about
the need to modernize and improve all of our public services - public education,
health, transport, et cetera. The phrase he has used is "front line first,
" by which he means we need to put more money and more support directly
into doctors, nurses, teachers, policemen on the beat and to empower them to
bring about improvements in patient care.
However, the analysis is more general than that. If you abandon the internal
market, because it is dead and buried, and you do not just revert to a
centralized command and control health care system, something else needs to be
put in place as the drivers for change and improvement because the system itself
cannot be relied upon to deliver the targets that are you are trying to
establish. That is why a whole new institutional architecture is being
established: the commission for health improvement, a National Institute for
Clinical Excellence, the duty of clinical governance at a local level. It is the
answer to the exam question that asks if markets are rejected and centralized
planning is rejected, then how will changes be brought about in this big complex
Obviously there is political support for doing it. That is
the piece that surprises me.
There is absolute political support. Our government has reached
the point in its analysis where it is saying, given continuing media criticism
of health care, given continuing professional concerns about the adequacy of
funding and what doctors feel they can do with the resources available - I am
not trying to be overly dramatic at this point - if we, as a government, do not
get it right over the next three or four years, there may not be another chance
to save the NHS model and to modernize it in a way that retains universal
population commitments and a willingness to pay taxes to government to fund a
health service that fails to deliver the services that people expect.
We, in the health department, tend to believe or act as if we
are being treated in a particular way. The approach that we have been setting
out here is the government's approach to many, if not all sectors of the public
sector, for the setting of standards, for much more emphasis on accountability,
and much more emphasis on performance measures and mechanisms for inspection.
One might say "naming and shaming" would be the term of art. Those
have been applied strongly to education and also to social services. Yesterday
the new Home Secretary announced that the same approaches will be applied to the
police force. This is a national, public-sector-wide philosophy and we have only
been describing it for the health sector.
On behalf of all of our colleagues, I thank you for this
useful and entertaining session. We would also like to thank Gail Tyerman of the
Canadian High Commission for the time and effort to organize this.
We hope we can make progress toward dealing with our problems and if we do, we
will let you know. As you said at the beginning, our joint problems are very
The committee adjourned.