Bain Health Care

Conference on Belgian Health Care
27 March 2002
Agenda
• Belgian health care system is currently being revisited in light of future

challenges
• Active government controls could lead Belgium health care into the arms of
managed care
• Belgium has the ability to become one of the best health care systems in Europe
BRU Healthcare Conference 2
This information is confidential and was prepared by Bain & Company solely for the use of our client; it is not to be relied on by any 3rd party without Bain's prior written consent.
Challenges ahead
Belgium spending on health is reasonable when compared
to other health care systems
Health expenditures as
a percentage of GDP (1998)
15%
10
8.6%
0
es
ria
e
al
d
Sw *
n
ce
UK
d
s
k
y
en
nd
n
y
nd
ec
an
an
ar
pa
ay
al
an
ai
ug
Sw tat
iu
st
an
la
ed
It
Sp
m
re
w
m
rla
Ja
el
nl
lg
rt
Au
er
Fr
S
en
or
G
Ir
Fi
er
Be
Po
he
itz
d
N
G
D
te
et
ni
N
U
*1997
Source: OECD
Challenges ahead
Most of the expenditures go to doctor fees, hospitalization
and pharmaceutical services
Government expenditures
for health care in Belgium
€15B
13.9
10.8
10 Other
Requalification
and retraining
7.7 Treatment by
physiotherapists
Dentist fees
Nurses fees
5.3 Rest and
5 nursing homes
3.7 and retreats
for seniors
Pharmaceutical
services
Hospitalisation
Doctor fees
0
1980 1985 1990 1995 2000
Source: Federal Ministry of Social Affairs

Challenges ahead
Population is rather satisfied with the current health care
system
% of population at least fairly satisfied

with its health care system (1998)
100%
80
60
40
20
0
Finland Netherlands Belgium UK Sweden Spain Italy Portugal
Austria Finland Luxemburg Denmark Germany Ireland Greece
Source: Eurostat BRU Healthcare Conference 5
Challenges ahead
Patients have the luxury of free choice of provider
Visits to specialists
100%
80
Belgium average
level of visits to
specialists without
60 referral
40
20 With referral
Without
referral
0
Dental Orthopedics Internal Cardiology Neurology Ophtalmology
surgery medicine
Urology General surgery Dermatology Gynaecology ENT
Source: P. Groenewegen and Diana M.J. Delnoij, Peers Report BRU Healthcare Conference 6
Challenges ahead
Still Belgian health care expenditures historically have
grown at higher rates than GDP
Evolution of government expenditures

for some health sectors in Belgium (1990-2000)
125%
100
75
50 GDP growth
25
0
Nurses Hospitalisation Doctors
Pharmaceuticals Dentists Physiotherapists Total

Challenges ahead
GDP should have grown an additional 2% per year over the
period to keep budget unchanged Increase
'80-'98
% of government 63%
expenses
160%
140
% of GDP 38%
120
100
1980 1982 1984 1986 1988 1990 1992 1994 1996 1998

Challenges ahead
Future health care trends will increase the pressure on the
current system
Progressive ageing of
the population
Increase in the standard Continuing development of

of living and desire for Budget expensive new medical
better health care techniques and treatments
A more qualified and

better paid medical
staff
Source: Litsearch
Challenges ahead
Not withstanding the specific risks of over-consumption
facing Belgian health care
•Patients have insufficient incentives to limit

demand
- No gate keepers
- Low level co-payments
•Providers have strong incentives to expand

service and induce demand
- Fee for service system
•Insurers have no strong incentives to control cost

- 25% sharing of risk on overspending
Source: Bain Analysis

Challenges ahead
Historically, policy measures have been symptomatic
Constrain demand
- Co-payments (“Remgeld”)
- Global medical file
- Ban third party payment
Constrain offer Price control
- Medical prescriptions control - Linear ↓ of clinical biology prices

- Medical profiles - ↓ of pharmaceutical prices
- Numerus clausus
Control - Linear ↓ of 3% on all allowances
- Programmation (hospitals, services,…) measures - Tariff reductions
- Quantity of pharmacies - Technique of “budget envelopes”
- Growth norm
- Responsibilization insurance companies
- Budget per subsector or institution
- Fixed budgets “forfaits”
Financial regulations
Source: Peers Report
Challenges ahead
…and unable to cure overspending
Real growth of belgian

health care spending
10%
New
growth norm
Growth norm
1995-2000
0
-5
1995 1996 1997 1998 1999
Source: Peers Report

Agenda

challenges
managed care
Cost control
Health care systems may be subdivided into three basic
models
National Health Service Social insurance Private insurance

model model model
• Universal coverage • Compulsory universal coverage • Employer-based or individual

purchase of private health
insurance coverage
• Tax financing • Financed by employer and • Financed by individual and/or

individual contributions through employer contributions
non-profit insurance funds
• Public providers • Public and/or private providers • Private providers
Source: OECD
Cost control
Mainly financed through Mainly financed through Mainly financed through

taxes social insurance private contributions
Public
UK National health
providers service model
Mixed Belgium, France, Social insurance

providers Germany model
Private
providers
Canada Netherlands US
Source: OECD
Cost control
Active government management could drive Belgium
towards the UK model
• UK health care system: going public
• US health care system: going private
Cost control
The UK’s NHS is a model of universal health care
driven by government command
About 80% is financed out All health care (apart from a

of taxation. Another 10% few exceptions) is free and
comes from social Fr available to all
ce x
contributions ee
an ta
d
fo
fin inly
r
al
a
l
NHS
P
re ub
n
ov of
io
so lic
is
pr ol
The state exactly decides ur c The state owns medical
re ntr
c e on
how much health care is to al tro facilities such as hospitals
ca co
be produced and who is lo l o and employs the health
th c
ca f
al bli
going to get it tio professionals
he Pu
n
Source: Bain Analysis, Litsearch

Cost control
This system has allowed the UK to keep its
health care spending under tight control
15%
10
0
es
ria
e
al
d
Sw *
n
ce
UK
d
s
k
y
en
nd
n
y
nd
ec
an
an
ar
pa
ay
al
an
ai
ug
Sw tat
iu
st
an
la
ed
It
Sp
m
re
w
m
rla
Ja
el
nl
lg
rt
Au
er
Fr
S
en
or
G
Ir
Fi
er
Be
Po
he
itz
d
N
G
D
te
et
ni
N
U
*1997
Source: OECD
Cost control
At the cost of sacrificing the supply of health care
Practising physicians per

1,000 population (1998)
6
United States
Luxembourg
Netherlands
Switzerland
2
Germany
Denmark
Portugal
Belgium
Sweden
Norway
Iceland
Finland
Austria
Greece
Ireland
France
Spain
Italy
UK
0
Acute-care beds per

1,000 population (1998)
7
United States
Luxembourg
Netherlands
Switzerland
2
Denmark
Germany
Australia
Portugal
Belgium
Sweden
Canada
Norway
Greece
Finland
Austria
Ireland
France
Spain
Italy
UK
0
Source: OECD
Cost control
And the quality of care provided to its patients
Five year survival rates
England & Wales
Women breast Scotland

cancer Europe
US
England & Wales
Men lung Scotland

cancer Europe
US
0 20 40 60 80 100%
Source: The Institute for Fiscal Studies

Cost control
Lack of supply has also driven to excessive waiting lists
Percentage of patients waiting for more than

one month for non-emergency surgery (1998)
60%
40
20
0
UK Australia Canada US Belgium

Cost control
UK has been unable to get this problem under control
Number of patients
waiting (million)
1.5
Post 1988 *
1.0
Pre 1988
0.5
0.0
1949 1961 1969 1975 1981 1987 1993 1997 1999 2000
*Data post 1988 account for waiting for day-case procedures

Cost control
As a result, patients increasingly turned towards
private insurance for core treatments
Persons covered by private

medical insurance (millions)
Total
Employer
purchase
4
Individual
2 purchase
0
1955 1960 1965 1970 1975 1980 1985 1990 1995

Cost control
Generating a two-tier health system where the rich
get basic treatment faster
Percentage of individuals covered

by private medical insurance
50%
40
30 Employer
purchase
20
Average
10 Individual
purchase
0
Poorest 2 3 4 5 6 7 8 9 Richest
Income decile

Cost control
A move by any government to a quasi-monopoly on
health could have devastating effects on the system
Monopoly
Monopolyonon Monopoly
Monopolyonon
resource allocation
resource allocation health care provision
health care provision
• Budget allocation methods are obscure and • Rigid provider controls limit free choice and
highly politicised increase waiting lists
• High level of bureaucracy • health care professionals have no means to
• Absence of market incentives respond to customer needs and have very
• Numerous reforms arise on a continuous limited levels of autonomy
basis with new governments, inducing a
waste of resources and demotivation

Cost control
Focusing only on cost controls will drive Belgium
towards the US model of managed care
• UK health care system: going public
• US health care system: going private
Cost control
A brief history of US managed care
Employers desiring to reduce health care costs
Private insurance companies ready to respond to this need
Tighter controls
- Reduced choice of providers
- Reduced choice of treatments
Increased competition
- Lower margins and further limiting of freedom
Dissatisfied physicians, employers and patients

Out of control health care budget

Cost control
US is the world’s most expensive health care system
15
10
n
ce
e
y
ria
m
UK
*
d
Be s
en
n
nd
s
al
nd
an
ar
ai
ec
al
Sw ate
pa
ay
an
an
ug
iu
an
ed
st
la
Sp
It
m
re
la
m
Ja
lg
nl
el
rt
St
er
Au
Fr
Sw
en
or
G
er
er
Ir
Fi
Po
itz
d
N
th
G
D
te
Ne
ni
U
*1997
Source: OECD
Cost control
Yet it fails to distinguish itself on the basis of basic health
indicators…
Male life expectancy

Deaths in First Year of Life/ at birth (1998)
1,000 Births (1999)
8 80
78
6
76
74
2
72
0 70
U.S. Canada Germany Japan U.S. France Belgium Japan
U.K Belgium France Germany U.K. Canada
Source: OECD
Cost control
…and does not provide adequate care for
a sizeable portion of its population
Coverage for the nonelderly population
100% 18%
Uninsured
10%
80
Medicaid
60
40 71%
Private/Other
20
0
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
Source: The Kaiser Commission

Cost control
Creating also here a two-tier health care system
100%
Uninsured
80
60
Medicaid
40
20
Private / Other
0
Poor (<100% Near Poor Moderate High (>300%)
poverty level) (100-199%) (200-299%)

Cost control
Which has increased cost for the state based on late
treatment of the uninsured
Probability of diagnosis
of a late stage cancer
Avoidable emergency hospitalisations
compared to insured people
among patients with diabetes
80% 300%
250
60
200
40 150
100
20
50
Uninsured
Insured
0 0
16 - 30 31-45 46-60 Colorectal Melanoma Breast Prostate

Cost control
And historically have created excessive profits for its
managed care organizations
Overhead and profits as a

percentage of premiums (1997)
30%
25
20
15
10
0
Aetna Foundation United Healthcare Pacificare Canada
Wellpoint Oxford Humana Medicare
Source: PNHP
Cost control
Which obtained high margins by focusing
on the most profitable patients
Projected health care costs (1997)

15,000
• Rationing and Denials of Care

10,000
• Implementation of Capitation
• Shifting Costs to Patients in the Form of

Co-Payments and Deductibles
5,000
• Fee Discounts
0
No Headache Stroke
Chronic
Illness
Anxiety Heart Disease
Source: PNHP
Cost control
Lessons for Belgium
•Relying on a private sector for cost management does

not lead to better care
•Cost management alone is not enough
•Even a mixed system has to watch for its social

responsibility

Cost control
Cost reductions will be followed by Managed Care initiatives “Agenda 2002”
which give insurers an operational role in hospital care
Cost Measures Managed Care Measures
• Introduction of parameters for the • “Introduction of parameters for the

evaluation of the behaviour of evaluation of the responsibility of
general practitioners and specialists: physicians regarding their hospital
- pharmaceuticals activities”
- medical imaging
- clinical biology • “Crucial role for insurers concerning
- technical interventions hospital policy”
- physiotherapy - Data controlling role in a pathology
• Penalties for physicians who do not based hospital financing model
follow the parameters - Validation of admission criteria
• APR-DRG classification of diseases - Control of efficacy of treatment
(13 surgical/13 internal)
• Aligning hospitals on standard
procedures with national references
• Shaming outliers
• Stimulate debate between hospitals
and physicians on fee-splitting

Agenda

challenges
managed care
Reforms
health care has to be managed in a systemic manner
• Hospitals • Home care

Health care providers
• Physicians • Nursing homes
• Long-term care
facilities
health care
Payers Health care suppliers
Policy
• Health insurers • Pharmaceuticals

• Employers • Medical devices
• Government • Medical supplies
Patients
Source: Bain analysis

Reforms
All of which have very different objectives
Payers Health care providers Health care suppliers Patients
• Health insurers • Hospitals • Maximise the • High quality health

- Highest possible - Independence from profitability of the care
number of members payer involvement industry
- Low costs - State of the art - High acceptance of
- Reduced risks technology and new technologies • Equality of care
treatment and treatments
- Sufficient budget - Level of
• Employers (standard cost per • Easy financial and
reimbursements
- Highest possible day) that allow for
geographical access
productivity - Profitable fee to care
continued
- Low health care splitting investment into
spending arrangements with research
physicians • Free choice of
providers
• Government
- Highest quality of • Physicians
care for patients - Fee-for-service
- Lowest possible cost payment
burden - Highest possible
- Cost consciousness fees
and cost- - Freedom of choice
participation of for deciding on the
payers and right therapy
providers

Reforms
Aligning stakeholder incentives has to combine increasing
the quality of care while reducing cost
• Become more
Health care providers Evidence based and
market driven
Health care
Payers Health care suppliers
Management
• Create cost • Use Disease

reductions for Management to
core care by increase quality at
providing non-core lower cost
care at market prices
Patients
• Continue free choice, but combine

with willingness to pay
Reforms
Key opportunities have in common that they increase
quality of care while reducing cost
Payers Health care providers Health care suppliers Patients
• Risk-based private • Reduction of • Disease • health care-Direct

insurance initiatives ineffective care management initiative across
- Reduces burden of - Better use of initiatives insurers
non-core Evidence Based - Higher quality of - Patient help-line
treatments on the Medicine (20% of care with focus on
system treatments) - Investment from providing
- Increases service - Agreement on suppliers information and
towards patients worst practices for - Reduction in cost reducing the
other treatments number of
- Educate/penalize unnecessary
• Preventive care outliers treatments/doctor
protocols visits
- Nurse operated
• Application of cost
savings to the i.e Glaxo-SmithKline
provision of non-
core services
i.e NHS-direct


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Conference on Belgian Health Care

• Belgian health care system is currently being revisited in light of future

BRU Healthcare Conference 2

Source: Federal Ministry of Social Affairs

% of population at least fairly satisfied

Source: Eurostat BRU Healthcare Conference 5

Evolution of government expenditures

Source: Federal Ministry of Social Affairs

Source: Federal Ministry of Social Affairs

Increase in the standard Continuing development of

A more qualified and

•Patients have insufficient incentives to limit

•Providers have strong incentives to expand

•Insurers have no strong incentives to control cost

Source: Bain Analysis

Constrain offer Price control

- Medical prescriptions control - Linear ↓ of clinical biology prices

Real growth of belgian

Source: Peers Report

• Belgian health care system is currently being revisited in light of future

BRU Healthcare Conference 13

National Health Service Social insurance Private insurance

• Universal coverage • Compulsory universal coverage • Employer-based or individual

• Tax financing • Financed by employer and • Financed by individual and/or

• Public providers • Public and/or private providers • Private providers

Mainly financed through Mainly financed through Mainly financed through

Mixed Belgium, France, Social insurance

• UK health care system: going public

• US health care system: going private

BRU Healthcare Conference 16

About 80% is financed out All health care (apart from a

Source: Bain Analysis, Litsearch

Practising physicians per

Acute-care beds per

Five year survival rates

England & Wales

Women breast Scotland

England & Wales

Men lung Scotland

Source: The Institute for Fiscal Studies

Percentage of patients waiting for more than

Source: The Institute for Fiscal Studies

*Data post 1988 account for waiting for day-case procedures

Persons covered by private

Source: The Institute for Fiscal Studies

Percentage of individuals covered

Source: The Institute for Fiscal Studies

Source: Bain Analysis

• UK health care system: going public

• US health care system: going private

BRU Healthcare Conference 26

Employers desiring to reduce health care costs

Private insurance companies ready to respond to this need

Dissatisfied physicians, employers and patients

Source: Bain Analysis

Male life expectancy

Coverage for the nonelderly population

Source: The Kaiser Commission

Source: The Kaiser Commission

Source: The Kaiser Commission

Overhead and profits as a

Projected health care costs (1997)

• Rationing and Denials of Care