by Ethan Parke

Single payer advocates and critics alike usually turn to Canada to see an example of what Vermont might look like if we are ever successful instituting a universal health care system in our small state. But Canada has over 34 million people and is vast geographically compared to Vermont. Canada is also comprised of semi-autonomous provinces, each with a slightly different health care system.

How about looking at four lesser known countries that are similar to Vermont in size of population, to see how each of them solved the problem of health care costs and universal access? Montenegro, Malta, Iceland, and Luxembourg all have universal, publicly financed health care. All are doing a better job of containing costs than the U.S., and all four score surprisingly well on indicators of health. Maybe there are some things we can learn from these nations as we get ready (it is hoped) to finance and implement a Vermont single payer plan in 2017.

Montenegro, a small, middle-income country on the Adriatic Sea, became an independent nation in 2006. Montenegro has 625,000 inhabitants, making it almost exactly the same as Vermont in size of population, though it is smaller than Vermont in geographic size by about half. The economy is based on tourism, services, agriculture, and manufacturing. Formerly part of the Yugoslav federation, the country had a tradition of a strong state sector, but since dissolution of socialist Yugoslavia in 1992, Montenegro began transitioning to a market economy.

Because it is a new nation, Montenegro was not included in the World Health Organization (WHO) World Health Report 2000, and therefore it is difficult to compare Montenegro’s health care system to other countries. Nevertheless, it is remarkable that in far less time than Vermont has spent debating health care reform, Montenegro has implemented a fine system of publicly-funded universal health care. This was accomplished despite a war-plagued recent past, a tenuous economy, and widespread government corruption.

All Montenegrin citizens are entitled to equal access to health care. The quality of service is good; medical personnel are extremely well-trained; and there are seven general hospitals and three hospitals offering tertiary care. However, hospitals and clinics often lack the top notch facilities and advanced technology that are common in wealthier countries.

Montenegro’s system is funded 100 percent by payroll and self-employment taxes. Employers pay 6 percent of salaries and employees pay 7.5 percent of salaries into the health care fund. Self-employed workers and farmers pay 13.5 percent of taxable income for health coverage. No other taxes for health care are levied. Workers’ dependents, the unemployed, the elderly, the disabled, and those on maternity leave pay no health care contribution, but are fully covered.

In 2010, Montenegro spent 9.1 percent of gross domestic product (GDP) on health care. This compares to 17.9 percent of GDP spent by the United States in the same year.

The Montenegrin national benefit package is very comprehensive. Most medical services are paid entirely by the health fund. This includes primary care, specialty care, hospitalization, rehabilitation, prescription drugs, pregnancy, and childbirth.

Dental care is mostly private, and is not covered by the government health fund, except for routine preventative dentistry. Prescription drugs are covered, as are some over-the-counter drugs if they have been specifically recommended by a doctor. Paradoxically, some over-the-counter drugs are more expensive than prescription drugs.

A few Montenegrin doctors practice outside the national system, catering to wealthy patients who can afford to pay out-of-pocket. But this sector is small and is not expected to grow.

In terms of health outcomes, Montenegro does better than many more highly developed nations in measures such as maternal mortality rate. It has fewer maternal deaths per 100,000 live births than the United States, Luxembourg, Canada, and Malta, according to the CIA World Factbook.

Malta, a tiny island nation in the Mediterranean Sea, has a population of 411,000. In 1964 it gained its independence from Great Britain and basically inherited the British National Health Service at that time. It has since tailored the system to fit local preferences and needs. In 2000 Malta was ranked number 5 in the world by WHO for the overall performance of its health care system, yet it was ranked only 37th in health care expenditure per capita.

Like Vermont, Malta has a diverse economy with a mixture of private industry, agriculture, and tourism. Malta also has a good public education system and a flagship public university with a medical school. The tourist industry on Malta includes medical tourism, in which people from around Europe, especially from England, travel to Malta to receive high quality medical care.

For Maltese residents, and for registered long-term visitors, the medical system is completely free at the point of delivery. Patients also have free choice of providers and have the option of going to a public or a private hospital. The benefit package includes all primary and specialty care, hospitalization, and rehabilitation. Prescription drugs, optician care, and dentistry are covered only if the patient is a member of a vulnerable group, such as the unemployed, low-income wage earners, chronic disease patients, and pregnant women. Dental care is offered free of charge to all school children.

There is no explicit rationing, except for services deemed non-essential, such as in vitro fertilization, and some types of cosmetic surgery. However, there are some waiting lists for common surgeries and other procedures which are not critically needed.

Malta’s health service is thus truly universal, though it does not fully cover all essential goods and services related to health. For those who want additional peace of mind, and who can afford it, private insurance is available to cover items not included in the public plan. Some providers are also allowed to operate outside the public system.

In Malta health spending is kept under control by the government. Public planning processes contribute to the development of spending guidelines for hospitals and other health care facilities. The guidelines are enforced by the Ministry of Health, which also imposes strict capital management and human resource management plans on health care facilities. Spending on physician care is limited because all doctors practicing in the public system are government employees who are paid a salary.

Malta’s health care system is financed by weekly payroll deductions and employer contributions. Dependents are fully covered by family members who are working. The unemployed, the elderly, and those on long-term disability, do not have to contribute directly to the system, though they are fully covered by it, and may be liable for income taxes. Parents on maternity leave also do not have to contribute. The self-employed pay a special income tax for health care that is somewhat higher than the standard employee deduction, and the self-employed must also pay additional amounts to cover family members.

Despite overwhelming reliance on the payroll tax, there is widespread consensus in Malta that the financing of health care is not excessive and is equitably distributed across the population.

Patient satisfaction surveys have shown that the Maltese people are very pleased with the quality of their health care system, with satisfaction rates running between 90 and 99 percent in most categories. However, a growing number of residents use private health care services in addition to the public system, as this gives them more options and sometimes quicker service. Many doctors also prefer to practice outside the national program, where they can earn more money catering to the wealthy. Malta thus faces the beginning of a two-tiered system that threatens to undermine the principles of fairness and equity upon which the system was founded.

Iceland is more than 10 times larger than Vermont in physical size but has a population of only about 315,000. Iceland’s economy is based on fishing, agriculture, and financial services. It ranks as one of the wealthiest and most developed nations in the world.

From 1936 to 1989 Iceland had a patchwork of tax-supported health insurance funds, but these were abolished in favor of a single, more efficient and more equitable government administered health care fund that was implemented in 1990.

Today, health care in Iceland is universal. All citizens have the right, at all times, to access the very best health care services. Non-citizens who have been residents of Iceland for at least six months are also entitled to the full array of health benefits. Even short term visitors may be eligible for free or low-cost care. Hospitalization is guaranteed for as long as necessary and, except for outpatient cases and very short stays, involves no payment at the point of use.

Iceland’s health care system is financed 85 percent by taxes and 15 percent by out-of-pocket payments for services that are not covered or only partially covered by the national plan.

Uncovered services include basic primary care, outpatient hospital care, dental care, and some pharmaceuticals. However, there are many circumstances in which normally uncovered services are provided free or at reduced rates. For instance, children are entitled to free dental check-ups and partially subsidized routine dental care. The elderly, the disabled, and the chronically ill are also entitled to free or reduced rate dental care.

Prescription drugs fall into four categories: critical (matter of life and death) medicines, significant therapeutic drugs, lower significance therapeutic drugs, and short-term medicines, such as antibiotics or pain-killers. The national program pays 100 percent of the cost of critical medicines, 75 percent of the cost of significant therapeutic drugs, less than 75 percent for the lower significance therapeutic drugs, and pays nothing for short term medicines.

Despite the list of uncovered services, there is almost no private health insurance in Iceland. That may be because of Iceland’s high standard of living and the fact that charges for the uncovered services, such as primary care doctors’ visits, are tightly regulated by the government. And yet despite rigorous rate-setting, Iceland has more doctors per capita than any other country.

Iceland’s system is financed by an assessment on employers based on a percentage of wages paid out. Employees contribute through an income tax. This means that coverage continues even if an employee is sidelined by sickness or injury. Thus there is no need for separate workers’ compensation insurance. The government also pays disabled employees a flat fee to cover loss of salary and other expenses of being sick.

The WHO ranked Iceland’s health care system 15th in the world in 2000 for overall performance, and 14th in the world in per capita health care expenditures. WHO ranked Iceland tied for 12th in terms of the fairness of its health care financing mechanisms.

Iceland’s system has been criticized for lack of cost control on hospitals, which frequently raise charges and exceed their recommended budgets. The government has therefore moved to adopt a diagnostic-related group reimbursement schedule, similar to that used in the U.S. for Medicare. But this may not be enough to curb hospital spending.

On the physician side, strict controls on physician fees have led to dissatisfaction among the medical community, particularly among general practitioners, and the problem is exacerbated by the high numbers of doctors, particularly specialists, serving the relatively small population base.

While the health care system is not the only factor affecting the health of the population, Icelanders are generally well satisfied with the health services offered by the government-financed program. In surveys, Icelanders generally rate the health care system higher than they do other public services.

Luxembourg is geographically very small (about half the size of Rhode Island) and is wedged between Belgium, Germany, and France. Luxembourg’s most recent population was estimated to be 515,000.

Luxembourg has a stable, high income, market economy dominated by manufacturing, banking, and finance. Unemployment in Luxembourg has traditionally been very low.

Since 1973 Luxembourg has had universal access and a health insurance mandate, requiring all workers and their dependents to be covered by employment-based insurance plans. Originally there were 11 fully private “sickness funds,” each catering to a separate category of employers. In 1974, to keep the funds solvent, the state injected money into the funds, providing up to 40% of their revenue, and standardized the payroll contribution levels by law.

By 1978 there were only 9 funds left and they joined together in one union that negotiated standard rates with providers. In 1992 the funds morphed into mere agents for administering reimbursement of public funds, and therefore they no longer bear much resemblance to U.S. style- insurance companies.

Rising health care costs triggered yet more reforms in 1995, when Luxembourg initiated global budgeting for hospitals. Each hospital now has to negotiate an annual budget with the Union of Sickness Funds, which reimburses hospitals in lump sums rather than for individual services.

The payroll assessments are shared half and half by employee and employer, and the revenues from these assessments are placed in the Union of Sickness Funds. All dependents of employees are covered. Non-working children are covered to age 27. Self-employed people pay a tax that is roughly equivalent to the full employer/employee assessment, with some adjustment according to type of self-employed business. The average self-employment tax is 5.44% of gross income, subject to a cap. Vulnerable groups get free care or variable state subsidies in the form of tax credits.

All medical necessities are covered, including prescription drugs and dentistry. Amazingly, Luxembourg spent only 7.8 percent of GDP on health care in 2010, according to the CIA World Factbook. This compares to 17.9 percent of GDP spent by the U.S.

Although Luxembourg is a wealthy nation, it has not fallen into the trap of allowing health care costs to escalate. Some of this is due to very strict government rate setting. Fees are fixed by the government and all providers must comply. Over-billing is not allowed.

Most doctors are in solo, private practice and almost all are paid on a fee-for-service basis. Primary care doctors do not act as gatekeepers, and in Luxembourg you don’t need a referral to see a specialist.

For doctor’s visits, dental care, and prescriptions, patients have to pay a fee at the point of service and then request reimbursement from the Sickness Fund, which pays 80 to 100 percent of the fee. Vulnerable groups are exempt from having to pay the upfront fee. Free medical care is provided for prenatal care, for children, and for maternal health. The government also runs a free health service for children that is implemented right in the schools.

One interesting fact: Doctors in Luxembourg often make house calls, preferring that sick patients stay at home rather than bring their germs to the clinic.

All hospitals in Luxembourg are public, and each hospital has first, second, and third class wards. Third class wards are free. Patients contribute a co-pay out-of-pocket for the higher class wards, which have more privacy and more spacious rooms. However, emergency care is free even if you have no insurance or are from a foreign country. Luxembourgers occasionally buy private insurance to cover co-pays and the few services that are not covered by the national plan.

Overall, Luxembourg’s health care financing is 93 percent public. The rest is out-of-pocket or from private insurance. The government finances approved capital construction projects at hospitals and clinics at 80 percent of costs, with the balance coming from capital reserves or special fundraising drives.

Luxembourg’s publicly funded system allows the government to implement integrated public health measures aimed at reducing the incidence of cardiovascular disease, cancer, accidents, diabetes, and communicable diseases. The government is also making concerted efforts in mental health, environmental health, and occupational health. The government’s popular school health program also remains a top priority.


Lessons for Vermont
Universal access was achieved in each of these four countries with relative ease. There was no handwringing about whether the country could afford an “entitlement program.” In each country there appears to be widespread acceptance of the role of government in guaranteeing universal health care as a public good, and widespread acceptance of taxation as the most equitable way to raise money for it. This is good news for Vermont as we head toward single payer in 2017.

The two richest countries in the comparison (Luxembourg and Iceland) are spending less than the U.S. on health care as a percent of GDP and per capita. But the country with by far the lowest per capita spending on health care in 2000 was Malta, which also ranked the highest in overall health system performance. This would suggest that a country that combines a single payer with a mostly public delivery system stands the best chance of delivering high quality health care at a reasonable price. Vermont would therefore do well to look at ways to make our private delivery system more transparent and publicly accountable as a cost-control and quality measure. Robust public health programs, such as Luxembourg’s school based clinics, also seem to have potential for lowering costs and improving population health.

Montenegro, with its small size, modest income levels, and tumultuous political history would seem at first glance to be a poor model for Vermont, especially in terms of health care quality. But Montenegro has achieved very high quality primary care, and good basic hospital care at a reasonable price. Again, this suggests that health care can be universal, high quality, and cost efficient, but government must play a central role in both financing and delivery in order for this to be achieved.

The financing of health care in the four countries is similar in that all rely most heavily on payroll taxes or payroll “assessments”, with self-employment taxes or income taxes secondary. Vermont should follow the same pattern, and should consider how to duplicate these countries’ efforts to include disability insurance (workers’ compensation) in the single payer plan, so that employers are relieved of this as a separate burden.

Among the four, Iceland has the highest level of private out-of-pocket financing. While Iceland’s system provides 100 percent public funding for hospitalization and catastrophic care, physicians’ fees in outpatient settings are funded privately out-of-pocket. However, the government very tightly regulates these fees, a situation that pleases consumers but displeases doctors. This suggests that if Vermont is to preserve fee-for-service physician reimbursement in a single payer system, it will have to adopt a standardized rate schedule that will hold costs down and still maintain an appropriate number of physician practices in the state.


Ethan Parke is a board member of Vermont Health Care for All