Health Care Cuts in Europe

When conversations turn to health care, I am always reminded of my grandfather. He was 91 when he died. He had never been ill. He had never needed medical treatment in his whole life. Upon reaching his nineties, however, he required prostate surgery.

Like all Belgians, my grandfather had paid wage-related contributions to cover health insurance throughout his entire professional life. The Belgian health care system is a so-called pay-as-you-go system. Today’s young and healthy do not set money aside for their own future needs, but are compelled to pay for today’s sick and elderly. As my grandfather had never needed much health care, he had been a net contributor to the system. Now was the first time he was going to claim something back.

He had his operation in May. In November he was dead. The prostate operation had gone fine, but afterwards the hospital had given him an antibiotic drug that caused complete deafness. Though there were other, but costlier, drugs available, the hospital gave the old man the cheapest one. They knew about the side-effects, but it did not strike them as an unreasonable and unjust thing to do. Why should it? A man who has already had 90 healthy years of life surely has no right to complain about deafness when some people get more seriously ill or die at a far younger age. When my grandfather left the hospital he was completely deaf. He lost his will to live. Six months later, he was dead.

In many Western European countries, health care is the fastest growing segment of government spending. Over the past forty years there has been a significant increase in health-care spending. According to the latest OECD figures (2003), Western European countries spend between 7.3 and 11.5% of their gross domestic product on health care. Ten years ago it was between 6.9 and 9.9%. In 1960 it was only around 4%.

Source: OECD

Much of the rise in Europe’s health-care costs is caused by factors beyond government control, such as demographic evolution. Another important cause of rising expenditure, however, is the advancement of better and newer – but more expensive – medical technology.

There are only two ways to keep the present government-run European health-care systems going. One can either drastically increase the financial burden on those at the paying end of the system – the young and healthy of today – or one can drastically limit the quality and the availability of health care for those at the receiving end – the sick and the elderly.

For decades governments increased the financial burden on the working population. When this burden became intolerable, they shifted their policies towards cutting back quality. In Europe there are medical treatments, operations or drugs which are not available to persons above a certain age, or to persons who are considered too sick, or to anyone at all. Political authorities, claiming to be the guardians of solidarity in society, decide who is allowed to get what kind of treatment, operation or drug. Soon euthanasia might be the price the solidarity principle of the welfare state imposes on those people whose health care is costing society the most. Politicians in Belgium and the Netherlands have already granted their citizens a “right to die” by means of a lethal (and cheap) euthanasia injection. Is this a new “freedom” that the state, which is constantly restricting every other aspect of our lives, generously bestows on us? Or does it boil down to “economic euthanasia,” which enables governments to save money by eliminating those that cost the welfare state too much?

Other ways in which many governments in Europe have tried to control health-care spending has been by drawing up “negative lists” of drugs which doctors are not allowed to prescribe. Drugs are put on the “negative” list not because they are harmful, but because they are high-quality goods that are deemed too expensive.

For almost a decade now, governments have been stifling medical innovation in Europe. Last month the American drug company Pfizer decided not to build a new plant in Belgium because the Belgian government has been constantly raising taxation on pharmaceuticals. The government wants to reduce pharmaceutical expenditure by limiting drugs. They reckon that by limiting supply, demand will go down. In the same way, European governments discourage young people from becoming doctors, dentists or nurses. Many countries allow only a limited number of people to study for a medical profession, despite the fact that, due to the demographic development and the growing number of elderly, more doctors and nurses will be needed in the future.

Last week young physiotherapists demonstrated in the streets of Brussels. In Belgium physiotherapists, like doctors and dentists, need a licence to be allowed to set up a practice. Without a licence, the services provided by these medical professions are not reimbursed by the sickness fund – and without such reimbursement it is impossible to get any patients. The government has just limited the annual number of physiotherapy licences to 270. As 410 young people completed their (4-year) physiotherapy studies this year, it means that 140 of them will not be able to use their degree, unless they leave Belgium. The minister of Education says this is the fault of the universities: they are required to make the exams more difficult so that only the government prescribed number of  270 students can pass.

As is often the case, many of continental Europe’s policies are of German origin. In the early 1990s the German government, in a move designed to cut health-care costs, limited – and in some cases completely blocked – access to new drugs and medical technology. Since 1993 the German government has set separate budgets for each segment of the health-care market, with provisions of heavy sanctions if these budgets are exceeded. The 1993 pharmaceutical budget was set at $15 billion – a 9.1% cut from 1992. The government ruled that money spent over the budget would be taken out of doctors’ incomes. This caused a 25% drop in spending on medicine. Similarly, the sale of the seven largest research-intensive drug manufacturers fell by 16.5%, while the sales of generics (copycat drugs which are cheap because they were developped at least 15 years ago and hence no longer protected by patents) rose by 36%.

While these measures were successful in the field of cost control, they had devastating consequences for the pharmaceutical industry. The German pharmaceutical companies, no longer keen on developing new drugs, saw their world-wide share of drug patents drop to 8% from 16%. Doctors, afraid that they would have to pay the pharmaceutical bills out of their own pockets, started to refer their patients to specialists and hospitals. Patients with minor illnesses, requiring common and cheaper medicines were helped, but the doctors would “dump” their more serious cases instead of treating them in more costly ways. As a result, in 1993 Germany saw an increase of 10% in hospital patients and 9% in referrals to specialists.

The next year a similar phenomenon occurred at the level of the hospitals. They, too, were assigned budgets that they were not allowed to exceed. Consequently German hospitals, faced with patients who might cost too much, referred them to university clinics, which by law are not allowed to refuse patients. “Patients are being turned away, acutely ill patients are wandering from clinic to clinic, and expensive drugs are being withheld from cancer sufferers,” the German weekly Der Spiegel wrote in 1994 (April 11). “Money is being saved – even if it costs lives to do so. Whenever possible many hospitals are turning away expensive patients covered by the sickness funds. The only good patient is a cheap patient.”

Unfortunately, the German system has become the European model. Politicians in neighbouring welfare states, noticing the drop in German health expenditure, started to follow the German example. The only thing that mattered in their eyes was cost control. Many adopted the policy of adding drug volume control to price control and finally to prescription control. France introduced so-called negative recommendations, telling doctors what they are allowed to prescribe and what not. These recommendations have been made compulsory and doctors risk heavy financial penalties if they go against them.

At the root of these decisions is the understandable desire of governments to control health-care costs. But rationing is clearly not the answer. What many governments in Western Europe have overlooked is that there is nothing wrong with a society devoting more of its resources to health care. This even appears to be an indication of prosperity. The higher and the more developed a society becomes, the more its citizens are willing to spend on keeping healthy. Modern technology makes everything cheaper except the highest quality of medical care, which is constantly improving. To try to limit access to this technology in the name of “cost-control” is irresponsible.

Meanwhile, the larger and more fundamental problem of how to finance the health-care systems is not adressed. Instead of funding the provisions of today’s sick with taxes from today’s healthy and young, people should be building up reserves for their own future liabilities. What Europe needs is to replace its pay-as-you-go systems by privatized and capitalized health-care systems. This, however, would imply that the governments relinquish control over the system, which is the very last thing they are willing to do.

@Paul Belien,I'm sorry to

@Paul Belien,

I'm sorry to hear about your grandfather but I believe some conclusions in this article are uncalled for:

Your grandfarther was probably given gentamycin or vancomycin or some other antibiotic with a name ending in -mycin (antiobiotics from the aminoglycoside group). These are not given because they are cheap but generally because they are a last resort, when no other class of antibiotics works anymore at combatting the infection, something very common in a hospital, where many bacteria are resistant to most antibiotics.

Also your euthenasia argument is nothing more than a slippery slope logical falacy.

Health Care Crisis in EU

Once again, Paul, you have illuminated a large and complex issue by providing a poignant portrait of your grandfather's losing the will to live after being proscribed a generic, cheaper drug than the more expensive drug that would have avoided this debilitating side effect of deafness.
Now I understand why euthanasia laws have been passed in these countries, purely out of economic considerations. But here in the United States, these laws are portraited by the MSM as sterling examples of compassion sanctioned by the state.

To Anonymous Bye-Bye

I don't think it was Paul's intention to say that in the US everything is honky dory, but only to point out that the "socialized" medicine as currently practiced in "Europe" is doomed to fail.
Sure, Anonymous, your kids have free medicine, so do all inhabitants of Cuba. That's not the issue.
The question is the future of such a system and the "hidden costs".
My sister, living in Belgium, takes her kids to a virtual "free" doctor appointment as well, but in the mean time my parents, also living in Belgium, who have paid taxes all their lives, are now unable to afford the medical support they need because the public health insurance refuses to reimburse them any longer. BOth my parents are in need of help, and while 15 years ago the insurance companies reimbursed such help, they no longer do. Also, some medicine my father needs is no longer reimbursed.
Before reading Paul's story of his grandfather, I came to the same conclusion: my parents would have been better off in a system where individual saving and foresigth is encouraged and taxes are lower, like in the US, because there at least they would have paid less taxes all their lives and they would have been aware that they would have to save and purchase additional private insurance when they are young for when they get really sick (just as I am doing now).
This is not a matter of US vs. Europe. Maybe, as with so many issues, both continents can learn from each other. But the issues that Paul raises are serious ones and should be addressed and considered, in stead of "shrugged" off by someone Anonymous whose despise for his own country and president has obviously gotten the better of him.


I left the U.S. in 1992, und haven't visited since 2000. I have zero experience of Clinton or Bush II, and having grown up in Fairfax with the children of military, politicians, and various civil servants, I remain amazed that anyone cares about the President. That the land I grew up in now freely practices things like torture deeply disturbs, but at least I live in a place which offers a certain sympathetic perspective to my shame - after all, America still does objectively have a way to go before reaching the bottom of the pit where real evildoers live. Not that the people trying to stop it from sinking lower aren't viciously attacked for their anti-American cowardice (watch how McCain is handled for what I mean).

Living in Germany, we have had to start to pay an additional tax for the long term care you describe as lacking in Belgium. Strange how nothing comes free, but at least in Germany, unlike the U.S., these costs are not being borrowed or hidden. (Or not astoundingly so - governments are different in degree, not essential nature.)

As for addressing serious issues - I am. Nobody else in my family has a doctor within walking distance available essentially 24 hours a day, not to mention 3. As for hard choices being made all the time in the medical world - look at the health care provided black / white citizens in America. The cheap antibiotic which ruined his grandfather's hearing is a choice in a finite world. Accepting this is neither pro nor anti - it remains the truth.

Interesting - I am certain

Interesting - I am certain that no American HMO has ever forced a patient to accept a cheaper generic, or has ever denied any medical procedure based on a cost/benefit scale (cost to HMO/benefit to HMO).

I live in a German town of about 5000 people, with three doctors, two dentists, and two pharmacies. When my children are sick, we simply walk to the nearest doctor (about 10 minutes). Since health care/prescriptions are free for children in Germany, I fail to see the 'disadvantages' of how we live here.

But I will freely admit one point - a fundamental difference between American and European health care is the awareness in Europe that everyone will die, without exception (and in Germany at least, euthansia is not acceptable public policy, for historical reasons). Like many other things in America (GM will save its most profitable factories - those building the largest SUVs), the dream like state in which reality is viewed is simply laughable. Or enough to drive me crazy.

America - love it or leave it.


Buddy, can you spare a dime?

Since health care/prescriptions are free for children in Germany, I fail to see the 'disadvantages' of how we live here.

We could ask the opinion of the 5 million unemployed Germans who don't live in your cosy bubble.

Bob Doney

Unemployed people are

Unemployed people are automatically insured by the AOK, the 'general' health insurer. As are older people, anyone on social assistance, etc. Germany is, after all, not a capitalistic society in how it treats it citizens. Social Darwinism, for example, is considered to be a deeply flawed ideology, closely tied to past historical shame. And having developed the modern 'social state' under that noted leftist Bismarck (the statesman who first developed the trick of conflating 'supporting the troops' to mean the same as supporting war), the Germans have a fairly long historical perspective on several questions which Americans seem quite blind to.

Being the world's largest exporter, with a savings rate approaching 11%, it is easier for Germany to provide a decent society for its members (I live near the headquarters of the owner of the only profitable 'American' automobile manufacturer). And though Germany has a very high per capita rate for medical expenditures, it is still half of the U.S. figure. But given enough time and selfish, self-serving proganda about the 'benefits' of a private health care system, I am sure that the Germans could screw up their system as badly as the American one, though I doubt anyone here will be convinced that their 'improved' system is the envy of the world. After all, no one in Europe is that impressed with the American one as it exists now. Kind of like how no one in Europe finds the hurricane response on the Gulf Coast anything to emulate. And no, most people in this region of Germany consider the response to be anything but a one-off mistake, but simply the expected result of electing incompetents to a second term.

Health care, free markets and scarcity

Excellent. Very clear explanations, and yet very personalized too.
Anyone can see the desire to do justice by making health care available to all. Yet everyone can see the injustice of cutting corners on the care for someone who paid into the system for decades and was getting service back for the first time.
I read this article on the same day that I read a discussion of health care and layoffs at the USA's General Motors corporation.


Instead of funding the provisions of today’s sick with taxes from today’s healthy and young, people should be building up reserves for their own future liabilities.

Very interesting and thought-provoking piece, Paul.

There's a big hoo-ha in the UK at the moment because (it seems) the government didn't order up enough flu jabs for this winter, or else (the government say) the doctors have been cheerfully and mistakenly jabbing the "worried well". So now a flu jab has become an inalienable human right. "I want my flu jab and I want it now!"

Meantime the government has ordered up a few tens of millions Tamiflu doses against the day when avian flu spreads from Vietnamese cock-fighters to the rest of us. I suppose a cynical government would look on a really serious flu pandemic as a blessing in disguise. A cull of the population - especially of the old, sick and expensive - might be just timely.

Same problem with pensions. How do we persuade the twenty and thirty-somethings that they had better start saving NOW for the medicines and pensions they are going to need when they're 90 or 100? Because that's the reality. Oh, and if they are going to have kids, they will need a savings plan for school and university fees as well. Having a drink or a smoke? Going out on a Friday night? Going on holiday? Forget it. Keep stuffing the money into that piggy bank, otherwise your last 30 years of life are going to be hell on earth.

Bob Doney