Sunday, January 2, 2011

The Bismarck Model

Otto von Bismarck
In 1883, the reactionary German chancellor Otto von Bismarck, a Prussian autocrat through and through, proposed the health care model that came to be adopted by many European nations and that echoes decisively today in the American health care apparatus. Though no social reformer, Bismarck viewed universal health insurance as an effective tactic in his grand design for German unification, which trumped his conservative tendencies. What has come to be known as the Bismarck Model survived the German militarism of World War I, the unstable democracy of the Weimar Republic, Naziism, World War II and its aftermath, and eventual reunification. Its durability cannot be doubted.

Today, the Bismarck Model serves as the predominant means of guaranteeing universal coverage in Europe, used in Germany, France, Switzerland, Belgium, Netherlands, and others. (Japan is also a Bismarck Model country.) The implementation varies, but all mandate insurance in one form or another. In Germany, for example, employers and employees jointly fund insurance via withholding; in Switzerland, individuals purchase their own policies. Even so, Bismarck Model countries share common traits:

  • Short waits, quality care, relatively low costs, and simplified administration
  • Tight regulation of insurance which is often (but not always) sold on a nonprofit basis
  • Claims paid without challenge
  • No exclusion for pre-existing conditions
  • Prices for most procedures fixed by the state
  • Private hospitals and physician practices
  • Generally high positions in the World Health Organization's overall rankings
There are, of course, tradeoffs. By eschewing a socialized system for which culturally most of them are ill-prepared, the Bismarck nations accept greater costs and less efficiency. (In health care, efficiency refers to performance measured against outcomes and costs.) While physicians receive a free education, have virtually no administrative overhead, and are rarely sued, they also earn less than their American counterparts. Moreover, despite state price fixing, cost issues are often addressed by raising premiums instead of controlling costs.

With the exception of veterans eligible for the VA system and active duty military personnel, most Americans under the age of 65 are either self-insured or have health insurance either as a benefit of employment. However, as indicated in the table above, the American approach to health insurance comes at a much greater cost than to countries operating under a pure version of the Bismarck Model. Lessons we can draw from these countries include:

  • The importance of a universal mandate for insurance under the auspices of single program
  • Consumer protections such as no exclusion for pre-existing conditions are feasible only with mandates
  • Immediate payment of claims without challenge lowers administrative burden and the financial impact on patients
  • Insurance regulation, nonprofit insurance, and a fixed price for procedures help control costs
  • Privatized care can exist successfully in a regulated environment
Later, HealthMatters will look in detail at the approaches of various Bismarck Model countries.


    1. Hmmmmm... You'd think our American conservatives would take note of the connection with Bismarck and give it some thought. I'm especially thinking of Newt Gingrich, who has "intellectual of the right" pretensions; he seems to be trying to fill the spot left vacant by William F. Buckley.

    2. The intellectual problem that conservatives have right now is their recent opposition to mandates, even though mandates have long been the lynchpin of conservative health care policy. I'm planning a entry on Consumer Driven Health Care, which has supplanted mandates -- to a point -- in conservative thought re health care.

    3. Don't forget: we can't have any progress in this area until the boomers have died off. 'They' really want us dead and gone, the sooner the better. Too many of you. The mantra I've heard my whole life, or at least since the first grade, when the teacher broke up our class into two, because "there are too many of you to teach at one time."

      Love, c.