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As Good As It Gets
By Mike Edwards, November & December 2004
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There is also a government limit on the amount a hospital may bill an
insurance company for a pacemaker—Van Essen's was $5,750, plus the
expense of the procedure. In the U.S., a pacemaker can cost as much as a
car—$15,000 to $20,000, just for the device. The whole procedure can zoom
up to $50,000. In the Netherlands, government pressure on hospitals, doctors,
and manufacturers helps to keep costs down.
These kinds of controls are not always painless. Just this past year, the
Dutch government hit a nerve when it decided to boost the $6-per-hour cost of
home care by 250 percent. Half a million citizens, most of them beyond the age
of 65, have been receiving subsidized home visits by health professionals or
workers who clean and tidy up (like most developed countries, the Netherlands
wants to help people maintain their independence and avoid going into nursing
homes as long as possible). However, at the increased rate of about $15 an
hour, despite government subsidies, home care is rapidly climbing out of sight
for many low-income retirees. This increase takes effect, moreover, at an
awkward time when the country has a nursing-home waiting list of some 50,000.
Still, all things considered, the Dutch like their health care. In a Harvard
School of Public Health survey (taken before the increase in home-care costs),
70 percent said they were satisfied with the system. The same study rated the
satisfaction level in the U.S. at 40 percent. And this even when the U.S.
spends far more on health care than any other nation in the world—an
average of $5,440 per person, with a large share of that going toward
retirees.
Canada, by the way, doesn't score much better. Just 46 percent say they
are satisfied. Although Canadians receive low-cost prescription drugs, thanks
to government controls, health services are underfunded and waiting periods for
treatment are long (see the sidebar "Canadian Health Care").
In Sweden, with its low birth rate and increasing number
of pensioners, experts estimate that by 2035 the system will be seriously out
of balance, with only about two workers supporting each older person.
Waiting. That seems to be the tradeoff. Someone who needs open-heart surgery
in the Netherlands might have to sit around for 14 weeks before a time slot and
hospital space become available. Hip surgery? You're maybe looking at an
average wait of eight weeks. Like much of Europe and also Canada, the
Netherlands is short of hospital beds and medical staff. Dutch officials say no
one has to wait for emergency attention, and some patients are being sent to
Germany and Belgium for faster treatment. Still, the delays underscore a major
difference between Dutch and U.S. care. Says one not-so-happy Dutch resident:
"I don't care what they say. If you need open-heart surgery here, you
can die before you get it."
"In America we love responsiveness," says Anderson, the Johns
Hopkins expert. "We're the best on responsiveness." But ready
access to care, he adds, is one of the reasons Americans pay more than people
do in other countries. Anderson is one of a number of health specialists and
economists who have been pointing out the built-in inefficiencies of U.S. care.
Some critics argue that the huge number of health-insurance
providers—HMOs, PPOs, Medicare, Medicaid, and all the rest—consumes
far more in overhead than would one or two providers and that their many forms
and complicated rules drive up hospital administrative costs. Others point to
the huge sums spent advertising and marketing drugs and hospitals.
Taxes
The Dutch in particular pay quite a lot to take care of one another. The
personal income tax rate in the Netherlands isn't Europe's highest, but
it's well up there, with a top rate of 52 percent on any income over
$60,000. (The top U.S. rate has been going down during the presidency of George
W. Bush and now stands at 35 percent. A family of four with an income of about
$60,000 would be in the 25 percent tax bracket.) Almost half of Dutch taxes go
to the universal pension fund, known as the AOW, which provides the basic
pension that everyone receives at age 65. The AOW takes a salary bite of 17.9
percent. Most Dutch workers have an employer-provided pension based on payments
by worker and employer—that's another salary bite of 6 or 7
percent.
Then comes a bigger bite: a 12.05 percent contribution to help pay for basic
state health insurance, known as the AWBZ, which, like the basic pension, is
universal. Besides paying for care for grave illnesses and a place in a nursing
home (after a wait), it also covers part (but less now) of the cost of home
care. Most workers also have government-regulated insurance with private or
nonprofit companies for lesser medical expenses and medicines. Employers
usually pay most of this cost; the worker's share is only about 1.7 percent
of income. On top of that formidable raft of outlays, there's also a stiff
value-added tax (VAT tax) of 19 percent on most things you buy. There's a
12 percent tax on food. And a whopping tax of as much as 40 percent on new cars
(plus roughly $6 for a gallon of gas). Yet costs like these haven't stopped
Wilhelmina and Cornelius van der Hoop, both retired teachers, from driving all
around Europe towing a trailer.
The couple have a combined pension of about $41,000 after all deductions.
"We have no reason to complain," Wilhelmina says. "All those
taxes help other people."
In fact, polls show that the majority of Dutch citizens don't object to
the large salary deduction that sustains the AOW. "The general attitude in
the Netherlands—if you ask the man in the street—is that people who
have worked their entire lives should be protected from poverty," says
pension expert Maarten Lindeboom, an economist at the Free University of
Amsterdam.
Dutch citizens with higher-than-average incomes usually invest in a private
pension plan or annuities. That's what retired physician-turned-tour guide
Anna Sophia Fischer did years ago. These investments put her annual income in
the $60,000 range, where the taxman ordinarily takes a large bite. But thanks
to reductions granted to people over 65, her tax is only about 30 percent of
her income. As a physician, Fischer was well acquainted with the fabled
liberality of the health system. "If you want a sex-change operation, the
government will pay for it," she says. "I do think that goes a bit
too far." A recent innovation: marijuana available by prescription for
pain.
A noticeable difference in most of Europe's treatment of older people is
the absence of laws that forbid discrimination and age-based mandatory
retirement. In the U.S., mandatory retirement has been illegal for most
occupations since 1986. Says one Dutch pension expert: "Here it is
automatic that at 65 the job is over." The European Union has mandated
that its 25 member states introduce laws against age discrimination by 2006,
but the word is that loopholes will permit mandatory retirement to continue.
Laurie McCann, senior attorney with AARP Foundation Litigation, concludes that
the EU is a long way from either "talking the talk" or "walking
the walk" when it comes to eliminating age discrimination.
Today some 14 percent of Americans 65 and older—about 4.8 million
people in all—are still on the job; that's one of the highest rates
in the industrialized world. Most European workers retire at age 60 or so,
taking advantage of pension generosity.
The need for a ban on mandatory retirement hasn't seemed all that
urgent. Frits Velker, a foreman at a Dutch plumbing and sheet-metal company,
was 59 when the company was sold. "I looked around and saw so many other
people who had retired early," he says. So Velker did too. His company
pension is about $27,000, and when he turns 65 he and wife Gerrie will receive
about $14,000 a year from the AOW, the state pension fund. In general, a worker
in the Netherlands can expect a total pension equaling about 70 percent of his
salary if he worked for 40 years. Thanks to cost-of-living adjustments, former
teacher Van Essen's pension is slightly higher—72 percent of his
salary—even though his teaching career stopped after 38 years.
Such generous retirement benefits are under siege all across Europe (and
Japan). Cutbacks and proposed cut-backs in care and pensions provoked angry
strikes last year in France, Italy, Germany, and Austria. Even in Sweden, shining star of the
Scandinavian welfare-state constellation, benefits have shrunk. With increasing
concern, governments are facing challenging demographics: swelling ranks of
longer-living older citizens and thinning ranks of workers able—and
willing—to pay for benefits.
Mike Edwards, a writer and editor for National Geographic magazine
for 34 years, has received national awards for articles on Chernobyl and
pollution in the former U.S.S.R.
Also contributing to this article was Sophie Korczyk, an economist and
consultant based in Alexandria, Virginia.
And the winner is… Check out how the 16
countries stacked up against each other in our Best Countries
chart.
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