Health Care Reform: The European Experience

Jan E. Blanpain

Interest in the United States in European health care systems is probably at an all-time high. The topic of health care reform is not only timely, but also extremely challenging for both the United States and Europe.

LEARNING FROM OTHERS

Members of Congress, state legislatures, regulating agencies, health insurers, the provider community, health services researchers, health policy institutes, labor unions, and industry are all seeking to upgrade their knowledge and understanding of given aspects of the performance of European health care systems.1

Health-related industries are also intensifying their long-standing interest in European health affairs and regulation to adjust their marketing, production, and distribution strategies to the new realities of tightening health care regulation in European countries, and in particular to the implications of the creation in 1993 of a single European market.2

Health care management consulting firms constitute the third party with growing involvement in the European health care scene. They assist U.S. and European health-related industries in assessing the health care environment, strategic planning, and marketing. They also offer policy and management consulting services to European governments and health authorities.

How other countries cope with given health care problems has been an area of keen interest for health policy leaders in the United States. It



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Changing the Health Care System: Models from Here and Abroad Health Care Reform: The European Experience Jan E. Blanpain Interest in the United States in European health care systems is probably at an all-time high. The topic of health care reform is not only timely, but also extremely challenging for both the United States and Europe. LEARNING FROM OTHERS Members of Congress, state legislatures, regulating agencies, health insurers, the provider community, health services researchers, health policy institutes, labor unions, and industry are all seeking to upgrade their knowledge and understanding of given aspects of the performance of European health care systems.1 Health-related industries are also intensifying their long-standing interest in European health affairs and regulation to adjust their marketing, production, and distribution strategies to the new realities of tightening health care regulation in European countries, and in particular to the implications of the creation in 1993 of a single European market.2 Health care management consulting firms constitute the third party with growing involvement in the European health care scene. They assist U.S. and European health-related industries in assessing the health care environment, strategic planning, and marketing. They also offer policy and management consulting services to European governments and health authorities. How other countries cope with given health care problems has been an area of keen interest for health policy leaders in the United States. It

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Changing the Health Care System: Models from Here and Abroad implies that other countries have some of the answers. As far back as the 1970s, U.S. interest in foreign health care systems had been as intense as it is now. During that period, the scope of countries and the kind of issues selected for study were rather biased. A common language with the United States led to an overrepresentation of Australia, Canada, and the United Kingdom in whatever study was mounted. The features or policy choices of a particular foreign health care system were not infrequently misrepresented. Usually, it was due to sloppy study design or conclusions that were based on superficial information. Occasionally, the ideological prejudices of the investigators prevailed, and they were often compounded by deliberate disinformation handed down by the system(s) being studied. The current interest in the United States in foreign health care systems receives extra impetus and focus from the political momentum that health care gained during the 1992 presidential election campaign. This was also the case in previous elections.3 Health care systems in the member states of the Organization for Economic Cooperation and Development (OECD) present interesting case studies for the United States, but analysts must take into account the facts that foreign health care systems are, on average, not well documented, extremely complex, and driven by local cultural and socioeconomic dynamics. Moreover, a majority of OECD countries present “moving targets” while their health care systems are in the grips of important reforms.4 U.S. visitors are discovering that European health care systems are in a state of flux. Health care issues in Europe are very controversial, and health care reforms tend to become bogged down in compromises. Health care is even more in the forefront of the political debate and election campaigns in Europe than it is in the United States. 5 There is a certain irony in the fact that health policy options copied from the United States are under severe attack in The Netherlands, Spain, Poland, and in particular the United Kingdom. EUROPEAN HEALTH REFORMS IN REVIEW The first wave of major health reforms since the introduction of compulsory health insurance in Imperial Germany by Otto von Bismarck in 1883 and in the United Kingdom by Winston Churchill and Lloyd George in 1911 occurred in Europe toward the end of World War II. The reforms of the mid-1940s were an integral part—and, indeed, were the cornerstone—of the cradle-to-grave welfare state. The main goal was to provide universal, equitable, and free access to all health care resources. Two models prevailed: (1) the gradual merging of existing health

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Changing the Health Care System: Models from Here and Abroad resources into a national health service freely accessible to all, or (2) a social security system that would ultimately guarantee universal free coverage for negotiated services purchased from health care providers. There was, with hindsight, a surprising degree of confidence in science and technology and in social engineering. Any medical encounter, or medical technology for that matter, was considered effective unless proven otherwise. Past and future improvements in health and survival were claimed to be the exclusive results of medical care. There was a strong conviction, and it was one of the tenets of Lord Beveridge's blueprint for the National Health Service in the United Kingdom, that enabling early access to hospital care would reduce the onset of irreversible and costly disease. It was predicted and believed that this would eventually lead to a substantial reduction in health expenditures in the near future. The health resources development effort that started in the mid-1940s was aimed at reducing shortages in the supply and geographic distributions of hospitals and physicians. In retrospect, it is remarkable how consensus existed among health authorities, politicians, organized medicine, the World Health Organization, the media, and the public in viewing the hospital as ultimately becoming the sole and central provider of total health care for the community. By the beginning of the 1970s, confidence in the post-World War II health policies and options evaporated. A new wave of reforms gathered momentum. Expenditures on health care had risen beyond affordable levels, and despite this, the impact of health care on survival seemed negligible or even perverse, with an alarming decrease in the life expectancies of middle-aged males. Eventually, unwavering faith in medical technology was replaced by doubts and apprehension. Medical encounters and medical technology were considered ineffective unless proven otherwise. Doctors and hospitals were branded “bad for your health.”6 The vaunted savings of free access had not materialized. On the contrary, a surplus of inappropriately utilized manpower and hospital resources had developed and fueled overutilization and cost escalation. The health reforms during the mid-1970s paid substantial lip service to the potential of health promotion and disease prevention. Yet, in operational terms, the reforms (e.g., the 1973 reorganization of the National Health Service in the United Kingdom) addressed predominantly the structural and some of the managerial problems of the health care delivery systems. Tiered and regionalized comprehensive health care systems were advocated as replacements for the unrelated solo providers of the past. Shifting the burden of care into the community from the hospital and

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Changing the Health Care System: Models from Here and Abroad its primary care resources was an essential policy within the reforms of the mid-1970s. Containing the supply, demand, and prices of health care became an important, complex, and expensive regulatory activity for governments. With limited understanding of the dynamics of health economics and the virtual absence of the sophisticated health data and management information systems, important policy instruments like need-based planning, global budgeting, target budgeting, incentive-based physician payment systems, and various forms of cost-sharing were introduced. A third wave of major health reforms started toward the end of the 1980s. This time, however, the reforms were not limited only to Western Europe. In the West, governments were primarily struggling with the coverage-versus-cost issue, a dilemma resulting from previous health policies, and with persistent inefficiencies and inequalities in their health care systems. Eastern European countries, on the contrary, were entirely abandoning their failed health care systems. Previously often paraded as showcases of rational planning and capable of providing comprehensive, accessible, and equitable health care services, Eastern European health services were found wanting. They tended to be obsolete, inappropriately equipped, and staffed by an oversupply of poorly trained and demoralized health professionals. Alarming mortality and morbidity patterns surfaced, denouncing previously rosy official statistics. Current health reforms in Germany, Ireland, The Netherlands, and the United Kingdom are more comprehensive than those in other European countries. Reform in the Federal Republic of Germany was over-shadowed by reunification, which involved the reintroduction of sickness funds and negotiated delivery of care in the former German Democratic Republic (East Germany). To accommodate for this important return to the past, discussions in the Federal Republic of Germany to rationalize the deployment of sickness funds were shelved. In Belgium, France, Spain, The Netherlands, and the United Kingdom, the reforms reflect a lengthy and convoluted process of negotiation. Governments, in confrontation with shifting alliances of various interest groups and opposition parties, eventually manage to reconcile policy proposals and instruments that are often diametrically opposed. A majority of countries have basically opted for strengthening government regulation. They introduced various, sometimes operationally complicated, economic disincentives to control inappropriate health care utilization. Specific management measures and sophisticated management information systems that can be used to improve efficiency, including mechanisms to assess and ensure the quality of care, receive more attention than they did in previous reforms. Already the related increases in management costs are drawing static. Others, in particular the United Kingdom and The Netherlands,

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Changing the Health Care System: Models from Here and Abroad opted for “managed competition,” as proposed by the well-known Stanford University economist, Alain C. Enthoven, with greater reliance on market forces and competition in the health care system. In both countries, a regulatory and financing framework will continue to function as an umbrella to safeguard equity, quality, and affordability. In Spain, the Abril Committee evaluating the Spanish health care system in view of reforms met great resistance from Parliament regarding its proposals for privatization. The baseline situation at the start of the current reforms in Europe varies from country to country, given the different health care systems and social/economic environments. THE TRANSFORMATION OF EUROPEAN HEALTH CARE There are numerous similarities among these countries as they evaluate their health care systems with an eye toward the next century. The aging of the population, which is outrunning earlier forecasts, raises the specter of an unbearable burden of illness and disability that could eventually bankrupt the social security budgets. Yet, 1988 long-term forecasts of the OECD predict that there is no special cause for alarm for the rest of the twentieth century, provided that the utilization patterns of elderly individuals would not grow significantly during this decade.7 Even within such an optimistic scenario, however, raising the efficiency and the quality of care for elderly individuals remains a formidable challenge. Important shifts can be witnessed with respect to the key concepts of social policy in Europe. The social safety net constructed during the golden 1960s is in need of repair. Inequalities in access to care and regarding important health indicators have hardly been touched in four decades of the welfare state.8 More targeted programs are now being introduced. Sickness compensation programs, which have been abused in several countries, are tightened and linked to occupational health programs. The emphasis on self-responsibility of patients is meant to decrease the indiscriminate use of health care resources against a background of self-neglect. Likewise, physician-induced regional variations in health care services utilization is straining resource allocation decisions. Increasingly, universal access and total coverage are being reduced and defined as a basic entitlement of services, with cost-effectiveness becoming an important litmus test for coverage of drugs, procedures, and health technology. Cost-sharing and required complementary insurance are additional mechanisms for containing basic entitlements. Cost containment in terms of keeping the rise in health expenditures

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Changing the Health Care System: Models from Here and Abroad in line with that of the gross domestic product (GDP) was attained in most European countries during the 1980s.9 Meanwhile, however, the goal of cost containment has changed. Containing the public deficit is the new priority to which health, education, and other programs of the welfare state must contribute. The “peace dividend” claimed for their health care budgets by regions with advanced weaponry systems (e.g., Wales and Scotland) or with substantial capacities for production and export of military hardware (Walloons in Belgium) is not materializing. On the contrary, it is going to be a costly business to reconvert and reintegrate the military into the civilian labor force. The drive for reduced public debts has gained new momentum since the Treaty on European Union that the Summit of the European Community reached in December 1991 in Maastricht, The Netherlands. The entry of member states into the European Monetary Union, scheduled for 1996, will be limited to those countries that have managed the formidable task of reducing their budget deficits to 3 percent of their gross national product (GNP). During the 1992 general elections in the United Kingdom, this 3 percent target pitted Tories (the Conservative Party) against the Labour Party in angry exchanges over their respective health budget calculations and over the broader question of whether taxes in the United Kingdom would be lowered or raised. The governments of Belgium and The Netherlands have issued new, lower caps on their health care budgets in their attempts to reach the requirements for Monetary Union. In the 1973 reorganization of the National Health Service in the United Kingdom and in the World Health Organization's (WHO's) Health for All—2000 strategy,10 disease prevention and health promotion were seen as providing an “efficiency” dividend. At that time, prevention and health promotion were perceived as cost-saving substitutes for medical care. Since then, the fixation on prevention as a means of cost containment has faded. The attention on prevention in current reforms recognizes the opportunity costs of screening and life-style programs. The increase in medical costs that disease prevention programs tend to generate in their wake is increasingly acknowledged.11 The efficiency issue with regard to prevention has been turned around. The cost-effectiveness of prevention programs is no longer taken for granted and is increasingly subjected to randomized clinical trials, often retargeted, and occasionally even subjected to moratoria. Efforts to curb bed capacity and the average length of stay in short-term, acute-care hospitals have been accompanied by genuine promotion of primary care and the mushrooming of a variety of day-care facilities, for example, ambulatory surgery, dialysis, and radiotherapy. In a number of countries, reductions in the number of beds in acute-care hospitals were financially compensated for or rewarded by expanding the numbers

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Changing the Health Care System: Models from Here and Abroad of beds in nursing homes and other extended-care facilities. Various innovative community-care and home-care programs developed, with the Scandinavian countries having the strongest tradition in institutionalizing elderly individuals, reversing the trend toward home care. One of the most fundamental developments changing the landscape of health care delivery in Europe is the gradual but ongoing consolidation of various types of multiunit organizations and networks in a quest for efficiency. A variety of configurations are being established. They range between loose agreements for cooperation in given areas among independent institutions to full mergers and corporate restructure. The pursuit of the full range of integrated services and the anticipation of economies of scale under more professional management systems are the main forces that drive the emergence of health care consortia in Europe, the development of which came later than it did in the United States. A number of governments are using economic incentives to discourage the continued existence of small and even medium-sized institutions. They also try to impose a downscaling of the combined bed capacity of merging institutions. Decentralization of managerial decision-making and competitive contracting with health care providers under the belief that the “invisible hand ” will generate increased efficiency feature high in the Dutch and U.K. reforms. In the opposite direction, utilization monitoring of all clinical procedures, linked to financial penalties for trespassing preset practice guidelines, are introducing costly microregulation as a heavy “visible hand” in the health economics of medical cultures like those in Belgium, France, and Germany, which were traditionally bent toward clinical autonomy. Quality of care and the need to make systematic quality assurance mandatory have emerged as central issues in political manifestos, health policy statements, and health reform acts. A synergism of factors contributes to this focus on quality of care. Broader developments in society at large heighten the issue of quality of care in Europe. Quality has emerged as a critical aspect of products, services, and the various environments with which humans interact, including the quality of their own lives. Quality has become the cutting edge in economic competition and ideological rivalry. The aspirations for a better quality of life, human-friendly public services, and a healthy environment were powerful undercurrents eroding the credibilities and legitimacies of the regimes and ruling political parties in Central and Eastern Europe. The fear of liability for malpractice and related defensive medicine did not significantly contribute to the introduction of quality assurance mechanisms in Europe, but partly explains the substantial lag in implementation of quality monitoring and improvement compared with that in the United States. Attitudes regard-

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Changing the Health Care System: Models from Here and Abroad ing advances in medicine in particular and science in general are ambivalent, notably when human dignity is at stake. Admiration and zero-risk expectations are mixed with accusations of pointless therapeutic assault. This in turn explains the reluctance of health professionals to expose their decision-making to peer review and scrutiny by members of the public. Cost containment has created a “cost versus quality” controversy. Providers of care claim that lowering costs will automatically degrade the quality of care and that more expenditures are indispensable for improving quality of care. Health care regulators and the insurance industry turn the argument around. They argue that quality assurance, by reducing current levels of inappropriate care and inefficient utilization of resources, could be a major source of savings. In practice, both parties are confronted with the burden of evidence for their claims. The professions increasingly pay attention to the cost aspects of care and how these relate to quality. They hesitantly engage in medical audits, hospital infection control, utilization review, clinical trials, consensus development, and related software development. Regulators and insurers seek to induce more efficient resource utilization and guide the decision-making toward appropriate care with the hope of improving the quality of care while curbing costs. Experiments with clinical resources management in the United Kingdom and plans in The Netherlands to combine a focus on cost-effectiveness with the use of practice guidelines developed by specialty boards justify the hope that quality at affordable cost may become realistic. 12 National responsibility for health policy and resource allocation decisions these days is being eroded. Choices in health care delivery and even revenue raising are gradually being claimed and redistributed away from the traditional national centers of power. This “divergence in convergence” downward to subnational levels and upward to European levels is part of the shaping of a new “Europe of Regions.” Subnational entities, which are transforming Europe, form a vivid mosaic with roots based in medieval history and ethnic, cultural, and religious differences. The transfer of responsibilities and power to regional authorities regarding the mission, role, and structure of health care delivery has important implications. Health care policymaking is gradually shifting from being guided by civil servants working for the central government to an increasing coopting of regionally elected politicians. The organizational models and the mix of central and regional authorities differ among countries. Variance between regions in a given country becomes more marked than before. Resource levels, resource configurations, spending levels, and priorities all reflect differences in the emphasis of politically defined health policies. When Mikhail Gorbachev was still in power in the former Soviet Union, he used to refer to the various political constellations in existence

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Changing the Health Care System: Models from Here and Abroad and the making of “the European home with many rooms.” In health affairs, a growing number of European institutions are also competing for a federal role in health affairs. Increasingly, the new regions position themselves as equal partners with their nation-states under the European umbrella(s). Under the original 1958 Treaty of Rome that formed the European Community (EC), the EC paid hardly any attention to health or health care in a positive way. Health could be invoked as a justification to deny free circulation of goods or services if they were considered to be a health risk by one or more member states. Health reasons were sometimes misused as a pretext for denying entry of obviously healthy products and sometimes even health foods to a given state. The Treaty of Rome, which emerged from the Coal and Steel Community and the European Atomic Energy Community (Euratom), paid some attention to industrial health, radiation health, and related research. Indirectly, the EC made important inroads in matters of health care delivery, AIDS and cancer programs, substance abuse control, environmental protection, and health-related research. It did so primarily to implement its economic and single-market policies. Since 1975, virtually all categories of health professionals are entitled to practice in any EC member state. Their training has been harmonized. The 1991 Maastricht Treaty on European Union, if ratified, will boost a health promotion role for the Community. In practice, it will legitimate and focus the indirect and scattered actions undertaken so far. The Council of Europe, which is an intergovernmental cooperative of more than just EC countries and whose size was recently increased by the entry of a number of Central European countries, has contributed to health policy through binding agreements in the areas of human rights, patient rights, and bioethics. The WHO, through its regional office in Copenhagen, covers a Europe that reaches from Vladivostok, Russia, to Rabat, Morocco, and that includes the republics of the former Soviet Union, Israel, and Turkey. Following the Alma Ata Declaration in 1978, WHO-Euro focused its activities on formulating, propagating, and monitoring among its member states a European Health for All—2000 strategy. The strategy is based on a set of 38 targets aimed at reducing mortality and morbidity. Primary health care, health promotion, and self-responsibility with community involvements and intersectoral cooperation are key elements of the European Health for All—2000 strategy. The effect of this initiative on country-level health policy-making has been mixed. On average, the medical profession remained aloof to what its leadership belittled as “tyranny of the healthy.” Where Health for All—2000 was seriously considered, it eventually got bogged down and sidetracked. It failed to overcome pow-

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Changing the Health Care System: Models from Here and Abroad erful vested interests and the inertia of established priorities and investments. Europe's human resources for health care are plagued with a series of problems. An unbalanced supply of various categories of health care workers is compounded by geographic and functional maldistributions. There is a marked oversupply of physicians, dentists, and pharmacists in most countries. Graduates compete for limited employment opportunities in health facilities and programs in the public and private sectors. Increasing numbers of young doctors join the ranks of Europeans who receive unemployment benefits. Others engage in various forms of “alternative medicine,” which are often questionable practices. Growing numbers enlist in international aid organizations and disaster areas, either natural or those caused by people, which span the globe. The professional leadership in health care, which for decades defensively and often successfully countered the various policy changes, is now uneasy and retrenched. The expectations of society regarding their new role as resource managers and responsible partners for an affordable health care system and as agents in the new bioethics are met with ambivalence. In the West, organized medicine paradoxically reverts to advocating stringent planning and the status quo when confronted with competing options. In the East, unrealistic hopes in the market economy fuel an open rebellion against the regulation of health care. Nursing in Europe is slipping into a deep crisis. A severe and growing shortage of nurses is starting to have a negative impact on patient care. Because of the demographic “degreening” of the population, there are fewer potential candidates for nursing and allied health professions. Cost containment and related shifts of inpatient care to alternate sites for care have contributed to a greater dependency on nurses to care for sicker patients. “Burnout” among health care workers has reached unheard-of proportions. Financial compensation is gradually being perceived as grossly unfair and insulting. Strikes and “work-by-rule” actions are frequent and, in turn, contribute to alarming declines in recruitment. During the last 4 years, Belgium, France, The Netherlands, and the United Kingdom have repeatedly been confronted with outbursts of anger from demoralized nurses, ambulance drivers, and even junior doctors. THE LESSONS The comparison of the health care systems of Europe and the United States or vice versa is often oversimplified. European health care is not monolithic, and neither is U.S. health care. For example, the situation in Germany reflects only part of the reality in Europe. Any comparison of

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Changing the Health Care System: Models from Here and Abroad Europe with the United States must recognize the distinctive features of health care configurations within Europe and within the Northwest, the Midwest, the Sunbelt states, and the West Coast of the United States. In a paradoxical way, solutions of the past became the problems of the future. The financial security of individuals and their free access to health care have resulted in the threat of societal insolvency and calls for indiscriminate cost containment. How to effectively address complex problems such as overutilization and issues related to medical autonomy remains a formidable challenge. Biases and shortcomings in problem identification and analysis have often been compounded by the absence of adequate data and cost analysis regarding these actions. The mistake that Lord Beveridge made, and more lately, the burden of illness attributed to the elderly or the savings expected from prevention, are typical examples of the continued blind policy-making that is done on the basis of conventional wisdom. The inertia of policies, which are usually implemented only when a situation becomes critical, has had serious consequences. The policies of hospital development, workforce development, and more recently, cost containment have all been overshooting their targets. Again and again, future policy designs ignore the lingering effects of previous policies and fail to include required checks and balances. Constraint analysis, loophole analysis, and impact analysis with respect to the broader environment of health care have been conspicuously absent in the strategic thinking underlying past and current health reforms. The information gap produced by the reforms tends to frustrate operational success. The information requirements are usually overambitious and unrealistic. Contracting between purchasers and providers of care and budget holding by general practitioners in the National Health Service is, for the moment, seriously hampered in the United Kingdom by the absence of sufficiently detailed need data. The mandatory use in Germany since 1990 of a cost-effectiveness ranking of hospitals for patient referral is inoperative because of the lag in issuing the relevant regulations and rankings. The linchpin of the Dutch reform is the use of risk-rating in allocating budgets to health insurance funds to reflect the actual risk profiles of their subscribers. Even the proponents of reform in The Netherlands admit that the actuarial and epidemiological complexity of this approach is formidable, even if it is only phased in by the beginning of the next century. The pace and intensity of change have increased throughout the three waves of health reform in Europe. In fact, the open-endedness of the current reforms has created a steady state of “reformitis.” The turbulence that is generated in the health care environment has taken its toll on

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Changing the Health Care System: Models from Here and Abroad health workers, who increasingly feel alienated, and has eroded the confidence of the public in a system beset with problems. In conclusion, in reforming the health care system for the next decades, health care policymakers in Europe and the United States should constantly keep in mind that health policies should be rooted in thorough analyses of the problems and should be based on feasible and affordable solutions and workable information systems. Moreover, the constant danger of the inertia of policies and solutions becoming a problem should be kept in mind. REFERENCES 1. Organization for Economic Cooperation and Development. 1990. Health Care Systems in Transition. Paris: Organization for Economic Cooperation and Development. 2. Burstall, M.L. 1991. Europe after 1992: Implications for pharmaceuticals. Health Affairs 10(3):157–177. 3. Blanpain, J.E., et al. 1978. National Health Insurance and Health Resources. Cambridge: Harvard University Press. 4. Hurst, J.W. 1991. Reforming health care in seven European nations. Health Affairs 10(3):7–21. 5. Schneider, M., et al. 1992. Health care in the EC member states. Health Policy 20(1 and 2):1–252. 6. Illich, I. 1975. Medical Nemesis: The Expropriation of Health. London: Colder and Boyars. 7. Organization for Economic Cooperation and Development. 1988. The Future of Social Protection. Paris: Organization for Economic Cooperation and Development. 8. Towsend, P., and N. Davidson. 1982. Inequalities in Health: The Black Report. Harmondsworth, England: Penguin Books. 9. Organization for Economic Cooperation and Development. 1987. Financing and Delivering Health Care. Paris: Organization for Economic Cooperation and Development. 10. World Health Organization. 1985. Targets for Health for All. Copenhagen: World Health Organization, Regional Office for Europe. 11. Evered, D., and J. Whelen (eds.). 1985. The Value of Preventive Medicine. London: Pitman Publishing Ltd. 12. Casparie, A.F. 1991. Guidelines to shape clinical practice—The role of medical societies: The Dutch experience in comparison with recent developments in the American approach. Health Policy 18(3):251–260.