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Do They Know Something We Don't?Reforming European Welfare States: Germany and the United Kingdom Compared by JochenClasen; The Reform of Bismarckian Pension Systems: A Comparison of Pension Politics inAustria, France, Germany, Italy and Sweden by Martin Schludi; Health Care Issues in theUnited States and Japan by David A. Wise; Naohiro YashiroReview by: J. Theodore AnagnosonPublic Administration Review, Vol. 68, No. 2 (Mar. - Apr., 2008), pp. 391-394Published by: Wiley on behalf of the American Society for Public AdministrationStable URL: http://www.jstor.org/stable/25145611 .
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J. Theodore Anagnoson
California State University, Los Angeles
Do They Know Something We Don t?
fochen Clasen, Reforming European Welfare States:
Germany and the United Kingdom Compared
(Oxford: Oxford University Press, 2005). 264pp. $35.95 (paper), ISBN: 9780199232017
Martin Schludi, The Reform of Bismarckian Pension
Systems: A Comparison of Pension Politics in
Austria, France, Germany, Italy and Sweden
(Amsterdam: Amsterdam University Press, 2006; distributed by University of Chicago Press). 320 pp. $50.00 (paper), ISBN: 9789053567401.
David A. Wise and Naohiro Yashiro, eds. Health Care Issues in the United States and Japan (Chicago:
University of Chicago, 2006). 256pp. $65.00 (cloth), ISBN: 9780226902920.
Controlling future pension and health costs has
been at the center of the most difficult problems
for many Western democracies in recent decades.
These three books, each taking a different ap
proach, offer interesting international insights into
this problem.
Martin Schludi compares five nations in
Europe with similar pension systems, all
based on social insurance. His question focuses on the "Bismarckian" pension systems in
Austria, France, Germany, Italy, and Sweden and
whether and how much each has changed its pen
sion program. Jochen Clasen compares Germany
and the United Kingdom on three dimensions?
unemployment, pension, and family policy?again with the goal of explaining change over time. David A. Wise and Naohiro Yashiro have edited a
collection of papers presented in 2003 comparing health systems and their outcomes from Japan and
the United States. The authors, both American and
Japanese, focus on both broad topics, such as how
senior citizens are supported in their health needs,
and narrower ones, such as heart attack outcomes
and the efficiency and quality of the Japanese home health industry.
Central to all the books are the questions of whether we can learn from what other nations have done.
Reading the health policy literature in the United States yields the impression, perhaps erroneous, that
what other nations have done is not part of our
national debate. I suspect that each of these authors
would argue to the contrary?that not
only can we in
the United States learn from what Europe and Japan have done, but also nations can learn from each other
in spite of the peculiarities in each country. Indeed, both Schludi and Clasen highlight models in which
program-specific features in each nation have definite
explanatory power, and Pierson's notion of "path
dependence" is part of the explanation in both books
(Pierson 2000). Path dependence is the idea that decisions made in the past restrict agencies and societ
ies from certain choices in the future; a major example
is the American decision to move to employer-based
health insurance during World War II, which made it
difficult to enact a single-payer health system.
Schludi's book is the most comprehensive study of
pensions, with analyses and comparisons of five na
tions with similar policy frameworks. Each of these nations has had economic and fiscal crises in the last
two decades. Each is subject to the now familiar
demographic challenges of substantial senior citizen
populations, relatively early retirement, substantial
pension and health benefits, and the resulting pay-as
you-go cost pressures. These pension systems have
four features that he terms "problematic." First, the
contribution rates are relatively high, with resulting
effects on the economy and on job creation at the
low end. Second, these are defined-benefit pensions,
with a "quasi-contractual" relationship that is diffi
cult to change. Third, all of the systems are
"pay as
you go," meaning that funding is not generally
ac
crued in advance to pay for the benefits necessary for
the baby boom. And fourth, benefit entitlements result from each person's employment relationship,
meaning that the benefit obligation has expanded as
proportionately more women have entered the labor
force.
J. Theodore Anagnoson is professor emeritus of political science at California
State University, Los Angeles, where he
teaches courses on health and aging
politics. In 1995-1997, he served as a
health policy analyst in the Office of the
Assistant Secretary for Planning and
Evaluation, U.S. Department of Health and
Human Services.
E-mail: [email protected]
Book Reviews 391
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One part of the answer to the title question of this
review is reassuring. The means enacted to assist in
controlling pension costs are similar to the means that
the United States has considered, including the
following:
Raising contribution rates slightly
Including noncovered groups
Shifting toward more tax financing, as opposed to contributions based on a
payroll tax
Partial privatization, reducing the proportion
paid by the public and shifting toward voluntary
savings to fill the gap, along the lines of President
George W. Bush's proposal for Social Security reform
Targeting benefits only on those who are poor
Increasing the retirement age, a standard
American proposal in many reform plans
Lowering the amounts paid
to retirees, either
by reducing the proportion of inflation compen
sated for or by reducing the benefits of future
retirees
While the need for reform varies, every country faces
many of the same problems: pay-as-you-go systems
that are dependent
on the size of the cohorts contrib
uting, while at the same time, baby boomers who are
about to retire and change the relative relationship of
payers to payees. The World Bank has recommended a
standard four-pillar model, with a noncontributory
basic system providing a minimal level of protection,
a
contributory system linked to earnings,
a mandatory
individual savings account, and a voluntary, flexible,
and discretionary system on top of the others (World Bank 2007). Schludi, however, finds that the "inher
ited pension profile" of each country is the best
predictor of the future and a "powerful political
constraint," making any evolution toward a standard
model problematic. The consensus in the literature
and from Schludi's study of the five nations is that
economic and demographic factors provide the occa
sion for considering change in pension policies, but
they do not guarantee success.
What does? Schludi's model is what he calls "actor
centered institutionalism." He considers the key play
ers and develops what might be termed a "contingency
model": If the government's ideal is at one point
on a spectrum ranging from the status quo at one
end to retrenchment at the other, and the union or
interest group position is somewhere else, then the
question is whether a compromise is possible between
the two positions and whether the participants
can
arrive at it.
Bargaining and consensus are characteristic of the
pension change process. New governments seldom
fully reverse the pension reforms of their predecessors.
Consensus is impossible if the opposition totally
rejects the reform as a matter of principle. A few of
the reforms have been based on consensus between
the government and the opposition; more of them
have been based on a compromise between the
government and the trade unions.
The bottom line is that pension arrangements are not
as resistant to change
as is often imagined, and even in
this area, which is both path dependent and politically salient for so many voters, change
is possible under a
variety of circumstances. Schludi's comprehensive
analysis is definitely worthy of study by public admin
istration scholars who are interested in welfare states
and the circumstances under which deeply entrenched
policy can be changed.
Clasen studies Great Britain and Germany in three
policy areas over more than two decades, beginning
in
the late 1970s and early 1980s, when the more con
servative parties in each country took over the govern
ment. He focuses on three policy areas:
pension,
unemployment, and family policy. In each, he is look
ing for what drives retrenchment and restructuring over a
relatively long historical period. He has many
insights. Retrenchment, for example, is inadequate as
a description of welfare policy
over the last two de
cades in these two countries; each nation restructured
to provide
more benefits to some groups at the same
time that some retrenchment was going
on. No single
factor drives change in these areas?in fact, it is "the
interaction of several factors which drives the direc
tion and shape of welfare reform." Actors are one such
factor, the institutional setting in which they operate
is a second, and the content and setting of the
program and its history is a third.
Both Schludi and Clasen use multiple
measures of
change in their respective social welfare areas.
Expenditures are the classic indicator, but they
are not
adequate by themselves. They do not capture
readjustments and restructuring designed to
improve
services to certain populations.
In Great Britain, the government passed 10 major
changes to
pension arrangements between 1980 and
2003. Many of these reforms increased benefits to
certain populations at the same time that the overall
costs of benefits were being reduced. The basic state
pension has been linked to prices since 1981 rather
than to the greater of price or wage increases, a
change
also recommended by President Bush. Since 1988, the
"reference years" for the state earnings-related pension
have been a full lifetime's earnings rather than the best
20 years, as previously. In the United States, a stan
dard incremental program recommendation for Social
Security is to raise the number of reference years from
the highest 35 years to the highest 38, a proposal that
has yet to be acted on. (Because the next three years
added would have lower levels of income, the net
392 Public Administration Review March | April 2008
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effect would be to lower each person's average wage on
which his or her Social Security pension is based.) The
British Labour government that came into power in
1997 introduced and increased winter fuel payments for those over 60 years of age and increased pensions
substantially, but it accepted the basic framework
introduced by Margaret Thatcher's government, which
moved Britain toward a multipolar system in which
the bottom-tier payments are targeted
to the poor.
Both Schludi and Clasen find that the reforms intro
duced by one government were
rarely reversed by the
opposition when it came into power.
In Germany, the 1980-2004 period saw 14 separate sets of changes
to pension arrangements. Some of
these increased payments; others decreased them. But
the overall framework stayed the same: a social
insurance-based system providing retirees with
approximately 65 percent to 70 percent of average
lifetime earnings. Most pensioner income comes from
public pensions. The basic framework of German
pensions proved significantly more difficult to cut
back than that of Britain because pensions in
Germany are so
closely tied to earnings.
Among the most significant of Clasen's insights for
American readers are the findings that close ties
between a program and the structure of collective
bargaining and industrial relations, as is found in
Germany, can be a
significant limiting factor when
governments are attempting
to cut back on a pro
gram; the continued significance of "path depen
dence" in many policy areas; and the features of
European pension systems giving credit for child
rearing, taking care of elders, full-time education,
and periods of unemployment.
Both Schludi and Clasen, to their credit, use multiple measures of different aspects of the welfare programs
they study, and both make the point that studying total program expenditures is too
limiting given the
complex changes that all of the nations studied have
made in their programs. And ultimately, one is abso
lutely struck by the ability of these nations to alter
their programs while we in the United States have
had policy paralysis.
In Wise and Yashiro's edited work, we turn to a differ
ent set of nations, the United States and Japan, and to
a different policy area, health care. But the issues are
similar. The book consists of 10 papers: five on Japan, three on the United States, and two on international
comparisons. The book begins with four general pa
pers. The first, by Naohiro Yashiro, Reiko Suzuki, and Wataru Suzuki, assesses the consequences of the
health care reforms of the 1990s for Japan's increas
ingly aging society. Among the differences between
Japan and the United States is the much higher num
ber of hospital beds in Japan. The reason for the dif
ference is partly that "hospitals are used as
nursing
homes for the elderly" (20) because of the shortage of
other nursing facilities. The authors cover the reforms
of the 1990s and 2003, which increased co-pays,
provided a financial incentive for using the family doctor as a gateway for access to
specialists, moved
toward a system of fixed reimbursements instead of
fee for service, and progressed toward a system of
long-term care insurance
designed to
provide long term care at home or in nursing homes rather than in
hospitals. In general, these reforms were modest, only
first steps toward more comprehensive reforms in the
future.
The second general paper, by David Cutler and David
Wise, covers the health insurance system in the
United States from the standpoint of reimbursement
mechanisms and insurance plans. The authors find
that all medical payments in the United States have
become substantially less generous over the last two to
three decades, with Medicare beneficiaries being the
least affected. Though the incentives from the benefi
ciary's standpoint are well illustrated, the authors do
not discuss the various methods that Medicare has
used to pay managed care
plans, which would have
been useful. The authors find the future direction of
the system unclear, as many patients do not like the
restrictions of managed care, but at the same time
costs are still increasing.
The third general paper, by David Cutler, looks at
medical care financing from an international stand
point, centering on how much costs will increase in
the future as a result of aging populations. Cutler
models health cost increases from the consequences of
aging and increased use of technology in health
systems, finding that the countries in the OECD
(Organisation for Economic Co-operation and
Development) that will be hardest hit include Spain, Switzerland, the Czech Republic, Italy, and Greece.
Each of these nations has both low fertility rates and
large projected increases in life expectancy. Least af
fected will be Turkey, the United Kingdom, New
Zealand, and Mexico. Both Japan and the United
States rank in the middle on this scale. Can we afford
these increases? Cutler indicates that the increases
could be paid by workers, retirees, general tax rev
enues, or some combination of the three, but he does
not go any further in this paper.
A fourth general paper, by Seiritsu Ogura, Tamotsu
Kadoda and Makoto Kawamura, looks at instability
and inequities in the Japanese health insurance sys
tem. Here the authors use a micro-simulation to
determine who pays and who benefits from the
post-1996 health reforms. They find that workers are
paying significantly more than their costs, while senior
citizens are paying much less, an average of 40 percent
of their costs. They investigate several scenarios
Book Reviews 393
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designed to make the financial burden equivalent to
the benefits received, finding that an 8 percent to
9 percent consumption tax combined with increases
in out-of-pocket costs would "reduce the huge dispar
ity in the contribution-to-costs ratios across different
age groups and improve the vertical equity of the
medical insurance system" (108).
The balance of the papers focus on each nation. Four
papers focus on Japan. Koichi Kawabuchi and
Shigeru Sugihara investigate whether Japanese physi cians and hospitals performing larger numbers of
angioplasties on
patients who have had acute myo
cardial infarctions have better results than those that
do few. The question is relevant because the Japanese
government reduces the reimbursement rate by
30 percent for hospitals that perform fewer than
100 procedures per year. An analysis of more than
900 patients reveals that the effect operates not at the
hospital level but at the physician level, and the
effect may not be linear, although the data are not
sufficient to indicate the exact nature of the
relationship.
The second of the four papers on Japan is "Market
Concentration, Efficiency, and Quality in the Japanese Home Help Industry," in which Yanfei Zhou and
Wataru Suzuki investigate whether the long-term care
insurance program introduced in 2000 has affected
the quality and cost of home help services. Their data
show a limited positive effect of competition on the
quality of care services and lower costs where more
competition exists.
The third paper focusing on Japan is by Haruko
Noguchi et al., who compare the quality of health care
in the United States and Japan for heart attack
patients, finding several differences in how patients are
treated in the two nations. The countries have quite
different ways of paying for the treatment of heart
attack patients, with diagnostic-related groups being
used in the United States and fee-for-service in Japan.
These are new data sets that show promise of
interesting findings in the future.
The final paper on Japan estimates the demand for
nicotine gum in Japan (Seiritsu Ogura et al.). Using a
sample of smokers from the Tokyo area, the authors
find that a 70 percent subsidy in the price of Nicor
ette, which went on sale over the counter in
September 2001, would cost the government approxi
mately what it would save in smoking-related illnesses
that might be prevented in just a
five-year period. A
time horizon longer than five years would clearly yield
substantially more benefits than cost.
Two papers on the United States complete the collec
tion. Jonathan Skinner contributes a paper on "Geog
raphy and the Use of Effective Health Care in the
United States." In it, he compares the treatment of
heart attack patients across
regions in the United
States, finding that regions differ substantially in
post-heart attack treatments. They vary directly with
income and education: Regions with higher incomes
and education levels are more likely
to adopt the latest
innovations earlier rather than later. The findings are
consistent with a model in which each physician group "undergo [es] different processes regarding the
adoption of specific technologies for their group. . . .
That there is so much latitude in the potential to
improve the quality of care (and at such little cost)
suggests that the incentives of the Medicare program
could be better aligned with improving quality rather
than rewarding the quantity of services in the United
States" (207).
The last paper, by Kathleen McGarry, titled "Does
Caregiving Affect Work? Evidence Based on Prior
Labor Force Experience," is among the most interest
ing papers in the collection. McGarry analyzes evi
dence from the panels of the Health and Retirement
Survey from 1992 to 2000 and shows there is little or
no relationship
at best between ties to the labor mar
ket and caregiving among women age 51-61 or mar
ried to someone in that range. "Having a parent who
needs care does not affect employment behavior, and
lagged labor force participation does not affect current
caregiving" (226).
All in all, these three books, like the recently pub lished volume by Rudolph G. Penner (2007), show
that the same policies that are
being considered to
contain future Social Security and health-related costs
in the United States are being implemented in other
nations. The real question is why our
governmental
system seems incapable of implementing them also.
The lists of pension policies implemented in Germany and the United Kingdom over the last 20 years dwarfs a similar list for the United States, leading
to the
question of whether Mancur Olson (1982) was right when he characterized aging democracies as so beset
by interest groups that they are
paralyzed in the face
of a clear need to take action.
References
Olson, Mancur. 1982. The Rise and Decline of Nations:
Economic Growth, Stagflation, and Social Rigidities.
New Haven, CT: Yale University Press.
Penner, Rudolph G., ed. 2007. International
Perspectives on Social Security Reform. Washington,
DC: Urban Institute Press.
Pierson, Paul. 2000. Increasing Returns, Path
Dependence, and the Study of Politics. American
Political Science Review 94(2): 251-67.
World Bank. 2007. Pensions, Overview. http://www.
worldbank.org/pensions/ [accessed November 19,
2007].
394 Public Administration Review March | April 2008
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