What country takes the best care of its older citizens? The Netherlands rates tops in our exclusive survey of 16 nations. But no place is perfect



Every week, Anna Sophia Fischer greets a clutch of tourists in the medieval central square of Utrecht and, with a spring in her step, guides them on a stroll among 14th-century Dutch monasteries and houses. She knows every arch, garden, and alley and, at 75, goes about her daily business by bicycle, as do the swarms of people around her. "You have to go by bike if you live in town," she says. (Could this be one reason that the Dutch live longer than we do—an average 78.6 years, compared with 77.3 in the U.S.?) A retired physician, Fischer is living her dream. "I wanted to do something different," she says. "I'm not rich, but I can do the things I want to do."

Wim van Essen, 69, is a former teacher, tall, vigorous, an ardent hiker, a fanatical chess player—and a one-man pep squad for the Dutch way of retirement. "You see how we live," he says, inviting a guest into his brick home in the leafy city of Amersfoort. There's a fireplace in the living room, a wildflower garden out back. Extra bedrooms upstairs await visiting grandchildren. On a coffee table are photos of Van Essen trekking in the Austrian Alps with his wife, Lamberta Jacoba Maria, nicknamed Bep. (Every year, the two of them take a major trip, partly subsidized by the government.) The couple receive government and work pensions and various perks. All told, it's a wonderful life, based on what Van Essen calls "a beautiful pension," which, when everything is added up, comes to about $45,000 a year.

In a world that is rapidly aging, the Netherlands, perhaps more than any other country, has created a society in which people have the luxury of growing old well, according to a survey conducted by AARP The Magazine. We weighed 17 criteria (see the PDF chart "And the Winner is…") in selected industrialized nations that approximate as closely as possible the lifestyle of most AARP members. We focused on key quality-of-life issues such as health care, work, education, taxes, and social programs.

But if you're already thinking of packing your bags, stop right there. The purpose of this report is not to encourage American retirees to immigrate to the Netherlands or to some of the other top scorers in our study. Most nations aren't keen to share their pensions and health care benefits with noncitizens just off a plane. Rather, our goal is to shed light on what retirees enjoy elsewhere in the world as a reference point for our own country's policies.

In the Netherlands, all citizens receive the full old-age pension at 65 if they've lived in the country for a minimum of 50 years between ages 15 and 64. Unlike our Social Security, however, the pension doesn't require a work history. The full amount per month is nearly $1,000 for singles and nearly $1,400 for couples, married or not. The old-age pension is in addition to an occupational, or employer-provided, pension, based on payments over the years by worker and employer. And every pensioner gets a "holiday allowance" of about $700, thoughtfully paid in May, just in time for spring.

Pension generosity is a major reason that, by international measurements, only 6.4 percent of the elderly fall in the bottom quarter of income distribution, as compared with the U.S. percentage of 20.7. Although the U.S. has a far larger per capita income than the Netherlands—$26,448 a year versus $17,080—it scores poorly in two other comparisons: First, all Dutch citizens have government insurance for medical conditions and nursing-home care; 45 million Americans have no health insurance at all. Second, prescription drugs are available to all Dutch citizens, with few if any copayments; Americans get drugs in many different ways and those without insurance pay top dollar. Even when Medicare drug coverage begins in 2006, most enrollees will still face substantial out-of-pocket costs.

'The European attitude is, we're all in this together and sooner or later we're all going to become older and need some help. The U.S. attitude is, we're all rugged individualists and we're going to take care of ourselves, not others.'
How do the Dutch do it? How do their euros stretch further than our dollars? The key factor is lower costs. Although medicine isn't completely socialized—physicians and pharmacists, for example, aren't state employees—the government regulates almost all health expenses. That helps explain why, in the view of Professor Gerard F. Anderson of the Johns Hopkins Bloomberg School of Public Health, "in the U.S. we pay a lot more than anybody else for pretty much the same stuff." In analyzing health systems in the Netherlands and other industrialized nations, Anderson found that drugs, hospitals, and physicians' services were from 30 to 50 percent more expensive in the U.S., "and their health status is as good or better than ours."

Another factor is attitude. A strong feeling of "social solidarity," as Anderson sees it, makes Europeans inclined to be generous to older people, more willing to support them. "Their attitude is, we're in this together and sooner or later we're going to become older and we'll need some help," he says. "The U.S. attitude is, we're all rugged individualists and we're going to take care of ourselves, not others."

The Netherlands demonstrates its attitude toward older citizens (2 million are over 65) by showering them with numerous friendly perks, in addition to the big-ticket items such as pensions and health care. One example: seven days of free travel a year on the efficient rail system. "I go as far as possible," says Joris Korst, a 65-year-old civil servant in Nieuwegein. That's never very far in the Netherlands, which is only a third the size of Pennsylvania, but the destinations can be exhilarating—like the windswept beaches that Korst strolls in the West Frisian Islands. Museums, movies, concerts, campgrounds, and holiday bungalows are discounted, too. All this and a country that's worldly, prosperous, tolerant, steeped in art, and graced by canals, windmills, and tulip fields. What's not to like?

Health Care

The Dutch are accustomed to paying minuscule copayments for expensive treatment.

Dutch health insurance took care of teacher Van Essen when he needed a heart pacemaker. "He never saw a bill," his wife, Bep, recalls. Neither did civil servant Korst, who remembers that there were no charges when his wife, Trees, had cancer surgery followed by 32 chemotherapy treatments. "The whole country paid," he says, referring to the state-regulated insurance. In the U.S., those 32 treatments alone could have cost $30,000 or more, depending on the type and number of drugs used. Medicare might cover 80 percent, but the patient still could owe thousands.

Compare Trees's experience with that of Harold Powers, 79, and his wife, Ozelle, 82, retired educators in Tennessee. Powers paid about $200 of the bill for his bypass heart surgery because Medicare picked up 80 percent of the tab and his private Medigap insurance (which costs extra) paid most of the rest. But, in addition, he and Ozelle spend about $3,000 a year for medicines, and Medicare won't cover any of that until 2006. Van Essen, on the other hand, pays nothing for the medicine he takes to prevent migraines. In 2003, however, the Dutch health ministry proposed that everyone make a copayment of $1.75 for each prescription—but backed down when the people protested.

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.