Managed competition in The Netherlands: lessons from five years of health care reform

In many European countries health care reforms are taking place. The guiding principle of the reforms is 'more market, less government'. In 1988 the Dutch Government launched proposals for the most radical market-oriented reform in Western Europe. The proposed system can be described as a national health insurance based on regulated competition among both insurers and providers of health care. It can be seen as an ingenious attempt to combine the 'efficiency' of competitive arrangements in the markets for health care and health insurance with the 'equity' of finance through predominantly income-related premiums (National Economic Research Associates 1993). Similar reforms have been proposed and discussed in other countries. In this paper we will concentrate on lessons that other countries may learn from the Dutch experience. What progress has been made since the proclamation of the reforms six years ago? What new issues and problems have arisen and how can we solve these new problems?

Buying groups seek compliance

Purchasing groups are trying harder than ever to entice hospitals into buying a greater percentage of products through group contracts, and to tackle the old obstacle of contract compliance, according to Modern Healthcare's 1994 purchasing survey.

The Chinese medicines market: moving towards a market system?

This paper presents a review of the Chinese pharmaceutical policy in order to analyse the forms of effective market competition introduced or not in the system. Registration, pricing and trade are three areas showing the limits on competition. The government limits the duration of the registration procedure to three years, which leaves some opportunities for challengers to market similar products afterwards. The pricing system in place is a maximum price ceiling. The price structure reveals a net difference of treatment between foreign products and domestic products. With respect to trading policy, the government applies a selective licensing policy for exports and imposes variable custom taxes on a product-by-product basis on imports. At a micro level, the Chinese market has instant market conditions with fair trade where manufacturers, importers and distributors can meet. Different cost-sharing experiments between the state, the working units and the patients also introduce more sensitivity to prices from the consumer. Such a duality between the limits imposed on competition by public policy tools and the experiments or market conditions in place at the level of the organisations underlines the ambiguity of the move towards a market economy in the Chinese pharmaceutical market.

Is health care a commodity: how will purchasing improve the National Health Service?

Through the reforms to the National Health Service in 1990 an internal market for public health care provision in the United Kingdom was introduced. As part of this new system of care, responsibility for purchasing of health care was separated from that for its provision. The new purchasing function, undertaken by district health authorities and fundholding general practices, has created the opportunity for improvements in health and higher standards of care to be achieved through new and explicit mechanisms. However, the purchasing function has not yet realized its full potential to achieve beneficial change, partly because traditional behaviours have not yet adapted to the new system of care and partly because specific aspects of the internal market are creating barriers and perverse incentives. This paper discusses these issues and identifies the important barriers which have still to be overcome if purchasing is to be the driving force for change in the new National Health Service.

Losers

This is the third in an occasional series of columns concerning ethics issues in healthcare reform. The first, "A Matter of Principle," and the second, "Freedom of Choice," appeared in the September/October 1992 and March/April 1993 issues, respectively.

The impact of managed care on specialty practices

With the primary care physician being the focal point for managed care, the relative status that specialists have enjoyed may be at an end. Cynthia S. Rowe, FACMPE, administrator for the Oregon Eye Care, investigates how specialists are faring under managed care and writes that without major re-engineering, they will face a tough road.

Managing the health care market in developing countries: prospects and problems

There is increasing interest in the prospects for managed market reforms in developing countries, stimulated by current reforms and policy debates in developed countries, and by perceptions of widespread public sector inefficiency in many countries. This review examines the prospects for such reforms in a developing country context, primarily by drawing on the arguments and evidence emerging from developed countries, with a specific focus on the provision of hospital services. The paper begins with a discussion of the current policy context of these reforms, and their main features. It argues that while current and proposed reforms vary in detail, most have in common the introduction of competition in the provision of health care, with the retention of a public monopoly of financing, and that this structure emerges from the dual goals of addressing current public sector inefficiencies while retaining the known equity and efficiency advantages of public health systems. The paper then explores the theoretical arguments and empirical evidence for and against these reforms, and examines their relevance for developing countries. Managed markets are argued to enhance both efficiency and equity. These arguments are analysed in terms of three distinct claims made by their proponents: that managed markets will promote increased provider competition, and hence, provider efficiency; that contractual relationships are more efficient than direct management; and that the benefits of managed markets will outweigh their costs. The analysis suggests that on all three issues, the theoretical arguments and empirical evidence remain ambiguous, and that this ambiguity is attributable in part to poor understanding of the behaviour of health sector agents within the market, and to the limited experience with these reforms. In the context of developing countries, the paper argues that most of the conditions required for successful implementation of these reforms are absent in all but a few, richer developing countries, and that the costs of these reforms, particularly in equity terms, are likely to pose substantial problems. Extensive managed market reforms are therefore unlikely to succeed, although limited introduction of particular elements of these reforms may be more successful. Developed country experience is useful in defining the conditions under which such limited reforms may succeed. There is an urgent need to evaluate the existing experience of different forms of contracting in developing countries, as well as to interpret emerging evidence from developed country reforms in the light of conditions in developing countries.

The real action in health care

It's not taking place in the White House or Congress. The show to watch is the boisterous, free-market affair, precipitated by employers fed up with rising medical costs, and carried on by insurers and HMOs scrapping for turf.

For-profits. The right medicine for some markets?

The aggressive systems-building strategies the nation's large for-profit systems are pursuing are shaking up markets across the country. But while some have accused the for-profits of focusing on empire-building, the reality of their strategic implementations is surprisingly complex.

Changing course. Realigning the supply chain: providers & suppliers share risks, rewards

The term "partnership" is overused these days, but health care providers and suppliers are taking it seriously, forging new kinds of relationships. A new Hospitals & Health Networks survey documents the approaches suppliers are taking in response to reform and other health system changes. In fact, a strong majority of suppliers are working with their clients now to realign the supply chain, and redefining the concept of value in the process.

Railways of the nineties

What killed the railways was that they were run by people who really liked choo-choos. This also is the Achilles' heel of hospitals. They are run by people fascinated with big white buildings and all they contain.

The market reform of the New Zealand health care system searching for the Holy Grail in the Antipodes

Everywhere there is a recognition that the delivery of health care is ineffective and inefficient and that these unpleasant outcomes are a product of the perverse incentives inherent in all health care systems. In New Zealand the Government documented the defects of the health care system and has introduced radical competitive market reforms, with a purchaser-provider split, in the belief that these will improve the system's performance. The nature of these reforms, centred on the purchaser-provider divide, is similar to changes introduced in the Netherlands, the UK, Sweden, Israel and Russia. The reforms which have been introduced in New Zealand are evaluated in terms of the eight major problems its Government sought to eradicate. It is shown that instead of mitigating these problems the reforms may worsen them, with the system becoming fragmented and less equitable. The move away from a single (tax) source of funds (i.e. the single pipe) may make cost control more difficult. The Government is seeking to address the issue of information generation to facilitate market trading but it is not clear how effectiveness and efficiency data will be produced in adequate volume and quality, let alone how it will be used to change producers behaviour. Many of the problems identified by the New Zealand Government are significant and in need of resolution. However whilst the political imperative may require immediate action, the economic case for these reforms is quite poor. Incremental change, with careful evaluation, would 'inform' policy change with knowledge of the attributes of competing management mechanisms and reward systems. Instead there is the too familiar combination of political assertions and an unwillingness to measure the impact of change, behaviours which may create the causes for the advocacy of the next 'redisorganisation' of the health care system.