Competition in the Dutch Health Care Sector

For more than two decades, Dutch health policy has been marked by a search for a suitable market order in health care. Suitable in the sense of maintaining universal access, containing the growth of health care expenditure and improving the technical and allocative efficiency of health care delivery. This search was spurred by the seemingly uncontrollable escalation of health care expenditure during the early 1970s. The solution initially put forward to control health care cost inflation was that of comprehensive government planning. Although the envisioned sophisticated health planning largely failed, the government did manage to gain substantial control over total health care expenditure by unilaterally imposing restrictions on the capacity and operating expenses of inpatient care institutions. However, the adverse consequences of such a top-down rationing strategy were the subject of growing criticism. Health care was thought to be too inefficient due to detailed government regulations which impeded cost-effective substitution of care (technical efficiency), provision of 'tailor-made' care to consumers (allocative efficiency) and quality-improving and cost-reducing innovations in the organization and delivery of care (dynamic efficiency). Since in many industries the market mechanism is seen as the most successful device for enhancing efficiency it is not surprising that the search continued in the direction of a more marketoriented health care system. Therefore, since the mid-1980s, competition has become the new 'buzzword' in health policy. This change of direction was in accordance with a much broader international reorientation of social policy under the banner of 'more market, less government' which is steadily undermining the Dutch corporatist welfare state. For a long time, however, competition was widely regarded as an unsuitable mechanism for determining resource allocation in health care. Competition was generally considered as having adverse effects on not only access and equity but also on efficiency, due to the presence of pervasive information problems. This raises the question of why the expectations on the role of competition in health care have changed and whether there is some reason behind this rhetoric. In this thesis the role and feasibility of competition in the Dutch market for health insurance and medical care are investigated. Competition is an elusive term, one which is used to describe either a particular market structure or a certain type of conduct. In the latter case, competition may cover all aspects of a commodity but could also be restricted to specific aspects, non-price competition for instance. In this thesis the term competition will be used to denote rivalry among sellers of a commodity for the patronage of potential buyers where rivalry concerns both price and non-price aspects of that commodity.