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Brief analytical summaries or syntheses #21

Managed competition in the Netherlands: an example for others ?

Summary

The introduction of managed competition in the Netherlands in 2006 fundamentally changed the roles of patients, insurers, providers and the government. This article, included in the last issue of Eurohealth, discusses the challenges presented by the introduction of managed competition in the Netherlands.

Background

After almost two decades of preparation, major health system reforms were introduced in the Netherlands in 2006. These brought important new structures and regulatory mechanisms to the Dutch health system, including managed competition among actors in health care.

The basic aims of the reform were to:

  1. contain rising health expenditures by increasing health system efficiency (i.e. higher quality at lower costs) through the introduction of managed competition; 
  2. reduce system inequities related to age, income and health status (under the new system everybody is insured under the same conditions and all health insurers are obliged to accept all individuals); and 
  3. increase transparency. The then ruling coalition of Christian Democrats and Liberals adopted a model of community-rated premiums under private law for these reforms.

Analysis and results

The legislative framework for managed competition is the 2006 Health Insurance Act (Zorgverzekeringswet, Zvw) and the Health Care Market Regulation Act (Wet marktordening gezondheidszorg, Wmg). The role of the government was changed from direct control of volumes, prices and productive capacity to ensuring quality and accessibility. Responsibilities for control were transferred to insurers, providers and the insured individuals. Interactions between these players take place in three markets: the markets for health insurance, health care provision and health care purchasing. The establishment of new ‘watchdog’ agencies in the health sector aims to avoid undesired market effects in the new system.

In this system, individuals are obliged to purchase basic health insurance from health insurers. Health insurers must compete on price and quality and they have to accept all individuals without discrimination. Tax subsidies partly compensate those on lower incomes for their health insurance costs. Health insurers can negotiate with providers on price, volume and quality of care. In this process, insurers are free to use selective contracting. Physicians are paid through a combination of capitation fees and fee-for-service. These fees are negotiated centrally between the National Association of General Practitioners, Health Insurers Netherlands and the Ministry of Health, Welfare and Sport. However, direct negotiations between insurers and physicians for lower fees is allowed. All Dutch residents contribute to this scheme in two ways: through premiums paid directly to the health insurer of their choice, and through an income-dependent employer contribution deducted through payroll.

To limit undesired market effects, the Health Care NZa, was created as an independent administrative body to supervise implementation of the Act.

 A number of problems have arisen in this type of system:

Competition on premiums led to financial problems for many insurers; a wave of mergers resulted in just four insurers having 88% of the market. Excessive tariffs led to overfunding of hospitals, which then had to be paid back. Physician payments were delayed and they received more funding than anticipated. Pervasive problems with uninsured individuals and defaulters remain.

On a positive note, although the demands on all actors have been high, the situation has never become chaotic.

Conclusion

The introduction of managed competition in the Netherlands has attracted a great deal of international attention. The implications of introducing this type of system should not be underestimated. Shifting responsibilities to market players does not mean that there is nothing left for the government to do. The Dutch experience demonstrates that even though complete chaos has not arisen, things did not turn out exactly as anticipated. Many problems have had to be solved by ad hoc measures. The experience clearly shows the need to have a strong institutional structure in place, with enough technological capacity and sufficient regulatory power to manage an innovative system. Until the system is fully implemented, it is difficult to evaluate whether managed competition is having the intended effects in terms of efficiency and quality.

Implications and recommendations

The system implemented in the Netherlands assumes that patients make informed choices when selecting their health care providers. This requires making sufficient and reliable information available for patients. Improvements in this area are needed.

The contracts negotiated by insurers focus mainly on price and volume, not on quality. Performance indicators that would enable health insurers to evaluate the quality of providers are lacking. As well, an insufficient supply of health care providers limits choice for health insurers, making selective contracting of providers uncommon.

The system for hospital financing is not yet stable and has led to overfunding and increased bureaucracy. This system will be reviewed and the new system should be implemented in 2012. The remuneration of the physicians is also problematic and their incomes have increased significantly.

Source

Managed competition in the Netherlands : an example for others ?