Competition, incentives and the English NHS

• Published in: Health economics Vol. 21; no. 1; pp. 33 - 40
• Main Author: Propper, Carol
• Format: Journal Article
• Language: English
• Published: Chichester, UK John Wiley & Sons, Ltd 01-01-2012; Wiley Periodicals Inc
• Series: Health Economics
• Subjects: Competition; Consumers; Delivery of Health Care - economics; Delivery of Health Care - organization & administration; Economic Competition - economics; Economic Competition - organization & administration; England; Health care; Health care delivery; Health care policy; Health Care Reform - economics; Health economics; Health insurance; Health services; Healthcare Disparities - economics; Humans; Incentives; Motivation; National health services; Quality of Health Care - economics; Reforms; State Medicine - economics; State Medicine - organization & administration; Studies; United Kingdom; United Kingdom > UK
• ISSN: 1057-9230; 1099-1050
• DOI: 10.1002/hec.1804

Twenty years ago, within the Organization for Economic Cooperation and Development (OECD) countries, competition in health care, on either insurer or the provider side of the health care market, was confined to the USA. Other OECD countries operated either National Health Service (NHS) type systems or social insurance. In neither of these was choice of either insurer or provider of care an important component of the health care system. In NHS type systems (e.g., the Nordic countries, Italy, Spain, the UK, Australia and New Zealand), the state (or a regional or local authority) funded and provided health care in publicly owned hospitals. In social insurance systems (e.g., France, Germany, Belgium), individuals were compulsorily covered by payroll taxes by an insurer who contracted with local providers to provide care. Choice was restricted in all these systems to richer individuals, either through a small private sector in (some of the) NHS countries or to choice of insurance for higher income earners (e.g., in the Netherlands). But in the last 20 years, competition has been widely advocated as a reform model, on the delivery side, or the insurance side, or on both. The UK has been a leader on the delivery side, trying competition on the delivery side (between hospitals) in the 1990s, with the creation of the NHS internal market in 1991, and again in England in the 2000s under first the labour administration of Tony Blair and then the current coalition government. On the insurance side, the Netherlands has been pursuing a policy of competition since the Decker plan of the 1990s and has been actively promoting competition on the delivery side since the turn of the century. New Zealand and the Nordic countries have encouraged competition on the delivery side, whereas Switzerland and Germany have introduced greater competition on the insurance side. As articulated by politicians, the appeal of competition is simple. Competition delivers greater productivity in the rest of the economy, and choice is generally valued by consumers. Extending this to the health care sector seems a logical way of improving productivity. Competition between suppliers will encourage efficiency and raise quality, whereas increasing choice will meet consumer demands for a more personalized service and, in cases where there is cost sharing, make consumers more responsive to quality and price differences. I begin a brief resumé of the main messages from the international literature drawing heavily on the study conducted by Gaynor and Town (2011) in Section II. I review the UK experience in Section III and then detail the issues where we have much less evidence in Section IV.