1. Erasmus University Rotterdam The Dutch Reforms, Gresham College, London, 27jan11 1 Choice of providers and mutual healthcare purchasers: the Dutch reforms Gresham College 27 January 2011 Wynand P.M.M. van de Ven Erasmus University Rotterdam vandeven@bmg.eur.nl

2. Erasmus University Rotterdam The Dutch Reforms, Gresham College, London, 27jan11 2 The Netherlands Kaartje Europe

3. Erasmus University Rotterdam The Dutch Reforms, Gresham College, London, 27jan11 3 Three waves of health care reforms In many OECD-countries three consecutive waves of health care reforms can be discerned: 1.Universal coverage and equal access; 2.Controls, rationing, and expenditure caps; 3.Incentives and competition. David Cutler, Journal of Economic Literature 2002(40) 881-906.

4. Erasmus University Rotterdam The Dutch Reforms, Gresham College, London, 27jan11 4 Key elements of reform debate 1.Who is the purchaser of care on behalf on the consumer? 2.Yes/No competition among: –Providers of care? –Purchasers of care (= insurers)? 3.Which benefits package? Which premium structure?

5. Erasmus University Rotterdam The Dutch Reforms, Gresham College, London, 27jan11 5 Dutch health care system Health care costs 2006: 10% GDP; Much private initiative and private enterprise: physicians, hospitals, insurers; Still much (detailed) government regulation; GP-gatekeeper; Health insurance before 2006 a mixture of:  mandatory public insurance (67%),  voluntary private insurance (33%). From 2006: mandatory private insurance (100%).

6. Erasmus University Rotterdam The Dutch Reforms, Gresham College, London, 27jan11 6 Reforms since the early 1990s The core of the reforms is that:  Risk-bearing insurers will be the purchasers of care on behalf on their members;  Government will deregulate existing price- and capacity-controls;  Government will “set the rules of the game” to achieve public goals.

7. Erasmus University Rotterdam The Dutch Reforms, Gresham College, London, 27jan11 7 Health Insurance Act (2006) Mandate for everyone in the Netherlands to buy individual private health insurance; Standard benefits package: described in terms of functions of care; Broad coverage: e.g. physician services, hospital care, drugs, medical devices, rehabilitation, prevention, mental care, dental care (children); Mandatory deductible: €165 per person (18+) per year.

8. Erasmus University Rotterdam The Dutch Reforms, Gresham College, London, 27jan11 8 Consumer choice Annual consumer choice of insurer and choice of insurance contract: –in kind, or reimbursement, or a combination; –preferred provider arrangement; –voluntary higher deductible: at most €650 per person (18+) per year; –premium rebate (<10%) for groups. Voluntary supplementary insurance.

9. Erasmus University Rotterdam The Dutch Reforms, Gresham College, London, 27jan11 9 Health Insurance Act (2) Much flexibility in defining the consumer’s concrete insurance entitlements; Selective contracting and vertical integration in principle allowed; Open enrolment & ‘community rating per insurer’ for each type of health insurance contract; Subsidies make health insurance affordable for everyone; Risk equalization.

10. Erasmus University Rotterdam The Dutch Reforms, Gresham College, London, 27jan11 10 Risk Equalization Fund (REF) premium (18+) REF-payment based on risk adjusters REF Insured Insurer Income-related contribution Gov’t contribution (18-) (50%) (45%) Two thirds of all households receive an income-related care allowance (at most € 1,464 per household per year, in 2008) ) (5%)

11. Erasmus University Rotterdam The Dutch Reforms, Gresham College, London, 27jan11 11 Regulated Competition Competition among health insurers: consumers have a periodic choice among health insurers or ‘health plans’ (‘organizations in which insurer and providers are integrated’); Competition among providers of care: insurers may selectively contract with providers; Not a free market; regulation to achieve society’s goals.

12. Erasmus University Rotterdam The Dutch Reforms, Gresham College, London, 27jan11 12 Evaluation Health Insurance Act dec09 The HI Act-2006 is a succes in the sense that: No political party or interest group has argued for a return to the former system with a distinction between sickness fund and private health insurance. There is broad support for the option to annually choose another insurer or health insurance contract.

13. Erasmus University Rotterdam The Dutch Reforms, Gresham College, London, 27jan11 13 Positive effects Good system of cross-subsidies (‘solidarity’); Standard benefits package available for everyone, without health-related premium; Annual choice of insurer/contract; Strong price competition among the insurers; Increasing information about price and quality of insurers and providers of care); Increasing insurers’ activities in purchasing care; Quality of care is on top of the agenda.

14. Erasmus University Rotterdam The Dutch Reforms, Gresham College, London, 27jan11 14 Preconditions managed competition 1.Risk equalization 2.Market regulation: a.Competition Authority; b.Quality Authority; c.Solvency Authority; d.Consumer Protection Authority; 3.Transparency a.Insurance products (Mandatory Health Insurance & Voluntary Supplementary Insurance) b.Medical products

15. Erasmus University Rotterdam The Dutch Reforms, Gresham College, London, 27jan11 15 Preconditions managed competition 4.Consumer information; 5.Freedom to contract; 6.Consumer choice of insurer; 7.Financial incentives for efficiency; a.Insurers; b.Providers of care; c.Consumers; 8.Contestable markets: a.(sufficient) insurers; b.(sufficient) providers of care.

16. Erasmus University Rotterdam The Dutch Reforms, Gresham College, London, 27jan11 16 Are the preconditions fulfilled? Precondition1990 (SF) 2010 Risk equalization - + Market regulation: Competition Authority; Quality Authority; Solvency Authority; Consumer Protection Authority; - + NA + Transparency Mandatory Health Insurance Voluntary Supplementary Insurance Medical products + - + - - / +

17. Erasmus University Rotterdam The Dutch Reforms, Gresham College, London, 27jan11 17 Are the preconditions fulfilled? Precondition1990 (SF) 2010 Consumer information- - / + Freedom to contract- - / + Consumer choice of insurer- + Financial incentives for efficiency: Insurers; Providers of care; Consumers; - - / + + Contestable markets: (sufficient) insurers; (sufficient) providers of care. - + - / +

18. Erasmus University Rotterdam The Dutch Reforms, Gresham College, London, 27jan11 18 Key issues Insurers are reluctant to selectively contract because of a lack of information on the quality of the (selected) providers of care; Good risk equalization is a precondition to make insurers responsive to the preferences of the chronically ill people; Who bears responsibility if a hospital goes bankrupt: government or the insurers? Supplementary insurance should not hinder chronically ill people to switch insurer; Managed competition under a global budget?

19. Erasmus University Rotterdam The Dutch Reforms, Gresham College, London, 27jan11 19 Conclusions Evaluation of Health Insurance Act: On balance positive, despite some serious problems. So far the reforms were focussed on the health insurance market; Although insurers have some degree of freedom to contract with providers of care, there is still a lot of government regulation with respect to prices. The next years the reforms will focus on the provider market.

20. Erasmus University Rotterdam The Dutch Reforms, Gresham College, London, 27jan11 20 Challenges Are insurers capable of being a prudent buyer of care on behalf of their insured? –If NOT, what then is the rationale of a competitive insurance market with all problems of risk selection? Is government prepared to give up its traditional tools (i.e.: supply-side regulations) for cost containment? The Dutch health care reform is work-in- progress. So far, the jury is still out.