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 Competition in health care

Competition in health care

Competition can be used in both health care finance (i.e. supply) and delivery. Competition on the finance side is essentially the use of competition between providers of insurance for either corporate or individual business. Conversely, competition on the delivery side is the use of competition between suppliers of health care, where these may be either primary, secondary and/or tertiary care providers.
Competition between firms to supply insurance or health services may be accompanied by consumer choice, but the two are not equivalent. For competition to exist on the insurer side of a health care market, consumers (or their employers) must have a choice of options provided by more than one insurer. However, competition on the delivery side may involve direct user choice, but it may also not. In many cases in which competition between suppliers of health care has been introduced, a third party may make decisions for patients as to where they access care. In systems in which patients are covered by insurance, the insurers may offer contracts which restrict the set of health care suppliers that the insured individual may use. An example of an insurance model in which choice is very limited at point of demand is the health maintenance organisation model, which limits the physicians and hospitals that patients can select at point of care use. Where competition between suppliers of health care has been introduced into tax financed systems, often the choice of hospital and tertiary suppliers of health care is made by primary care physicians, not by the patient themselves, and in addition the patients may have limited choice of primary care physicians.
The United States has competition (and patient choice) on both sides of the market. Insurers compete for corporate and individual buyers and negotiate with competing suppliers to provide health care. Contracts on both sides are often very complex and one of the aims of the Affordable Care Act of 2010 (often known as ObamaCare) was to promote competition on the insurance side by providing consumers, through insurance exchanges, with less complex insurance contracts.
In Europe, pro-competitive reforms in the finance of health care (i.e. on the insurance side) have taken place in those health care systems where finance is provided by means of social insurance. These systems traditionally have had consumer choice of provider at the point of use. In recent years, many of these countries have faced strong cost containment issues. In response, Germany, and the Netherlands in particular, have sought to introduce choice on the financing side, in the shape of promoting competition between insurance funds. Switzerland and, to a limited extent, France have followed a similar path (Costa-Font and Zigante, 2012). Universality of coverage is maintained through continued compulsory insurance.
In contrast, in health care systems where finance is provided through taxation (e.g. United Kingdom, the Nordic countries, Spain, Portugal and Italy), there has been traditionally little choice of provider offered to consumers. These countries have reformed by promoting increasing levels of choice for consumers by separating the finance and delivery of health care and allowing and encouraging competition between suppliers, either of hospital-based services and/or community-based services, whilst maintaining universal coverage through taxation. The arrangements are sometimes referred to as ‘quasi-markets’ (Le Grand and Bartlett, 1993).
While the precise mechanisms vary across countries, reforms aimed at encouraging competition in supply include three components: first, decentralisation of decision making (perhaps from national to local level, or from administrative bodies to the suppliers of care); second, the promotion of competition between suppliers (e.g. by making public providers into free-standing organisations with harder budget constraints); and third, changes in payments/incentives for suppliers of care (e.g. the introduction of prospective payment systems that pay suppliers a fixed-fee per type of treatment ex-ante).

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