Preconditions for efficiency and affordability in competitive healthcare markets: are they fulfilled in Belgium, Germany, Israel, the Netherlands and Switzerland?

Context: From the mid-1990s several countries have introduced elements of regulated competition in healthcare. The aim of this paper is to identify the most important preconditions for achieving efficiency and affordability under regulated competition in healthcare, and to indicate to what extent these preconditions are fulfilled in Belgium, Germany, Israel, the Netherlands and Switzerland. These experiences can be worthwhile for other countries (considering) implementing regulated competition (e.g. Australia, Czech Republic, Ireland, Russia, Slovakia, US).

Methods: We identify and discuss ten preconditions derived from the theoretical model of regulated competition and assess the extent to which each of these preconditions is fulfilled in Belgium, Germany, Israel, the Netherlands and Switzerland.

Findings: After more than a decade of healthcare reforms in none of these countries all preconditions are completely fulfilled. The following preconditions are least fulfilled: consumer information and transparency, contestable markets, freedom to contract and integrate, and competition regulation. The extent to which the preconditions are fulfilled differs substantially across the five countries. Despite substantial progress in the last years in improving the risk equalization systems, insurers are still confronted with substantial incentives for risk selection, in particular in Israel and Switzerland. Imperfect risk adjustment implies that governments are faced with a complex tradeoff between efficiency, affordability and selection.

Conclusions: Implementing regulated competition in healthcare is complex, given the preconditions that have to be fulfilled. Moreover, since not all preconditions can be fulfilled simultaneously, tradeoffs have to be made with implications for the levels of efficiency and affordability that can be achieved. Therefore the optimal set of preconditions is not only an empirical question but ultimately also a matter of societal preferences.