Lessons from the Netherlands

An Experiment with Regulated Competition and Individual Mandates for Universal Health Care: The New Dutch Health Insurance System

By Pauline Vaillancourt Rosenau, University of Texas, Houston, and Christiaan J. Lako, Radboud University Nijmegen, the Netherlands

Journal of Health Politics, Policy and Law

December 6, 2008

The 2006 Enthoven-inspired Dutch health insurance reform, based on regulated competition with a mandate for individuals to purchase insurance, will interest U.S. policy makers who seek universal coverage. This ongoing experiment includes guaranteed issue, price competition for a standardized basic benefits package, community rating, sliding-scale income-based subsidies for patients, and risk equalization for insurers. Our assessment of the first two years is based on Dutch Central Bank statistics, national opinion polls, consumer surveys, and qualitative interviews with policy makers. The first lesson for the United States is that the new Dutch health insurance model may not control costs. To date, consumer premiums are increasing, and insurance companies report large losses on the basic policies. Second, regulated competition is unlikely to make voters/citizens happy; public satisfaction is not high, and perceived quality is down. Third, consumers may not behave as economic models predict, remaining responsive to price incentives. Finally, policy makers should not underestimate the opposition from health care providers who define their profession as more than simply a job. If regulated competition with individual mandates performs poorly in auspicious circumstances such as the Netherlands, how will this model fare in the United States, where access, quality, and cost challenges are even greater? Might the assumptions of economic theory not apply in the health sector?

http://jhppl.dukejournals.org/cgi/content/abstract/33/6/1031

Comment:

By Don McCanne, MD

Why is this article so important? Simply because there is a rapidly building momentum for similar health care reform in the United States built on a model of competing private insurance plans (possibly with a public plan offered as an additional option). The recent Dutch reform has important lessons for us.

Although the Dutch health care system was in far better shape than ours, their politicians decided that they could improve their system even more, while making it more affordable, by replacing their dual public and private insurance programs with a single market of competing private plans.

They put into place the policies (listed in the abstract above) that we are currently discussing for our reform, which theoretically would regulate the market to ensure efficiency and prevent the private insurers from gaming the system. The Netherlands has provided us with a very instructive, real-life experiment on whether competing private plans would serve us well as a model for health care financing reform in the United States.

The Dutch model was not initiated with a clean slate on policy principles. We now have decades of research and experience which should provide us with a basis for predicting, to varying degrees of certainly, the anticipated results of these policy applications.

Essentially everyone agrees that market competition fails to provide greater value and control costs when applied to obtaining care within the health care delivery system. Many still believe, however, that competition between private health plans will achieve that goal. Consumers can shop based on differences in the private plans, while the insurers can contract with the providers, demanding the value and cost containment that we seek. Or so goes the theory.

When the Dutch embarked on this reform, those understanding health policy raised many red flags. Here we’ll discuss only the basic premise that private plans are more effective in controlling costs than was the public/private dual system. After all, cost containment was given by the Dutch government as the primary reason for health financing reform.

What did those of us who were concerned about their model predict? We predicted that the private plans would not be able to control costs, that there would be consolidation of the private plans, and that health care would become even less affordable for the Dutch citizens.

After almost three years of this experiment, what has happened? Health care costs have continued to grow well in excess of the rate of inflation. Health insurers attempted to keep their premiums affordable in order to gain market share, but because of insurer losses, premium increases have been greater than would have been anticipated based on the market competition theory. In spite of these premium increases, insurer losses have been increasing. Insurers with less penetration in the marketplace are now facing the necessity of consolidation.

In another article in this same journal, Kieke Okma states, “… the trend of market concentration in Dutch health insurance and health care will likely continue. This might result in both higher prices and more-restricted access to health care services, both of which will not be too popular with Dutch patients and insured.”

Although there are many policy lessons for us in the Dutch experiment, there is one predominant message that the U.S. policy community must understand. Everyone agrees that costs absolutely must be contained, and we need to do that in a manner that repairs our fractured health care delivery system. The primary reason for the Dutch reform was this need for cost containment. But what is their position now?

According to Rosenau and Lako, “In the face of initial failure to control costs, the reaction of the Dutch government has been to reiterate its faith in the free market for health insurance and to argue that cost containment was not an important rationale for the Health Insurance Act in any case (confidential personal interview, April 13, 2007).”

With the insistence that the mandates of political feasibility require that the ideology of private plan competition displace sound health policies, the path that our national policy makers are currently negotiating places at grave risk both our finances and our health.