This site uses cookies to improve your experience and to provide services and advertising. By continuing to browse, you agree to the use of cookies described in our Cookies Policy. You may change your settings at any time but this may impact on the functionality of the site. To learn more see our Cookies Policy.
OK
Dublin: 3 °C Thursday 14 November, 2019
Advertisement

Column: Competition in our health system – it’s time for that debate

There are many reasons why competition in the healthcare sector will not work in the same way as it does in markets for other goods and services, says Brian Turner – who asks if more competition would mean better value.

Brian Turner

Health Minister James Reilly has promised that free GP care will be extended to the entire public from 2015 and universal health insurance by 2016. Figures recently released show that the numbers of people with private health insurance fell by 64,000 in 2012. So what is the future of our health service and how do insurance companies fit in?

MAJOR CHANGES ARE coming down the tracks for the Irish health system under the Government’s health reform proposals. Two of the main features of the plans are the introduction of free-at-the-point-of-use GP care for all by 2015 and universal health insurance in 2016.

The first of these would be a positive development, as over half the population currently has to pay significant out-of-pocket charges to see a GP (typically around €50 per visit) and this puts many off seeking care until their illness has progressed to the point where they need hospitalisation (a more expensive care setting). Removing this financial barrier to accessing a GP should therefore lead to long-term savings for the system, although the cost of providing this has been estimated at €389 million per annum.

Universal health insurance will rely heavily on the introduction – or enhancement – of competition, both between providers and between purchasers of care. The plans envisage hospitals competing against each other to offer value to insurers (purchasers), and insurers competing against each other to offer value to consumers (some of whom will be patients but others of whom might not need to access services)

Peculiarities in healthcare sector competition

There are many reasons why competition in the healthcare sector will not work in the same way as it does in markets for other goods and services. Firstly, demand for healthcare is a derived demand – what people actually demand is good health, but in some cases they will need healthcare to meet that demand. Secondly, demand for healthcare is uncertain for most people, as they don’t know when they will need it (unless they have a chronic condition, in which case they might be better able to predict their needs).

Thirdly and perhaps most importantly, there are information mismatches between consumers and purchasers, between purchasers and providers and between providers and patients (for example, if a doctor prescribes a particular course of treatment, most people would not have the expert knowledge to disagree, whereas the same lack of knowledge is not evident when people go to buy milk or bread).  These information mismatches can lead to market failures, as a result of which, any competitive market for healthcare or health insurance would need to be very tightly regulated.

Information on both costs and outcomes will be crucial for the benefits of competition to accrue, as will transparency of that information for both payers (insurers) and patients. This will require investment in information systems and will need skilled people to analyse the data.

Reorganisation

The reorganisation of public hospitals into hospital groups will, to an extent, create dominant regional providers, and in these circumstances it will be interesting to see how – and for what – private hospitals will compete. Competition between health insurers in Ireland in the last two decades has not led to a reduction in premiums – nor even a reduction in premium inflation – so the reliance on competition to keep costs down may be a leap of faith. Evidence from the Dutch system, on which Fine Gael modelled many of its pre-election proposals, shows a significant increase in costs after implementing a similar type of reform. This raises concerns about affordability of universal health insurance, both at an individual level and a system-wide level.

It’s time to have a national debate about the type of health system we want, and how much we are willing to pay for it, with inputs from all of the main stakeholders (providers, payers and, most importantly, patients). This would give the current and future Ministers for Health a clear mandate in terms of the system’s design.

Brian Turner is lectures on health economics, insurance economics and general economics at University College Cork.

Read: One in three families plan to give up private healthcare>

Read: Government urged to use VHI shareholding to negotiate consultant fee reduction>

  • Share on Facebook
  • Email this article
  •  

About the author:

Brian Turner

Read next:

COMMENTS (22)