In a previous post one of us (Gaynor) examined some evidence
on whether price controls are effective in slowing the rate of growth of health
care spending, and how they compare with competition in private markets. In
this post we examine some evidence from the Netherlands that may bear on the
matter. In the previous post a data point from the Netherlands was shown as
part of an international comparison, but it’s worthwhile to examine the Netherlands experience a bit
further. The Netherlands is particularly interesting because they have employed
rate setting in health care and subsequently deregulated much of their health
sector to allow prices to be market determined. The question of whether the end
of rate setting and the introduction of competition raised or lowered health
care costs and prices in the Netherlands is hotly debated.
The article
by Steven Brill in Time also led also to a lot of discussion in the
Netherlands. Rob Wijnberg (former editor of the important Dutch Newspaper
NRC-next) tweeted, “brilliant article about the reasons why competition in
health care doesn’t work" (https://twitter.com/robwijnberg,
Feb 26, translation M. Mikkers).
Health reform in the Netherlands has been gradual and has
had a number of different elements. Initially competition in health insurance
was introduced (with an individual mandate), while maintaining rate setting for
providers. A partial and gradual deregulation of provider prices followed. For
hospitals some services have been deregulated (this is called the B Segment)
and some services remain under price controls (the A Segment). The proportion
of services in the deregulated B Segment has increased over time. In 2005 8% of
hospital services were in the B-segment. This percentage then increased to 20%
and 30% in 2008 and 2009 respectively. In 2012 virtually all elective care (70%
of hospital services) was in the B segment.
The figure below
(source: Market Scan Hospital Market 2011, Netherlands Healthcare Authority [in Dutch]) shows the percentage change in hospital prices over time in the price
controlled A Segment and deregulated B Segment. As can be seen, growth in the
deregulated segment, where prices are market determined, is substantially lower
from about 2006-2007 onwards. In fact, from about 2008-2009 to 2010-2011 prices
were falling in the deregulated segment while they were still growing in the
price controlled segment. This doesn’t necessarily mean that competition
controls prices and rate setting does not (lots of other things could be going
on), but neither do we see what we’d expect if rate setting was doing a
superior job of controlling prices.
The next figure (below, source: CBS [Dutch Central Bureau of Statistics] ) shows the growth rate in hospital spending in the Netherlands in the period
before rate deregulation (2001-2005) and after deregulation began (2006-2011).
The average annual growth rates between the two periods are virtually
indistinguishable. Again, this isn’t scientific proof that rate setting doesn’t
control costs (either in general or in the Netherlands), but there’s no slam
dunk for rate setting in the patterns that we observe. We may be able to see
more interesting patterns in the future. By 2014 and 2015 virtually all prices
for elective care will have been deregulated and all parties in the market will
be fully exposed to the consequences of their (price) negotiations. 
In sum, the Netherlands is a good place to look for the
effects of rate setting versus markets on prices and spending, since they have
employed both. A quick look at some descriptive statistics doesn’t yield any
slam dunks for rate setting. If anything, shifting to markets may have substantially
reduced price growth. However, careful study will be required in order to draw
firmer conclusions. Last, while we believe that there are lessons for the US
from experiences in other countries (and vice versa), we do have to be cautious
in making strong inferences across very different health care systems and
societies.
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