Book review: “The Market Reform in Dutch Health Care” by Patrick Jeurissen and Hans Maarse
But the old excuses are becoming ever less convincing. In 2021, UK healthcare spending stood at 11.9% of GDP, which exceeds Scandinavian levels. Over the past quarter-century, NHS spending per capita has doubled in real terms, even after adjusting for changes in the age profile of the population, and excluding directly Covid-related spending.
Fortunately, while it is still not widely acknowledged that there are better alternatives out there, saying so is no longer the social taboo it once was. Former Brexit Secretary David Davis MP recently wrote an article for the Telegraph entitled “An insurance-based system is the only way to save the NHS”, and former Health Secretary Sajid Javid recently argued that the UK should emulate the health systems of France or Germany. Clare Foges argued in the Times: “The social insurance systems of many European nations offer a high standard of healthcare and swift access for all. […] Anyone who has needed medical help in France or Germany will attest to the quality.” Her colleague Melanie Phillips wrote in the same paper: “[T]here is a better alternative. This is […] European social insurance.”
These are not fringe voices. If Times journalists and former Secretaries of State can openly articulate these ideas, it is safe to say that they have entered the Overton Window.
But what is holding these conversations back is that the NHS’s critics usually cannot tell us a great deal about how their preferred alternative actually works, let alone how to get there. After the experience with Brexit, we can see why people might be a little wary of proposals for radical change without a clear transition plan.
It is with this in mind that the book The Market Reform in Dutch Health Care by Patrick Jeurissen and Hans Maarse might be of interest to some of our readers. The health system of the Netherlands is a market-oriented social insurance system – but it has not always been that way. The current system is the result of a series of liberalising reforms. This book tells the story of how these reforms came about, what the transition from the old to the new system looked like, what has happened since then and how much of that can be attributed to the market reforms, what lessons this offers for other countries, and what the future might hold for that system.
The Netherlands never had a state-run health service. They have long had an insurance system of sorts (which is older than the British NHS), and the vast majority of healthcare provision has always been private. So the market reforms did not mean “privatisation”.
But historically, the system used to be so tightly state-controlled that they might as well just have nationalised it, and establish an NHS. Until the early 1990s, people could not choose their own health insurer (they were regional monopolies), and insurers could not set their own premiums. Even after that, healthcare remained a highly standardised product. All insurers offered the same benefit package with minimal variation; they all contracted with the same healthcare providers, and they all used the same reimbursement formulas to pay them. That all changed from 2006 onwards, when, step by step, the actors in the health system were given greater freedom to arrange their own contractual relations as they saw fit. As a logical correlate, they also had to take greater responsibility for their own finances, including the risk of bankruptcy.
State hospital planning, for example, was abolished in 2008. The state no longer has control over where hospital capacity should expand, and where it should be scaled back.
There have been four hospital bankruptcies since then. Two of them were not a big issue, because the functions performed by those hospitals were immediately absorbed by competitors. The other two, however, caused a major political backlash, and yet, the government stood firm, resisting the pressure to bail them out.
Is the new system working, overall?
Broadly, yes – but for free-marketeers, not every passage of the book makes for comfortable reading. Healthcare markets do not quite work out in the way the textbook model would predict. Switching rates between insurers, for example, remain fairly low, and multiple prices exist for near-identical insurance products. Low-cost insurance options, which involve limitations in provider choice, are available, but few people make use of them. Selective contracting has been limited in practice as well. The idea is that high-performing healthcare providers win more contracts, while poorly performing ones keep losing them. This can happen, but most of the time, every major hospital is virtually guaranteed a contract with every major health insurer. Health insurers are supposed to act as specialised purchasers representing their clients’ interests vis-à-vis providers, but surveys show that people trust healthcare professionals far more than health insurers. This limits what insurers can do when trying to reconfigure health service delivery. The reforms have not created a dynamic market with frequent entries and exits. There has been substantial consolidation in the health insurance market, but only two new entrants have established themselves. There has been a proliferation of new treatment centres, but they have not grown big enough to challenge the market power of established hospital providers.
Politically, market reforms in healthcare are far less controversial in the Netherlands than they are in the UK. Nonetheless, the authors show that the new system has its critics, and that the public’s acceptance of liberalisation has probably been stretched as far as it can. There is, they believe, almost no chance that this reform programme will be taken any further, and a realistic chance that some of it will be rolled back again.
But if the system is some way away from what free-market economists might have hoped for, it is still a lot closer to that than to the caricature of private health systems which exists in the minds of NHS worshippers. The system offers a high standard of healthcare to everyone at a spending level similar to the UK’s. Outcomes are better across the board, waiting times are shorter, and the system has a degree of independence from politics that is unimaginable with the NHS. Freedom of choice exists in a meaningful sense for those who want to make use of it (and if most people don’t want to, that need not be a problem either). Even some of the more plausible critiques of market systems do not hold water. For example, the authors show that it is not true that competition gets in the way of cooperation. Dutch healthcare providers clearly compete with each other for patients, but they also cooperate where they have common aims (a phenomenon described as “coopetition”).
Readers who (like me) were hoping for clear empirical results of what has worked and what has not will be somewhat disappointed, although that is not the authors’ fault. Empirical evidence is still scant, and inconclusive.
Overall, this book is a comprehensive, accessible and balanced account of a system which offers valuable lessons, and which deserves to be more widely known.