E&F - lecture 11 Flashcards
Rationale third-party in health care
- Risk and uncertainty;
- We do not know when we get sick and what will be expenses and therefore there is a demand for insurance, thus a third party - Information asymmetry;
- Providers have more knowledge SID Supply induced moral hazard third party needed to counteract these undesired effects - Externalities (e.g. “altruïstic preferences”; contagious diseases).
Main functions for third parties in hc
- Insurance function;
- Agency function;
– reducing moral hazard;
– providing information about the quality of care;
– being a prudent buyer of care on behalf of the consumer; - Access function: to guarantee universal access to basic health services.
Major goal of healthcare reforms
Major goal of healthcare reforms:
Ø in many European / OECD countries: a Third Party acting as an effective agent on behalf of the consumer (the second function);
Ø in low-income countries: all three functions!
Who can perform third-party role?
- Insurance companies;
- Employers;
- Unions;
- Providers of care (e.g. polyclinic-fundholder);
- Integrated insurer-provider organisations;
- Government (national, regional and local).
Three models of paying providers by third-party payers (“insurers”):
a. reimbursement model;
b. contract model;
c. Integrated model.
Reimbursement model
- Consumer pays premium
- Consumer provides care and gets bill
- Consumer informs insurer of expenses
- Insurer reimburses to the consumer
- Consumer pays provider
- No contact between provider and insurer: supplier induced moral hazard, no influence on the delivery of health care
- Insurer: third party payer
- Examples mandatory: France
Contract model
- Between insurer and provider: contracts
- Insurer: purchaser of care on behalf of enrollees
- There are a lot of transaction costs: negotiation
- Examples mandatory: Germany and the Netherlands
Integrated model
- Insurer and provider for one organization (to reduce transaction costs)
- Examples mandatory: southern and northern European countries
From contract to integrated: competitive market
From integrated to contract: monopolistic market
Aspects crucial for the functioning, regulation and classification of healthcare systems:
- Yes/no competition among the third-party-payers?
- Yes/no competition among the providers of care?
- Which type of payment from the third-party payer to the providers of care?
Other aspects crucial for the functioning and regulation of healthcare systems:
- Who is the third-party payer/purchaser?
- Voluntary or mandatory health insurance?
- Which benefits are (not) covered?
- Cost sharing: how much? which forms?
- Yes/no for-profit insurers and/or providers of care?
Model 1b or Model 2b?
- Purchaser power;
- largest in 2b
- Transaction costs;
- Larger in 1b
- Coordination of local health care delivery;
- In 1b
- Incentive for third-party purchaser to act as an agent on behalf of the consumer;
- Strong in 1b
- Incentives for risk rating or –in case of premium rate restrictions- incentives for risk selection.
- Issue in 1b, not in 2b
We cannot say 1 is better than the other
(Dis)advantages model 4
- Advantages model 4: strong ability to contain costs (e.g. budgeting), low administrative costs, relative simple legislation/regulation;
- Disadvantages model 4: lack of incentives for efficiency, for innovation and for consumer responsiveness; bureaucracy, fiscal underfunding, waiting lists.
(Dis)advantages model 2
- Advantages model 2: providers have incentives for efficiency, for innovation and for consumer responsiveness;
- Disadvantages model 2: third-party purchasers have no/weak incentives for efficiency, for innovation and for consumer responsiveness;
high transaction costs of contracting; complex regulation.
(Dis)advantages model 1
- Advantages model 1: both third-party purchasers and providers have incentives for efficiency, for innovation and for consumer responsiveness;
- Disadvantages model 1: high transaction costs of contracting; incentives for risk selection; complex regulation.
Model 1c
Model 1c = Enthoven’s model of ‘Managed Competition of Alternative Delivery Systems’ (e.g., HMOs).
Advantages of an HMO (health maintenance organization):
* One information system that all doctors and nurses use;
* Good coordination of care;
* Good planning of healthcare facilities;
* Low contracting costs;
* Incentives to avoid complications (= extra costs);
* Incentives to invest in prevention & health maintenance.
Typology of health care systems
- Traditional sickness fund insurance (Bismarck model)
- National health insurance
- National health services (Beveridge model and semashko model)
- Mixed systems
Bismarck system (1883)
- Contributions form both employers and employees
- Contracts between sickness funds and providers of care
- Compulsory for workers with an income below a certain level
- Government determines the conditions that govern the relations between sickness funds, providers and consumers.
- Original roots in work-related insurance, mostly up to a certain income.
- Extension of Bismarck system to population-wide coverage:
o Switzerland (1996);
o Belgium (1998);
o France (2000);
o The Netherlands (2006).
Semashko system (1918)
- Highly centralized, funded by the state budget
- Free access to health care for all
- Facilities are state-owned and managed by district and regional authorities
- Population allocated to the outpatient clinic in its area; no free choice of doctor
- Hospital and outpatient clinics are budgeted
- Physicians are salaried
- Physicians ask for gratuities
- Separate medical facilities for industrial workers
Beveridge system (NHS, 1948)
- Centralized and funded by the state
- (nearly) free access to health care for all
- Facilities are state-owned and budgeted
- Hospital physicians are salaried
- Government regulation less strong than in semashko systems
- Some room for private services and private health insurance
- General practitioner: contract with the NHS
no extensive occupational health care sector
Typology of health care systems (Toth)
Toth (2016) discern:
- three ideal types of financing systems:
– Voluntary insurance
– Social health insurance
– Residual programs - and two additional models:
– Compulsory national health insurance
– Universalist system.
Typology of health care systems (Toth)
Five different financing models:
- Voluntary insurance
1. Citizens are free to obtain coverage, or pay out-of-pocket;
2. Competing private insurers, risk rating; - Social health insurance
1. e.g., Bismarckian system;
2. Mandatory for certain categories of workers;
3. Contribution related to salary;
4. Workers assigned to non-competing sickness funds; - Residual programs
1. Financed by the community, but only available to particular categories;
2. e.g., elderly, low-income, serious disease, minors, … - compulsory national health insurance
1. The state requires all residents to take out private health insurance covering essential health services;
2. Competing private insurers;
3. Subsidies for low-income citizens;
4. Multi-payer system. - Universalist system
1. Single-payer system;
2. For the entire population;
3. Right to health care is linked to being a resident;
4. Mandatory contributions.
As an additional criterion Toth (2016) discern integrated versus separated models:
Ø Integrated model
Ø Insurers provide most of the care needed by their policy holders directly through their own facilities and healthcare personnel.
Ø Insurer and providers coincide, constituting a single organization.
Ø Sperated model
Ø Insurers and providers are functionally separated;
Ø Insurers reimburse the expenditures of health care.
Three waves of health care reforms
- Universal coverage and equal access;
- Controls, rationing and expenditures caps;
- Incentives and competition.
Features & Problems after the first wave
- Common features:
– mandatory comprehensive coverage;
– limited co-payments;
– free choice of health care providers;
– open-ended financing system. - Common problem:
– uncontrollable health care cost inflation;
– (due to) the absence of constraints on demand and supply.
Second wave: cost containment
- Introduction of constraints on demand:
- co-payments, coinsurance and deductibles;
- moderately used in most G7-countries.
- Introduction of constraints on supply:
- control of capacity and entry;
- rate regulation;
- overall expenditure caps for health professionals;
- global budgeting of hospitals;
- extensively used in all G7-countries.
Problems after the second wave
- Increasing conflicts between rationing policies and the “right” to health care;
- Supply and price regulation result in inefficient allocation of resources (government failure);
- Supply and price regulation cannot contain long-run cost growth;
- A lack of incentives for efficiency!
Third wave: incentives and competition
- At the patient level (at the time that services are used);
- Competition at the level of insurance purchase (rather than at the time of services used);
- Incentives within the provider community.
From model 2b towards model 1b
Possible transition paths:
1. Monopolistic insurer & several branches, that over time become independent;
2. Give choice to groups of insured;
3. Give consumers the option to conclude a contract with a neighbouring ‘purchaser’;
4. Coalitions of GP-fundholders;
5. Give consumers the option to opt-out.
Dutch health care system
- Much private initiative and private enterprise: physicians, hospitals, insurers;
- Still much (detailed) government regulation;
- GP-gatekeeper;
- Health insurance before 2006 a mixture of:
Ø mandatory public insurance (67%),
Ø voluntary private insurance (33%). - From 2006: mandatory private insurance (100%).
Reforms since the early 1990s
The core of the reforms is that:
Ø Risk-bearing insurers will be the prudent buyer of care on behalf on their members;
Ø Government will deregulate existing price- and capacity-controls;
Ø Government will “set the rules of the game” to achieve public goals: access, affordability, good quality.
Health Insurance Act (since 01jan06)
- Mandate for everyone in the Netherlandsto buy individual private health insurance from a private insurer;
- Standard benefits package;
- Broad coverage: e.g. physician services, hospital care, drugs, medical devices, rehabilitation, prevention, mental care, dental care (children);
- Mandatory deductible: €385 (in 2018) per person (18+) per year.
- Individual insurer is assumed to be(come) the prudent buyer of care;
- Much flexibility in defining the consumer’s concrete insurance entitlements;
- Selective contracting insurers - providers;
- Open enrolment & ‘community rating per insurer’ for each type of health insurance contract;
- Income-related care allowances per household;
- Risk equalization.
Consumer choice
- Annual consumer choice of insurer and choice of insurance contract:
– in kind, or reimbursement, or a combination;
– preferred provider arrangement;
– voluntary additional deductible: at most + €500 per person (18+) per year. - Voluntary supplementary insurance.
Regulated Competition
- Competition among health insurers:
consumers have a periodic choice among health insurers or ‘health plans’ (‘organizations in which insurer and providers are integrated’); - Competition among providers of care:
insurers may selectively contract with providers; - Not a free market; regulation to achieve society’s public goals.
