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Selective contracting: a key element of the Dutch health
care reforms
Vertragsfreiheit: ein sinnvoller weg fur das Schweizer Gesundheitswesen?
Zurich, 13jan05
Wynand P.M.M. van de VenProfessor of Health Insurance
Department of Health Policy and ManagementErasmus University Rotterdam
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Dutch health care system• health care costs 2004: 10% GNP;• much private initiative and private
enterprise;• much (detailed) government regulation;• GP-gatekeeper;• seperation of finance and delivery of
health care;• nearly the whole population has health
insurance.
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Role of government1865: Act on Medical Licenses1941: Sickness Fund Act1968: Exceptonal Medical Expenditures Act1971: Hospital Facilities Act1982: Health Care Tariffs Act1985: Health Care Facilities Act1986: Act on Access to private health
insurance 1988: “Dekker Reforms”1998: New Competition Act
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Dutch Health Insurance System 2004
National Health Insurance for Catastrophic Risks (AWBZ)
Supplementary Insurance
Sickness Fund Insurance (mandatory)
Private Health Insurance(voluntary)
4%
52%
46%
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Why Dekker reforms? • uncoordinated financing structure;• lack of incentives for efficiency;• detailed government regulation:
unworkable;• problems with Dutch health insurance
system.
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Dekker-reform proposal (1987)
• compulsory health insurance for everyone;
• regulated competition:
- among insurers;
- among providers of care.
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Insurer as purchaser of care
Insurer
Consumer Provider of care
Insurancepolicy
contract
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Central Fund
Consumer
Sickness Fund
income-related contribution
risk adjusted premium subsidy
The Dutch mandatory sickness fund insurance
premium contribution
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Dutch system:
consumer premium
subsidycontribution
Swiss system:Central fund
subsidycontribution
consumer insurerpremium +contribution
Central fund
insurer
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Rationale
The rationale is to stimulate the sickness funds to improve efficiency in health care production and to respond to consumers’ preferences.
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Explicit choice
Who is the third-party purchaser of care:
1. Government, or a cartel of sickness funds;
2. Individual risk-bearing sickness funds.
In the first option it is hard to think of any rational argument for giving consumers a periodic choice among risk-bearing sickness funds.
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Towards regulated competitionAccording to the declaration of policy of the Dutch government (May 2003): “The central planning by government has failed
and will be replaced by regulated competition as soon as justifiable”.
With these last 4 words, government on the one hand stresses the urgent need for reform and on the other hand indicates that not all preconditions for regulated competition are yet fulfilled.
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Proposed changes from 01jan06
• In sep04 Government submitted a Health Care Insurance Bill to Parliament proposing a mandatory health care insurance for the whole population from 01jan06;
• No distinction between SF (10 mln.) and private health insurance (6 mln.).
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Preconditions Managed Competition
• Selective contracting;• Sufficient freedom in contracting (price,
quality);• Prices must reflect costs;• Adequate competition policy;• Good risk adjustment (or risk
equalization);• Consumer information (price, quality).
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What has been realised?
• Selective contracting with individual providers (1992);
• Maximum rather than fixed fees (1992);• Consumer choice among risk-bearing
sickness funds (1992);• Risk-adjusted premium subsidies (1992);• Competition Act (1998).
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Managed Care• From 2002 sickness funds and hospitals are
allowed to set up new pharmacies. Some sickness funds and some hospitals do it (sometimes together).
• From 2003 sickness funds have some flexibility in purchasing (on average at most for about 60 euro per insured per year) health care outside the defined benefits package and not subject to the national price-regulation.
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Managed Care (2)• From 2003 sickness fund are allowed to set up
outpatient primary care centres. Some sickness funds do it.
• From 2005 prices for physiotherapy will be free;• From 2005 hospitals will be paid on the basis of so-
called Diagnostic-Treatment-Combinations (DTCs);• From 2005 for 10% of these DTCs sickness funds
and hospitals are allowed to freely negotiate prices and to selectively contract. Contingent on the results this percentage may further increase.
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Competition policy• Since 2000 we see a more active role of the
Competition Authority in health care, both on the insurance market and the provider market.
• In the period 2000-2003 the Competition Authority focussed its attention primarily on outpatient care.
• Recently the Competition Authority also focusses on (mergers of) hospitals.
• The health care sector is a priority on the 2004-agenda of the Competition Authority.
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Dutch Health Care Authority ( > 2006)
• Responsible for managing the competition among health care providers / insurers;
• Supervises (sub)markets in health care (costs, prices, contract conditions);
• Supervises the heath care insurance market;
• Close cooperation (and in the long run a potential merger) with the Dutch Competition Authority.
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Dutch system:
consumer premium
subsidycontribution
Swiss system:Central fund
subsidycontribution
consumer insurerpremium +contribution
Central fund
insurer
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Are age and gender sufficient?
If the premium subsidies are based on only age and gender, then an insurer will, roughly speaking, make:
–a predictable loss of about 100% for the 10% of the population with the worst health status;
–a predictable profit of about 25 to 40% for the healthiest half of the population.
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Selection activities
• selective contracting;• limited provider plans (HMOs/PPOs);• other managed care techniques;• design of benefits package;• supplementary health insurance;• selective advertising;• virtual (internet) sickness fund;• employer-related (group) sickness fund.
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amAdverse effects of selection
Selection may threaten• Good quality care for the
chronically ill;• Solidarity;• Efficiency.
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amRisk adjusters in the Netherlands
Year New risk adjuster
1992 Age/gender1995 Region,
Being an employee (yes/no),Disability
1997 Age/disability2002 Pharmacy-based Cost Groups (PCGs)2004 Diagnostic Cost Groups (DCGs)
Being self-employed (yes/no)
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amAdditional annual premium subsidy
Risk GroupAdditional annual
premium subsidy (in €)
DCG 0 Reference group 07 Brain injury 17359 Colon cancer 2261
11 Liver disorders 348712 Rectal cancer 363613 Congestive heart failure 357814 Hypertension, complicated 449115 Neurologic disorders 539016 Brain / nervous system cancers 616519 Chemotherapy 759120 Diabetes with chronic complications 728821 Pulmonary fibrosis and
brochiectasis8603
22 HIV / AIDS 978023 Renal failure / nephritis 24020
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Additional annual premium subsidy Risk Group Additional annual premium
subsidy (in €)PCG 0 Reference group 0
1 Asthma / COPD 8762 Epilepsy 10513 Rheumatism 11764 Heart diseases 14955 Crohn’s disease/ c.
ulcerosa1538
6 Stomach diseases 19327 Diabetes (insuline
dependent)2807
8 Parkinson 26539 Organ transplants 4363
10 Cancer 479611 Cystic fibrosis 538212 HIV / AIDS 1145513 Kidney problems 18225
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• Dutch health care : towards regulated competition;
• Selective contracting : a key component of regulated competition;
• Essential preconditions for regulated competition:– Adequate competition policy;– Good risk adjustment / risk equalization.
