Health Reforms in England

The King’s Fund, London, 23 March 2011

Dr. Jan-Kees Helderman

Department of Public Administration & Political Science

Views from a Dutch perspective

Changing the Rules or the Game?

Liberating the NHS?

Revisiting Kenneth Arrow (1963)

“The problem with health care is that the social adjustment towards optimality will always put obstacles in its own path because of the uncertainty and non-marketability of the bearing of risks and the imperfect marketability of information. As a consequence, health care systems will always be confronted with second-best solutions in the form of compensatory institutional structures.”

• There are no Pareto optimal solutions for an equitable, efficient and affordable health care system

• So under what conditions can choice and competition become part of the second-best solution?

This depends on the institutional structures of the system and country at stake and our capabilities to reform them

Each system has its own rationale:

• Bismarckian health care systems and Beveridge systems evolved into different institutional configurations.

• Beveridge NHS system: • Tax funded National Health System• Purchaser / provider split: internal market

• Bismarckian Social Health Insurance system Sickness funds & for-profit health insurers (de-facto universal) Non-profit private providers National Health Insurance & regulated competition

• Both aim to address quality / equity / efficiency and costs by combining command & control / competition and collaboration

(Source: Davis K., Schoen, C., Stremikis, K (2010) Mirror, Mirror on the Wall, Commonwealth Fund)

A corporatist – Bismarckian – health insurance system

• Sovereignty and subsidiarity: corporatism

- What can be delivered in the private sphere should not be undertaken by the government

- Predominantly public financed and private delivery of health care

- Third party payer: sickness funds and private for-profit health insurers

- Independent not-for-profit health care providers

• The Dutch state is responsible for access, affordability and quality of health care, but not equipped to accomplish these responsibilities under its own strength

Private health insurance

White paper: Health on Demand (2001)

Simons-plan (1993)

Exceptional Medical Expenses Act (1968) National Health Insurance under private law, January 1st, 2006

Mid 19th century – World War II: Voluntary sickness funds

Purple coalitions (1994-2001)

Et Voila!

Centre-right Cabinet (2001-2007)

30A short historical overview of Dutch health care

Access to Health Insurance Act (1986)

Sickness fund decree (1941)

Sickness Fund Act (1964)

Dekker-proposals (1987)

1980s: why did we need reforms?

• Problems with equity

Bifurcated health insurance system

• Problems with efficiency

Fragmented finance structure / no incentives

• Problem with responsiveness

Little or no choice for enrollees / citizens

• Problems with cost containment

Dekker Committee (1987): Willingness to Change

Key elements of the Dekker proposals (1987)

• A new standard insurance for all, provided by social and private health insurers

- Basic package and supplementary insurance packages

- Health insurance fund: in order to compensate health insurers for their high risks in the basic package

- Nominal flat rate premiums with compensation for people on low incomes through individual health care allowance

• Consumer choice?

- Citizens can change insurer every year- Collective contracts allowed

• Competition?

- Insurers compete for the business of the insured - Selective contracting: competition in the providers market

Incremental gradual reforms

1. We came from a bifurcated system of sickness funds and private health insurers

2. We introduced very incrementally a system of regulated competition together with the introduction of a basic health insurance for all

3. Because of sophisticated risk equalisation subsidies to health insurers, equity is ensured

4. Ending up in a full convergence of sickness funds and private health insurers

It took more than twenty years to accomplish this

CentralHealth Insurance

Fund

employer

State

(Ministry of Public Health, Well-being and Sports)

citizen

Health care allowance

State contribution (5%)

Income-dependent contribution (50%)

Healthinsurer

Health careprovider

Nominal premium (45%)

Reimbursement of costs -/- personal excess

Payment of health care bills

The Dutch Health Insurance SystemIn

com

e s

olid

ari

ty

Income solidarity

Risk-adjustment subsidies

Risk Solidarity

Selective contracting: A /B segment

Monitoring & Supervision: Inspectorate for Health Care / Dutch Competion Authority / Dutch Health Care Authority

HEALTH CARE INSURANCE BOARD

Key actor: the health insurer

• Full convergence of sickness funds and private health insurers

• All 28 health insurers are private entities - Organised in 14 large insurance holdings- 4 largest companies hold 90% of the insurance market- Offering a wide variety of insurance plans- Collective contract with employers

• Selective contracting in the medical curative sector is still a marginal phenomenon

• Health insurers are also involved in the development of performance indicators

• Gradual transition from ex-post to ex-ante risk equalisation

• PbR: in 2012, 70% of all hospital care will be negotiable on price

Time:

2006DisplacementNew Health Insurance Act

1987

BLUEPRINTThe Dekker Plan

Conversion

1986 LayeringAccess to Health Insurance Act

Gradual improvement of risk equalisationGradual introduction of competition

Gradual convergene of health insurers

1980 Drift

Little reformist change

(passive political agency)

Large reformist change

(active political agency)

Figure 1. The extent of institutional change and associated ‘levels’ of agency

Gradual institutional change

“Detailed descriptions of types of incremental meandering would also be interesting; perhaps this would more clearly differentiate between a sequence that lead to reform and another that leads to revolution.” (Hirschman en Lindblom, 1962: 221).

Detailed descriptions of types of incremental meandering would also be interesting; perhaps this would more clearly differentiate between a sequence that leads to reform and another that leads to revolution.” (Hirschman en Lindblom, 1962: 221)

Learning by Monitoring

• Actors must learn how to (co-) operate in a market

- Exit – Voice & Loyalty

• Reforms ask for consistency and continuity, but also for carefully monitoring their (unintended) consequences.

Trust

Reputation

Reciprocity

Increasing levels of co-operation

Net benefits

(Elinor Ostrom, 1998, A Behavioral Approach the Rational Choice Theory of Collective Action. American Political Science Review, Vol. 92, No.1,pp.1-22)

Integrated careInnovationsPrevention

Reflections on England

• Stop and Go Reforms- 1989 Working for Patients / 1991 Internal Market > GP Fundholding- 1997 the New NHS > third way / 2000 the NHS plan > performance targets / 2002 Delivering

the NHS plan: provider competition / patient choice / 2004 The NHS improvement plan / 2008 NHS next stage review

• 2010 Liberating the NHS:

From NHS trusts to foundation Trusts An economic regulator: Monitor Strengthen the role of local authorities: integration of health and social care

Commissioning:- Abolition of SHAs and PCTs- GP-led commissioning by GP-consortia

- Independent NHS Commissioning Board?

Requires being capable of:• Assess needs• Develop data to analyse utilisation• Predict risk• Managing financial and insurance risks• Monitoring performance of providers

• Size of the regional offices?