Unbiased Analysis of Today's Healthcare Issues

Health Care Reform in the Netherlands: A Work in Progress

Written By: Jason Shafrin - Mar• 02•09

In the Netherlands, the Health Insurance Act of 2006 mandates that all individuals have health insurance.  Health insurance is provided by the private sector and these private health insurers can charge any premium they please.  The government does provide some risk-adjusted payment to the insurance companies.  This means that the state gives insurance company more money if they take on sicker individuals.  Further, the state subsidies the cost of health insurance premiums for poor individuals.   Insurers are driving down prices by setting up their own pharmacies and primary care centers, and beginning to create preferred provider organizations.

In an earlier post, I wrote that the Dutch system could be a viable health reform option in the U.S.  A recent editorial in Health Economics, however, argues that the Dutch health reform is not complete.   Although there individuals have free choice between insurer they choose, insurers ability to negotiate prices with providers is severely limited.  For instance,

  • “in the hospital sector, most prices are still derived from a fixed global budget and are the same for all insurers.”
  • Insurers are responsible for the cost of building new facilities.  Only after they receive government approval will they be reimbursed for construction costs.  This creates significant uncertainty as to the cost effectiveness of plan hospital facility expansions.
  • Preferred-provider structures are still in a basic state because of much uncertainty as to provider quality.  However,there has been some progress in terms of quality measurement.  “The Health Care Inspectorate (IGZ) started to develop a basic set of hospital performance indicators about quality (including structure, process and outcome indicators), safety, efficiency and accessibility, in cooperation with the hospitals and medical specialists…the Netherlands Health Insurers Association since 2006 annually publishes a guide with hospital performance indicators.”
  • Another reason for the limited use of preferred-provider contracts is consumer and provider backlash.  Both groups are weary of limitations to patient choice of provider.
  • Another impediment to reform is that most of the insurers hospital costs are eventually reimbursed by the government.  Although this protect insurers from catastrophic losses for a few very sick patients, insurers’ competitive advantage should be in measuring risk.  Further, if insurers are not on the hook for the downstream hospital costs, it gives them less of an incentive to improve the quality of care and reduce hospitalizations.

There are some positive developments.  The Dutch government began using Diagnosis Treatment Combinations (DTC) to pay insurers for patient hospitalizations.   This payment system–similar to the DRG system used in the U.S.–replaced per diem rates and gives an incentive to insurers to decrease the number of days an individual is hospitalized.

The Dutch health care reforms have made significant progress towards moving the country towards a “managed competition” model.  Despite the positive effects of many reforms, there remains significant room for improvement.

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