NEJM: Dutch experience shows limits of competition in health care

From New England Journal of Medicine:

Discussions about U.S. health care reform are often parochial, with scant attention paid to other countries' experiences. It is thus surprising that in the ongoing debate over Medicare, some U.S. commentators have turned to the Netherlands as a model of regulated competition among private insurance companies.1 The Dutch experience is particularly relevant given the proposal by Congressman Paul Ryan (R-WI) to eliminate traditional Medicare and instead provide beneficiaries with vouchers to purchase private insurance. (The Republican majority in the House passed the Ryan plan as part of the 2012 budget resolution, but it was defeated in the Senate.)

It is easy to understand why Dutch health care — which does rely on regulated private insurance — would appeal to advocates of Medicare vouchers. Indeed, U.S. ideas about managed competition helped to shape health care reform in the Netherlands.2 But careful examination of the Dutch experience shows that insurance competition has not produced the expected benefits and in fact has created new problems, calling into question the merits of this reform model and its suitability for Medicare.

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The myth that competition has been key to cost containment in the Netherlands has obscured a crucial reality. Health care systems in Europe, Canada, Japan, and beyond, all of which spend much less than the United States on medical services, rely on regulation of prices, coordinated payment, budgets, and in some cases limits on selected expensive medical technologies, to contain health care spending.5 Systemwide regulation of spending, rather than competition among insurers, is the key to controlling health care costs. The Netherlands, after all, spent much less on medical care than the United States with virtually universal insurance coverage long before it began experimenting with managed competition in 2006.

The Dutch experience provides a cautionary tale about the place of private insurance competition in health care reform. The Dutch reforms have fallen far short of expectations — a reminder that policy intentions should not be confused with outcomes and that managed competition is hardly a panacea. The idea that the Dutch reforms provide a successful model for U.S. Medicare to emulate is bizarre. The Dutch case in fact underscores the pitfalls of the casual use (and misuse) of international experience in U.S. health care reform debates.5 Before we learn from other countries' experiences with medical care, we first need to learn about them.