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Extending Choice In English Health Care: The implications of the economic evidence

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  • Burgess, Simon
  • Propper, Carol
  • Wilson, Deborah

Abstract

Extending choice in health care is currently popular amongst English, and other, politicians. Those promoting choice make an appeal to a simple economic argument. Competitive pressure helps make private firms more efficient and consumer choice acts as a major driver for efficiency. Giving service users the ability to choose applies competitive pressure to health care providers and, analogously with private markets, they will raise their game to attract business. The paper subjects this assumption to the scrutiny provided by a review of the theoretical and empirical economic evidence on choice in health care. The review considers several interlocking aspects of the current English choice policy: competition between hospitals, the responsiveness of patients to greater choice, the provision of information and the use of fixed prices. The paper concludes that there is neither strong theoretical nor empirical support for competition, but that there are cases where competition has improved outcomes. The paper ends with a discussion of the implications of this literature for policies to promote competition in the English NHS.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 5328.

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Date of creation: Nov 2005
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Handle: RePEc:cpr:ceprdp:5328

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Keywords: choice; competition; English NHS reforms; health care;

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References

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  1. Ho, Vivian & Hamilton, Barton H., 2000. "Hospital mergers and acquisitions: does market consolidation harm patients?," Journal of Health Economics, Elsevier, vol. 19(5), pages 767-791, September.
  2. Jean M. Abraham & Martin S. Gaynor & William B. Vogt, 2005. "Entry and Competition in Local Hospital Markets," NBER Working Papers 11649, National Bureau of Economic Research, Inc.
  3. David Dranove & Daniel Kessler & Mark McClellan & Mark Satterthwaite, 2003. "Is More Information Better? The Effects of "Report Cards" on Health Care Providers," Journal of Political Economy, University of Chicago Press, vol. 111(3), pages 555-588, June.
  4. Propper, Carol & Burgess, Simon & Green, Katherine, 2004. "Does competition between hospitals improve the quality of care?: Hospital death rates and the NHS internal market," Journal of Public Economics, Elsevier, vol. 88(7-8), pages 1247-1272, July.
  5. Daniel P. Kessler & Mark B. McClellan, 2000. "Is Hospital Competition Socially Wasteful?," The Quarterly Journal of Economics, MIT Press, vol. 115(2), pages 577-615, May.
  6. Ellis, Randall P., 1998. "Creaming, skimping and dumping: provider competition on the intensive and extensive margins1," Journal of Health Economics, Elsevier, vol. 17(5), pages 537-555, October.
  7. Gerdtham, Ulf-G. & Löthgren, Mickael & Tambour, Magnus & Rehnberg, Clas, 1998. "Internal Markets and Health Care Efficiency: A Multiple-Output Stochastic Frontier Analysis," Working Paper Series in Economics and Finance 222, Stockholm School of Economics.
  8. Jonathan Gruber, 1992. "The Effect of Price Shopping in Medical Markets: Hospital Responses to PPOs in California," NBER Working Papers 4190, National Bureau of Economic Research, Inc.
  9. Dranove, David & Satterthwaite, Mark A., 2000. "The industrial organization of health care markets," Handbook of Health Economics, in: A. J. Culyer & J. P. Newhouse (ed.), Handbook of Health Economics, edition 1, volume 1, chapter 20, pages 1093-1139 Elsevier.
  10. Carol Propper & Deborah Wilson, 2003. "The Use and Usefulness of Performance Measures in the Public Sector," The Centre for Market and Public Organisation 03/073, Department of Economics, University of Bristol, UK.
  11. Le Grand, Julian, 1991. "Quasi-markets and Social Policy," Economic Journal, Royal Economic Society, vol. 101(408), pages 1256-67, September.
  12. Sloan, Frank A., 2000. "Not-for-profit ownership and hospital behavior," Handbook of Health Economics, in: A. J. Culyer & J. P. Newhouse (ed.), Handbook of Health Economics, edition 1, volume 1, chapter 21, pages 1141-1174 Elsevier.
  13. Martin Gaynor & William B. Vogt, . "Antitrust and Competition in Health Care Markets," GSIA Working Papers 1999-E29, Carnegie Mellon University, Tepper School of Business.
  14. Thomas J. Kane & Douglas O. Staiger, 2002. "The Promise and Pitfalls of Using Imprecise School Accountability Measures," Journal of Economic Perspectives, American Economic Association, vol. 16(4), pages 91-114, Fall.
  15. Propper, Carol, 1996. "Market structure and prices: The responses of hospitals in the UK National Health Service to competition," Journal of Public Economics, Elsevier, vol. 61(3), pages 307-335, September.
  16. Mike Damiani & Jennifer Dixon & Carol Propper, 2004. "Mapping choice in the NHS: Analysis of routine data," The Centre for Market and Public Organisation 04/095, Department of Economics, University of Bristol, UK.
  17. Robinson, James C. & Luft, Harold S., 1985. "The impact of hospital market structure on patient volume, average length of stay, and the cost of care," Journal of Health Economics, Elsevier, vol. 4(4), pages 333-356, December.
  18. Propper, Carol & Croxson, Bronwyn & Shearer, Arran, 2002. "Waiting times for hospital admissions: the impact of GP fundholding," Journal of Health Economics, Elsevier, vol. 21(2), pages 227-252, March.
  19. Propper, Carol & Wilson, Deborah & Soderlund, Neil, 1998. "The effects of regulation and competition in the NHS internal market: the case of general practice fundholder prices," Journal of Health Economics, Elsevier, vol. 17(6), pages 645-673, December.
  20. Tay, Abigail, 2003. " Assessing Competition in Hospital Care Markets: The Importance of Accounting for Quality Differentiation," RAND Journal of Economics, The RAND Corporation, vol. 34(4), pages 786-814, Winter.
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Citations

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Cited by:
  1. Zack Cooper & Stephen Gibbons & Simon Jones & Alistair McGuire, 2011. "Does Hospital Competition Save Lives? Evidence From The English NHS Patient Choice Reforms," Economic Journal, Royal Economic Society, vol. 121(554), pages F228-F260, 08.
  2. Cookson, Richard & Laudicella, Mauro & Donni, Paolo Li, 2012. "Measuring change in health care equity using small-area administrative data – Evidence from the English NHS 2001–2008," Social Science & Medicine, Elsevier, vol. 75(8), pages 1514-1522.
  3. Fabbri D & Robone S, 2009. "The geography of hospital admission in a National Health Service with patient choice: Evidence from Italy," Health, Econometrics and Data Group (HEDG) Working Papers 09/16, HEDG, c/o Department of Economics, University of York.
  4. Richard Cookson & Mauro Laudicella & Paolo Li Donni, 2011. "Measuring change in health care equity using small area administrative data – evidence from the English NHS 2001-8," Working Papers 067cherp, Centre for Health Economics, University of York.
  5. Cookson R & Laudicella M, 2009. "Do the poor still cost more? The relationship between small area income deprivation and length of stay for elective hip replacement in the English NHS from 2001/2 to 2006/7," Health, Econometrics and Data Group (HEDG) Working Papers 09/07, HEDG, c/o Department of Economics, University of York.
  6. Zack Cooper & Stephen Gibbons & Simon Jones & Alistair McGuire, 2010. "Does hospital competition improve efficiency? An analysis of the recent market-based reforms to the English NHS," LSE Research Online Documents on Economics 28578, London School of Economics and Political Science, LSE Library.
  7. Elenka Brenna & Federico Spandonaro, 2014. "Does federalism induce patients’ mobility across regions? Evidence from the Italian experience," DISCE - Working Papers del Dipartimento di Economia e Finanza def9, Università Cattolica del Sacro Cuore, Dipartimenti e Istituti di Scienze Economiche (DISCE).
  8. Jacqueline O'Reilly & Miriam M. Wiley, 2008. "How Local is Hospital Treatment? An Exploratory Analysis of Public/Private Variation in Location of Treatment in Irish Acute Public Hospitals," Papers WP237, Economic and Social Research Institute (ESRI).
  9. Cookson, Richard & Laudicella, Mauro & Donni, Paolo Li, 2013. "Does hospital competition harm equity? Evidence from the English National Health Service," Journal of Health Economics, Elsevier, vol. 32(2), pages 410-422.
  10. Brenna, Elenka, 2011. "Quasi-market and cost-containment in Beveridge systems: The Lombardy model of Italy," Health Policy, Elsevier, vol. 103(2), pages 209-218.
  11. Michiel Bijlsma & Pierre Koning & Victoria Shestalova, 2013. "The Effect of Competition on Process and Outcome Quality of Hospital Care in the Netherlands," De Economist, Springer, vol. 161(2), pages 121-155, June.

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