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Free to Choose? Reform and Demand Response in the English National Health Service

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  • Martin Gaynor
  • Carol Propper
  • Stephan Seiler

    ()

Abstract

The impacts of choice in public services are controversial. We exploit a reform in the English National Health Service to assess the impact of relaxing constraints on patient choice. We estimate a demand model to evaluate whether increased choice increased demand elasticity faced by hospitals with regard to clinical quality and waiting time for an important surgical procedure. We find substantial impacts of the removal of restrictions. Patients became more responsive to clinical quality. Sicker patients and better informed patients were more affected. We leverage our model to calculate potential benefits. We find increased demand responsiveness led to a significant reduction in mortality and an increase in patient welfare. The elasticity of demand faced by hospitals increased post-reform, giving hospitals potentially large incentives to improve their quality of care and find suggestive evidence that hospitals responded strongly to the enhanced incentives due to increased demand elasticity. The results suggests greater choice can enhance quality.

Suggested Citation

  • Martin Gaynor & Carol Propper & Stephan Seiler, 2012. "Free to Choose? Reform and Demand Response in the English National Health Service," The Centre for Market and Public Organisation 12/297, Department of Economics, University of Bristol, UK.
  • Handle: RePEc:bri:cmpowp:12/297
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    References listed on IDEAS

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    Cited by:

    1. Moscelli, Giuseppe & Siciliani, Luigi & Gutacker, Nils & Gravelle, Hugh, 2016. "Location, quality and choice of hospital: Evidence from England 2002–2013," Regional Science and Urban Economics, Elsevier, pages 112-124.
    2. repec:oxf:wpaper:747 is not listed on IDEAS
    3. Mark Stabile & Sarah Thomson, 2014. "The Changing Role of Government in Financing Health Care: An International Perspective," Journal of Economic Literature, American Economic Association, pages 480-518.
    4. Carol Propper, 2013. "Competition, Incentives and the English NHS," ifo DICE Report, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 11(1), pages 16-20, 04.
    5. Cook, Andrew & Gaynor, Martin & Stephens Jr, Melvin & Taylor, Lowell, 2012. "The effect of a hospital nurse staffing mandate on patient health outcomes: Evidence from California's minimum staffing regulation," Journal of Health Economics, Elsevier, vol. 31(2), pages 340-348.
    6. Martin Gaynor & Kate Ho & Robert J. Town, 2015. "The Industrial Organization of Health-Care Markets," Journal of Economic Literature, American Economic Association, pages 235-284.
    7. Barany, Zsofia L. & Siegel, Christian, 2017. "Disentangling Occupation- and Sector-specific Technological Change," Economics Series 331, Institute for Advanced Studies.
    8. Rita Santos & Hugh Gravelle & Carol Propper, 2013. "Does quality affect patients’ choice of doctor? Evidence from the UK," Working Papers 088cherp, Centre for Health Economics, University of York.
    9. Katz, Michael L., 2013. "Provider competition and healthcare quality: More bang for the buck?," International Journal of Industrial Organization, Elsevier, pages 612-625.
    10. Kurt R. Brekke & Luigi Siciliani & Odd Rune Straume, 2017. "Hospital Mergers with Regulated Prices," Scandinavian Journal of Economics, Wiley Blackwell, pages 597-627.
    11. Moscelli, Giuseppe & Siciliani, Luigi & Tonei, Valentina, 2016. "Do waiting times affect health outcomes? Evidence from coronary bypass," Social Science & Medicine, Elsevier, pages 151-159.
    12. Gutacker, Nils & Siciliani, Luigi & Moscelli, Giuseppe & Gravelle, Hugh, 2016. "Choice of hospital: Which type of quality matters?," Journal of Health Economics, Elsevier, pages 230-246.
    13. Rita Santos & Hugh Gravelle & Carol Propper, 2013. "Does quality affect patients’ choice of doctor? Evidence from the UK," The Centre for Market and Public Organisation 13/306, Department of Economics, University of Bristol, UK.
    14. Gibbons, Stephen & Neumayer, Eric & Perkins, Richard, 2015. "Student satisfaction, league tables and university applications: Evidence from Britain," Economics of Education Review, Elsevier, pages 148-164.
    15. Gaynor, Martin & Town, Robert J., 2011. "Competition in Health Care Markets," Handbook of Health Economics, Elsevier.
    16. Gabriel Ahlfeldt & Kristoffer Möller & Sevrin Waights & Nicolai Wendland, 2012. "On prisoner's dilemmas and gilded cages: The economics of heritage preservation," ERSA conference papers ersa12p783, European Regional Science Association.
    17. Brekke, Kurt R. & Siciliani, Luigi & Straume, Odd Rune, 2013. "Hospital Mergers: A Spatial Competition Approach," Discussion Paper Series in Economics 8/2013, Norwegian School of Economics, Department of Economics.
    18. repec:nip:nipewp:10/2014 is not listed on IDEAS
    19. Stephen Gibbons & Eric Neumayer & Richard Perkins, 2013. "Student Satisfaction, League Tables and University Applications," SERC Discussion Papers 0142, Spatial Economics Research Centre, LSE.
    20. Hugh Gravelle & Giuseppe Moscelli & Rita Santos & Luigi Siciliani, 2014. "Patient choice and the effects of hospital market structure on mortality for AMI, hip fracture and stroke patients," Working Papers 106cherp, Centre for Health Economics, University of York.

    More about this item

    Keywords

    Demand Estimation; Non-price Competition; Health Economics; Patient Choice; Health Care Reform;

    JEL classification:

    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • I11 - Health, Education, and Welfare - - Health - - - Analysis of Health Care Markets
    • I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L30 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - General

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