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

  • Martin Gaynor
  • Carol Propper
  • Stephan Seiler

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.

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Paper provided by Centre for Economic Performance, LSE in its series CEP Discussion Papers with number dp1179.

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Date of creation: Nov 2012
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Handle: RePEc:cep:cepdps:dp1179
Contact details of provider: Web page: http://cep.lse.ac.uk/_new/publications/series.asp?prog=CEP

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  1. Austan Goolsbee & Amil Petrin, 2004. "The Consumer Gains from Direct Broadcast Satellites and the Competition with Cable TV," Econometrica, Econometric Society, vol. 72(2), pages 351-381, 03.
  2. F. Moscone & E. Tosetti & G. Vittadini, 2012. "Social interaction in patients’ hospital choice: evidence from Italy," Journal of the Royal Statistical Society Series A, Royal Statistical Society, vol. 175(2), pages 453-472, 04.
  3. Caroline M. Hoxby, 2003. "The Economics of School Choice," NBER Books, National Bureau of Economic Research, Inc, number hox03-1, May.
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  5. Martin Gaynor & Rodrigo Moreno-Serra & Carol Propper, 2013. "Death by Market Power: Reform, Competition, and Patient Outcomes in the National Health Service," American Economic Journal: Economic Policy, American Economic Association, vol. 5(4), pages 134-66, November.
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  7. Tim Besley & Maitreesh Ghatak, 2003. "Incentives, choice and accountability in the provision of public services," IFS Working Papers W03/08, Institute for Fiscal Studies.
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  9. Varkevisser, Marco & van der Geest, Stéphanie A. & Schut, Frederik T., 2012. "Do patients choose hospitals with high quality ratings? Empirical evidence from the market for angioplasty in the Netherlands," Journal of Health Economics, Elsevier, vol. 31(2), pages 371-378.
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  11. Propper Carol & Sutton Matt & Whitnall Carolyn & Windmeijer Frank, 2008. "Did 'Targets and Terror' Reduce Waiting Times in England for Hospital Care?," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 8(2), pages 1-27, January.
  12. Caroline Minter Hoxby, 2003. "Introduction to "The Economics of School Choice"," NBER Chapters, in: The Economics of School Choice, pages 1-22 National Bureau of Economic Research, Inc.
  13. Gowrisankaran, Gautam & Town, Robert J., 1999. "Estimating the quality of care in hospitals using instrumental variables," Journal of Health Economics, Elsevier, vol. 18(6), pages 747-767, December.
  14. 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.
  15. Walter Beckert & Mette Christensen & Kate Collyer, 2012. "Choice of NHS‐funded Hospital Services in England," Economic Journal, Royal Economic Society, vol. 122(560), pages 400-417, 05.
  16. Le Grand, Julian, 2003. "Motivation, Agency, and Public Policy: Of Knights and Knaves, Pawns and Queens," OUP Catalogue, Oxford University Press, number 9780199266999, March.
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