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Financing medical specialist services in the Netherlands; welfare implications of imperfect agency

Author

Listed:
  • Ed Westerhout

    (CPB Netherlands Bureau for Economic Policy Analysis)

  • K. Folmer

Abstract

From 1995 onward the financing scheme for specialist care in the Netherlands has moved from a fee-for-service scheme to a lump-sum budget scheme. From 1995 onward the financing scheme for specialist care in the Netherlands has moved from a fee-for-service scheme to a lump-sum budget scheme. This paper analyses the economic and welfare effects of this policy change. The paper adopts a model that integrates demand and supply considerations and recognizes the potential roles of moral hazard and supplier-induced demand. The model is fully numerical, being estimated and calibrated upon data for the Dutch health care sector. The paper finds that the shift in financing regime has been welfare-reducing. The policy change induced medical specialists to lower the supply of health services which was already too low from a welfare point of view. This conclusion is robust to significant changes in major parameter values.

Suggested Citation

  • Ed Westerhout & K. Folmer, 2002. "Financing medical specialist services in the Netherlands; welfare implications of imperfect agency," CPB Discussion Paper 6, CPB Netherlands Bureau for Economic Policy Analysis.
    • Handle: RePEc:cpb:discus:6
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    References listed on IDEAS

    as
    1. Kees Folmer & Johnny Stevens & Frank Van Tulder & Ed Westerhout, 1997. "Towards an economic model of the Dutch health care sector," Health Economics, John Wiley & Sons, Ltd., vol. 6(4), pages 351-363, July.
    2. Ellis, Randall P. & McGuire, Thomas G., 1990. "Optimal payment systems for health services," Journal of Health Economics, Elsevier, vol. 9(4), pages 375-396, December.
    3. Randall P. Ellis & Thomas G. McGuire, 1993. "Supply-Side and Demand-Side Cost Sharing in Health Care," Journal of Economic Perspectives, American Economic Association, vol. 7(4), pages 135-151, Fall.
    4. Erik Canton & Ed Westerhout, 1999. "A model for the Dutch pharmaceutical market," Health Economics, John Wiley & Sons, Ltd., vol. 8(5), pages 391-402, August.
    5. Ellis, Randall P. & McGuire, Thomas G., 1986. "Provider behavior under prospective reimbursement : Cost sharing and supply," Journal of Health Economics, Elsevier, vol. 5(2), pages 129-151, June.
    6. Feldman, Roger & Dowd, Bryan, 1991. "A New Estimate of the Welfare Loss of Excess Health Insurance," American Economic Review, American Economic Association, vol. 81(1), pages 297-301, March.
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    Cited by:

    1. Folmer, Cees & Westerhout, Ed, 2008. "Financing medical specialist services in The Netherlands: Welfare implications of imperfect agency," Economic Modelling, Elsevier, vol. 25(5), pages 946-958, September.

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    More about this item

    JEL classification:

    • D60 - Microeconomics - - Welfare Economics - - - General
    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health

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