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Reform or micro management?

Article published in Healthcare Europa on June 9, 2010.

Faced by huge deficits will governments in Europe seek to liberalise healthcare markets to increase competition or micro manage healthcare delivery to try and reduce costs?

The Institut Molinari, a generally pro-free market think tank in Paris, has recently published a paper suggesting that France should follow the Dutch model and move to competitive healthcare insurance. Researcher Valentin Petkantchin says the new Dutch model has delivered clear savings with healthcare expenditure annual rises falling from an average of 7.6% in 1998-2005 to 5.3% from 2006-2008. The free market in procedures has grown from 20% of the total in 2008 to 34% in 2009.

But he is pessimistic that the French government will follow the Dutch.

In practice, he says that under Minister of Health Roselyne Bachelot, the government has imposed extra layers of regulations, even going as far as penalising private doctors from setting up in certain regions. He thinks this approach is doomed to failure and points out that deficits continue to soar. “Since 1998 the French health insurance has been in deficit every year and the 2010 deficit came to €14.9bn.” He doesn’t think that the government will hit its targets of keeping healthcare expenditure growth to 2.9% in 2011 and 2.8% in 2012.

Private equity payers and operators like Ramsay have told us that they think the new regional structure in France will lead to growth in the private sector as it will enable them to develop a much more strategic relationship. Petkantchin is much more pessimistic. “The public hospitals are expensive but it is very difficult to cut their costs thanks to unions and local political elites.” He thinks the private sector may take the brunt of any cuts.

Going back to the question we started this piece with, I think it is pretty clear that the answer is most European governments will simply go in for more micro management. Profound healthcare reform as practiced by the Dutch calls for patience and political consensus. And you won’t see much of that over the next few years!

The next few years should be good for private outsourcers – think labs, imaging, anything which saves money and isn’t too high profile. Not so good for private hospitals which compete directly for business with the public sector as in Italy and France.

L’Institut économique Molinari

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