Belgium and the Netherlands Revisited

In recent years, the health care policy debate in many countries has concentrated on the issue of reform of health systems. Several industrial countries have adapted versions of the prototype model of managed competition. The point of departure of competitive reforms in European countries such as the Netherlands and Belgium is fundamentally different from that in the United States, however. To guarantee universal access, the European countries' health care systems are heavily regulated, sometimes at the expense of incentives for efficiency and innovation. Reforms toward more managed competition are introduced with the objective (or hope) of enhancing efficiency and innovation while preserving equity. The Netherlands was one of the first countries in which the government proposed a "grand design" health care reform, which is now being gradually implemented in a diluted form. Although Belgium borders the Netherlands, and its health care system shares some of the characteristics of the Dutch system, there are also some fundamental differences. In Belgium, any comparable proposals for efficiency enhancement through increased financial accountability are far less market-oriented than in the Netherlands.

The Roles of Government and Health Insurers

The Netherlands and Belgium are two geographically small but densely populated neighboring countries with populations of 15 million and 10 million, respectively. They are both relatively average health care spenders according to OECD standards. Their proportion of GDP spent on health care reached a maximum of 8 percent in Belgium and 9 percent in the Netherlands in 1993, but these shares have slightly decreased since then, to 7.5 percent and 8.5 percent, respectively, in 1997. In both countries, there is extensive government regulation of many aspects of the finance and delivery of health care, but the government is not itself the main provider of services, as it is in many National Health Service-type systems. In Belgium and the Netherlands, health care is mostly financed--as are most other social insurance benefits--by means of social security payroll taxes levied on earnings. Health care is provided by private nonprofit institutions, and the compulsory health insurance coverage is provided by sickness funds that are private nonprofit organizations. ¹ In the Netherlands, one-third of the population (primarily civil servants and high-income groups) are not eligible for social health insurance and have to rely on private health insurance coverage (except for long-term care, which is covered by a national health insurance scheme). Still, private health insurance accounts for no more than 15 percent of total health care expenditures. In sum, while almost all health care in both countries is provided by private (but regulated) nonprofit providers, the great majority of health care expenditures are publicly funded.

As in most other European countries, the governments in the Netherlands and Belgium have attempted to reduce the problem of moral hazard and to contain health care expenditure by means of extensive supply-side regulation. Indeed, these governments managed to gain substantial control over total health care expenditures by unilaterally imposing restrictions on the capacity and operating expenses of inpatient care institutions. But this top-down rationing strategy has met with growing criticism. Critics charge that supply-side regulation impedes cost-effective substitution of care and the exploitation of economies of scale and scope (thus reducing technical efficiency); that it lacks incentives to tailor care to consumers' preferences (thus reducing allocative efficiency); and that it generates insufficient incentives for cost-reducing innovations in the organization and delivery of health care (thus reducing dynamic efficiency). Moreover, it is often argued that in countries with a public health insurance system, insurers (or sickness funds) may be better equipped for effectively managing care than the government. Since insurers usually have to negotiate contracts with providers, they have crucial (often local) information about the amount and type of medical care provided...