Introduction to the reform of Dutch health care (2024)

1.1. Scope and purpose of the study

In January 2006 the Dutch embarked upon a reform of their health care system based upon the principles of regulated competition (Enthoven, 1988). The flagship of the reform was the Health Insurance Act (Zorgverzekeringswet), which integrated statutory health insurance and all other (mainly private) health insurance schemes into a single mandated health insurance scheme with free consumer choice that covered the entire population. In the new system, consumers were given free choice of an insurer in order to trigger competition. Private insurers would act as prudent purchasers of health services on behalf of their clients, offering them an attractive health plan in terms of quality and costs. For their part, providers would compete for contracts with insurers. The main policy goals (in policy documents often referred to as public values) of this “market reform” were to achieve a health care system offering high-quality care to patients that would be accessible to every person (universal access), based upon solidarity and affordability (financial sustainability). Another goal of the reform was to enhance freedom of choice. The primary function of the state was to regulate health care and preserve the public values in health care.

The introduction of the new health insurance legislation was the preliminary end-point of a political discussion that had started almost 20 years earlier with the publication of a report written by a group of independent experts at the request of the government. In its report “Willingness to change” (Bereidheid tot verandering), published in 1987, the Dekker Committee identified many structural problems in Dutch health care. Its main conclusion was that Dutch health care had evolved as an inefficient and inflexible system, lacking powerful incentives to replace expensive care with less expensive but equally effective care. To resolve these problems, the Committee recommended a market-based reform that would offer insurers and providers more room for entrepreneurship and consumers more freedom of choice. These recommendations sparked a heated dispute on the merits of competition in health care, which is illustrated by the simple fact that it would take until 2006 before the Committee’s main recommendation of introducing a mandated basic health insurance scheme would come into effect. The political debate on competition in health care has never ended, and currently (2021) one can hear various voices calling for a reversal of the market reform and a reassertion of the role of the state in health care.

The choice for market reform can be interpreted as a reaction to a period of ever-extending state intervention in health care. Growing concerns about escalating health care expenditures, particularly after the oil crises in the 1970s, had resulted in an avalanche of regulatory and budgetary instruments, including hospital planning, expenditure caps, price controls, user charges and various other policy instruments. After years of mostly disappointing experience with these instruments, the idea emerged that an alternative strategy was needed to make the direction of health care more effective and to establish a proper balance between equity and efficiency. Health care had to be transformed from a supply-driven system into a demand-led system, in which the state concentrated on the introduction of an effective regulatory system and an effective supervisory system.

This concept of an alternative model for the organization of health care fit well with the ideas of the so-called New Public Management (Clarke & Newman, 1997; Pollitt, 1993), which had gained much popularity in the Netherlands. The advocates of this new wave in public policy-making postulated that the state had to transform itself from a “bureaucratic state” into a “managerial state”, in which it would carry system responsibility and delegate a great deal of its steering to regulatory agencies at arm’s length. Competition in health insurance and health care provision was depicted as a more effective instrument for achieving the state’s policy goals in health care than detailed bureaucratic intervention. Competition was certainly not presented as a goal in itself, but rather as an alternative institutional vehicle for achieving the state’s policy goals.

In choosing a health care system based on regulated competition, the Netherlands changed its system in a more fundamental way than other western European countries. Belgium, Germany and Switzerland, each in their own way, restructured their health care systems by moving away from detailed hierarchical control towards systems with more freedom of choice and room for entrepreneurial behaviour for insurers and providers. This restructuring was done with the intention of improving performance in terms of quality of care, accessibility and financial sustainability (Thomson et al., 2013; van de Ven et al., 2013).

The Netherlands now has 15 years of experience with regulated competition among private health insurers. This is enough time to find out how the system has worked in practice and what can be learned from the Dutch experience. In order to do so, we start, first, with an examination of the policy goals, policy instruments and the “assumptive world” (Vickers, 1965) of market reform. We will see that the path from abstract ideas to concrete changes was paved with many obstacles. The reform required the accommodation of a set of abstract ideas to the real world of diverging ideological views, conflicting interests, institutional constraints and complex power relations. Second, this study offers an analysis of the implementation of the market reform. How have insurers and providers put it into practice, and how did consumers respond to the reform? Our third purpose is to examine the results of the reforms. To what extent have the stated policy goals been achieved? Did the reforms establish new relationships among citizens, insurers and providers as envisaged in the government’s policy documents? What is the evidence for the problems that market-based systems have often been accused of, such as high administrative costs, restricted access to health care, rent-seeking, cream skimming and adverse selection? Fourth, we will briefly consider the future of the market reform. Is there any reason to expect a move away from regulated competition in the near future? What may be the impact of the coronavirus disease (COVID-19) pandemic in this respect? Finally, our purpose is to draw some policy lessons from the Dutch experience with health care reform that, we hope, will be valuable to health care policy-makers in other countries, in particular countries that are experimenting with regulated competition.

Our analysis is based upon government documents, policy reports, research papers, monitors, market scans and articles published in peer-reviewed journals. Furthermore, we conducted semi-structured interviews about our findings and analyses with former ministers, policy-makers and administrators who are or have been closely involved in the reform of Dutch health care. Their comments helped us to get a better understanding of the essence of the reform. We also benefited from critical comments of foreign experts on an earlier draft of the study.

The structure of this chapter is as follows: After a critical comment on the term “market reform” (section 1.2), we consider the historical and political context of the reform (section 1.3). Next follows a brief outline of an analytical model for the study of health care reform (section 1.4). The chapter ends with an overview of the structure of this book (section 1.5).

1.2. Is “market reform” a correct term?

Throughout this study, we will use the terminology “market reform” and “competition” to describe the reform of Dutch health care. We use these terms for the practical reason that both terms are commonly used in the political debate and international literature. The terminology suggests that health care in the Netherlands has indeed adopted the characteristics of a market system. This study will lead us to conclude that this is only partially true. It is true for health insurance, although we will see that this part of health care is heavily regulated to preserve the public values or interests of universal access, high quality and financial sustainability. It is a much more strictly regulated market than, say, the private market for car or civil liability insurance. By contrast, purchasing and provision take place in a system that, with some exceptions, can be depicted as a quasi-market. For instance, it will appear that the scope of price competition should not be overstated and that most providers of health care (in some sectors all providers) are contracted. In short, the term “market reform” suggests more competition than really exists in practice and is, for this reason, actually misleading. We hope to make clear in this study that the current Dutch health care system must be understood as very much a hybrid system and that practice differs in many respects from the policy paradigm of regulated competition.

Nevertheless, the term “market reform” is still frequently used in the political debate on health care reform in the Netherlands. In the current political debate, competition is increasingly depicted as a source of persistent problems. Often-heard diagnoses are that competition conflicts with people’s badly needed cooperation and trust in health professionals and that there is a strong need for more state direction in health care. In politics competition appears to be an easy target for the blame game. Almost everything considered wrong is somehow linked to competition. Competition has become a container concept without any precise meaning. Obviously, this is not helpful. Therefore, it is necessary to investigate what is meant by competition in health care, how it has been shaped and how it has played out in terms of access, quality, efficiency costs and other issues. This is what this study aims to do.

1.3. Historical and political context

Reforms can never be well understood without taking their historical and political context into account. At the beginning of the 19th century, state intervention in health care was largely non-existent. Since then, as in all countries on the European continent, the state gradually but deeply penetrated into Dutch health care. The state mainly focused its interventions on addressing public health problems, for instance by vaccinating children of poor families against smallpox, putting legal restrictions on child labour and improving public hygiene. Repeated outbreaks of cholera were another concern (de Swaan, 1988; Houwaart, 1991). The health policy agenda broadened in the 20th century, when the state became ever more involved in the regulation of health care. Policy attention increasingly shifted to the regulation of health care financing and provision of health services. Particularly after the Second World War (1939–1945), the organization of health care evolved as a critical element in the building of the welfare state. State responsibility for public health was explicitly formulated in Article 22 of the revised Constitution (1983), which states that the state shall take measures to promote public health.

As an outcome of a long historical process, state responsibility for health care has become deeply institutionalized. The challenge of the reform of health care that we analyse in this book, thus, was not to question this responsibility, but rather to redefine and reorganize it in a changed health care landscape. The reform can be conceptualized as a complex mix of institutional change and continuity.

A second contextual factor is associated with the specific structure of the public–private mix in Dutch health care. Simply stated, one may depict Dutch health care as a combination of public financing and private provision. While health care is largely financed by public resources (mainly social contributions), the provision of health services is almost completely left to private providers, most of which operate on a not-for-profit basis. For-profit hospitals and for-profit nursing homes are – even today – forbidden. With the exception of municipal public health agencies, public providers do not exist. The reforms have not altered this basic structure.¹

The mix of public financing and private provision can be understood as a historical political compromise. In the 18th and 19th centuries, private not-for-profit organizations, many affiliated with a religion, dominated the provision of health services. Most municipalities fulfilled only a residual role in caring for their inhabitants. State interference in health care provision was met with great suspicion. The private not-for-profit sector (particulier initiatief) perceived state interference as an encroachment of its independent position, which it justified not only on historical but also on democratic grounds. In the private sector’s conception of democracy, private organizations had the constitutional right to organize health care and other (social) services for their own clientele. State intervention was permitted only if the private not-for-profit sector failed to fulfil its social responsibility. Gradually, however, this ideological belief eroded, not only as a result of the “depillarization” of Dutch society that started in the late 1950s and early 1960s (Lijphart, 1968), but also for practical reasons. Because of mounting financial problems, private not-for-profit organizations had gradually become dependent on financial support from the state for the provision of health services. Also, public support for a leading role of the state in health care (and other sectors of public life as well) increased. As an ultimate political compromise, the state was accorded overall political responsibility for the financial accessibility and quality of health care, while the private sector kept its leading role in the quotidian provision of these services. We will see in this book that the 2006 reform of health care and the 2015 reform of long-term care fully respected this historical compromise.

Health insurance originated in the private sector (Companje et al., 2011). The first sick funds date from the 19th century. It took until the beginning of the 20th century for the state to propose legislation to regulate health insurance. However, all efforts to introduce a statutory scheme failed in the period 1900–1940, not only because of the resistance of the funds to state intervention but also because of fierce opposition from the medical profession, which feared state control of its activities. Eventually, in 1941, the German occupier implemented a scheme of state-controlled health insurance for employees. The statutory scheme did not eliminate the funds, but it downgraded them to implementing agents under strict hierarchical control. The scheme was largely codified in 1964 in the Sick Fund Act (Ziekenfondswet), which covered about two thirds of the population. Persons not covered by the scheme could purchase substitute private health insurance, which also had a long history in Dutch health insurance (Schut, 1995; Maarse & Jeurissen, 2020).

The traditional public–private mix in Dutch health care has certainly facilitated the reforms. For instance, there was no need to privatize hospitals (in 1997 the last public general hospital had been converted into a private not-for-profit entity) or implement a purchaser–provider split, as was necessary in the United Kingdom, the Nordic countries and the countries in central and eastern Europe. Furthermore, it was relatively easy to convert sick funds and private insurers into implementing agencies of the new health insurance scheme. In sum, the reform built on the traditional balance between the public and private sectors.

The structure of Dutch health care on the eve of the reforms can be conceptualized as the result of a long historical development in which rivalling ideologies, conflicting interests, power relations and accidental events always heavily influenced the direction of health care policy-making. Disputes about issues such as regulations, policy goals and instruments or the balance between the state and the private sector were business as usual. Negotiating political compromises was the only way to agree on new legislation. State intervention in health care is, therefore, not the outcome of hierarchical intervention, but rather the outcome of a process of consultation and negotiation with the leading organizations representing the interests of health insurers and service providers.

The impact of this political culture, which constitutes an important element of the so-called consensus democracy (Lijphart, 1999) and the neo-corporatist style of public policy-making in the Netherlands (Visser & Hemerijck, 1997; Andeweg et al., 2020), is clearly recognizable in the reforms of medical and long-term care. The government’s strategy has always been to gain the support of the lead organizations for its reforms by engaging them in the policy-making process in return for political influence. Consequently, the reforms were less radical than the government originally had in mind and took much more time than envisaged. The need for political compromise was also closely associated with the tradition of coalition government in Dutch politics. The reforms were feasible only after they sufficiently accommodated the wishes of the political parties constituting the government coalition of the day.

Borrowing a term from Moran, one may conceptualize Dutch health care as a “health care state”, that is, a state in which public and private agents have deeply penetrated each other (Moran, 1999: 4). Parallel to the growing complexity of health care, the increased number of policy actors in health care and the close connection of health care with other sectors of public life, mutual dependency has significantly increased. It is no exaggeration to postulate that neither the state nor the private sector can effectively operate without cooperation. We will see in this study that the increased mutual dependency influenced the shape and results of the reforms.

The deeply rooted principle of universal and equal access in Dutch health care also greatly influenced the reforms. The leading normative principle holds that each sick person or person with a handicap has access to state-of-the-art health services and that age, gender, income, social position, race or any other discriminating factor should not influence what type of care a person receives. One may speak of an egalitarian culture in health care. Violation of the principle of universal and equal access is considered inequitable. The impact of this principle is clearly recognizable in the reform of medical care and long-term care. To be politically and socially feasible, both reforms had to respect the historical legacy of universal and equal access.

Universal access in the Dutch context also includes the absence of financial barriers to health care. There is widespread public support for the view that the financial burden of health care must be shared by means of a solidary financing model. People should pay according to their ability to pay for a broad package of health services, and the amount they pay should not be linked to pre-existing medical disorders (van der Aa et al., 2018). The principle of solidarity also helps to explain why many people in the Netherlands consider private payments for health care unfair and why in the past several arrangements for user charges in statutory health insurance were short-lived. The impact of the normative principle of solidarity upon the reform of medical care and long-term care can hardly be underestimated.

1.4. What is health care reform?

There is no consistent and universally accepted definition of what constitutes health care reform. Policy-makers and policy analysts assign different meanings and connotations to the concept. It also happens that, for political reasons, policy-makers sell incremental policy changes as reform (Saltman & Figueras, 1997: 2).

In this study we define health care reform as a deliberate attempt to implement a major change in a country’s health care system. It is an orchestrated effort to bring about “system change”, reflecting a belief that the existing system is failing or will be unable to respond adequately to future changes in disease patterns or technological changes.

The study of health care reform (Okma & Tenbensel, 2020) requires an investigation into the policy goals of the reform and the policy instruments necessary to achieve these goals. We will see that the policy goals of the market reform only pointed out a direction of change. Health system performance had to be improved, in particular in terms of quality and cost control, while guaranteeing universal access. The absence of quantified policy goals makes it difficult to measure the success of the reform. How much change in the desired direction is needed to qualify as successful reform? What is more, stakeholders and citizens may appreciate the results quite differently.

What has been said about the formulation of policy goals for health care reform also applies to the formulation of the policy instruments. The main instrument of the reform of Dutch health care is institutional change through the introduction of regulated competition. However, this is a rather abstract concept that raises the question of how it has been worked out in concrete regulations and how it has been put into practice.

1.5. Structure of the study

To structure our study, we make use of a simple analytical model (Fig. 1.2). This model makes a distinction among primary functions that each care system must fulfil: (a) the provision of health care; (b) the financing of health care; and (c) the allocation of scarce resources to health care (purchasing). The market reform is conceptualized as a deliberate attempt to implement major changes in the way that these functions are fulfilled. All relationships between the building blocks in Fig. 1.2 are reciprocal. On one hand, the reform intends to bring about certain changes in health care financing, health care purchasing and health care provision. On the other hand, experiences with each of these changes may lead to adjustments in the reform. In a similar way, the effects of the reform may be reason for adjustments in the implementation of the reform or in the content of the reform itself.

The study starts in Chapter 2 with an analysis of the content of the reform plan (policy goals and instruments, policy paradigm), the policy-making process and the political struggle that preceded the adoption of the reform plan. Next follows an analysis of the implementation and the effects of the reform. Chapter 3 presents a study of the implementation strategy of insurers and the response of consumers to the reform of the health insurance market and the policy lessons that can be learned from it. Furthermore, attention will be paid to the impact of the reform on freedom of choice, risk solidarity and income solidarity. Both types of solidarity make up an important dimension of access to health care and health care financing. The practice of health care purchasing is the subject of analysis in Chapter 4. How do insurers shape purchasing? What kind of contracting models exist, and how are they used in contracting? Since purchasing has often been considered the heart of the reform, the question arises whether insurers have indeed been able to fulfil their assigned agency role. What policy lessons can be drawn from the experience with purchasing in Dutch health care? We will also touch on a hot political issue in the reform, namely the power balance between insurers and providers. Chapter 5 is devoted to an analysis of health care provision. To what extent has the reform truly altered the landscape of health care provision? Do health care providers engage in competition with each other as assumed in the model of regulated competition? What has been the influence of the reform on the quality and accessibility of health care (particularly in terms of waiting time)? What are the policy lessons to be learned from it?

An overriding issue in the political debate on the market reform has always been its impact on health care expenditures. The reform is assumed to contribute to effective cost control and financial sustainability by squeezing out technical and allocative inefficiencies. The big question, of course, is whether this ambitious policy goal has indeed been achieved. This question will be addressed in Chapter 6.

The main topic in Chapter 7 is our assessment of the reforms, including the future of regulated competition. After an overview of the main findings in this study, we will reflect upon the role of the state and insurers in current discussions on regulated competition. Our conclusion is that the political debate tends to go in the direction of a more leading role for the state in combination with a less prominent role for insurers. The call for reassertion of the role of the state in health care is also motivated by experiences with the handling of the COVID-19 pandemic in 2020.