The Wall Street Journal featured the health care reform in the Netherlands on Thursday. I always support the MSA idea better because medical service providers can compete for customers/patients while the patients bear the true medical costs. The key is in competition among hospitals and doctors. Little did I know that competition among insurers works, too. At first glance, the idea should be as good as competition among hospitals and doctors as long as the adverse selection problem is taken care of. In the Dutch system, adverse selection problem is overcome by government subsidy together with mandatory acceptance of enrollment.
But how the doctors are compensated must be carefully studied. Economists will tell you competition among suppliers will not only bring cost savings to customers but also brings about innovation in the industry. If doctors and hospitals fight for customers/patients directly, they will enjoy all the profits their innovations can bring home. With insurance companies in the middle, I don't know if doctors and hospitals will have enough incentives to innovate. Well, innovations can occur in the insurer level, too. But I don't know if that can translate into medical advances.
Speaking of doctors' compensation, I am writing a paper about that under Prof. Dobkin's supervision. I should write another post to discuss it. Stay tuned!
(Picture: wsj.com)
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