Competition and solidarity: Belgium

1. Erik Schokkaert (Department of Economics, KULeuven; CORE, Université catholique de Louvain) Competition and solidarity: Belgium

2. Introduction • Crucial importance of historical circumstances and of the resulting institutional background. • Belgium as a Bismarck system • Switzerland, the Netherlands, Belgium, UK. • Be careful: the overall system matters. • Bismarckian versus Beveridge systems: underfunding of the NHS was not a political accident, but was to be expected (cf. other features of the "welfare state").

3. “Competition” has different faces,... Freedom of choice on provider and/or on insurance markets? Increased importance of voluntary health insurance? OOP-payments reflecting social cost? On provider and/or on insurance markets? Quality and/or price competition? Free price setting or regulated prices? For-profit or not-for-profit players? All countries have “mixed” systems, but the choices will depend on the historical/institutional background

4. ...and the same is true for “solidarity” • ETHICAL PRINCIPLE - JUSTICE: “No inequality in outcomes that is caused by characteristics/variables for which individuals cannot be held responsible”. • Q1: what outcomes? • Access to health care. • Health (includes many other policy domains, e.g. housing and education). • Overall well-being (includes the financing side). • Q2: where to draw the responsibility cut? • From full egalitarianism to complete libertarianism. • Example: responsibility for lifestyle? For treatment choices?

5. Social support At least as important: is the population willing to support “just” institutions? This solidarity is under pressure in all Western countries. Institutional changes (e.g. introducing more market) have consequences for these feelings of solidarity. I will NOT talk about this crucial question.

6. An example Imagine two secretaries, of the same age, doing practically the same job. One finds out that the other earns considerably more than she does. The better paid secretary, however, is quicker, more efficient and more reliable at her job. In your opinion, is it fair or not fair that one secretary is paid more than the other? (Source: World Values Study)

7. 1. Belgium: basic features • Universal and compulsory health insurance system with very broad coverage: • population coverage nearly 100%. • service coverage very broad, including, e.g., long-term care. • Administered by five sickness funds (ideological roots). • Free choice of sickness fund. • Supplemental insurance market: importance limited but slowly growing. Mainly hospital insurance.

8. Provider markets Very large freedom of choice both for patients and providers (e.g. no gatekeeping). Large number of physicians (specialists): no waiting times. Payment largely fee-for-service (also for medical services in hospitals). “Official prices”, but possibility of extra-billing. Hospitals largely non-profit. Large OOP-payments for patients. At first sight, a reasonably competitive environment.

9. 2. Belgium: the health insurance market • The basic financial structure • Solidarity 1: premium structure • Solidarity 2: risk adjustment • Efficiency 1: risk adjustment • Efficiency 2: expenditure control • Predictions and reality Supplemental (voluntary) hospital insurance

10. A. The basic financial structure Solidarity fund (RIZIV/INAMI) Solidarity contribution (income related) Risk-adjusted budget Sickness Fund Consumer Premium Contribution

11. B. Premium Community rating for each sickness fund. Yearly premiums differ, but extremely small: < € 30. Financing largely through income-related social contributions. This is a deliberate choice!

12. C. Solidarity in the risk adjustment system • (in addition to age, gender, morbidity information) also rich set of socio-economic variables. • DEBATE ON SOLIDARITY: DISTINCTION BETWEEN EXPLANATORY VARIABLES AND (NORMATIVE) RISK ADJUSTERS • medical supply. • self-employed. • very low income earners (social assistance).

13. D. Financial responsibility limited • Compulsory insurance market closed to new entrants. • Allocation rule of fixed overall budget: 30% normative expenditures – 70% actual expenditures. • Responsibility for 25% of difference between expenditures and sickness fund budget. • Yet, on a very large insured package! • Still, incentives for risk selection. But does it happen?

14. E. No individual instruments for expenditure control Belgian sickness funds cannot engage in selective contracting. They negotiate “official” prices as a cartel (with the provider associations). They are extremely cautious in disseminating information about providers. Hardly any incentives for efficiency (with some exceptions).

15. F. Theoretical predictions and the Belgian reality: obvious but one puzzle • growing danger of risk selection. • no price competition in compulsory system; weak incentives for individual sickness funds to control expenditures, almost no instruments: competition on service quality, not on prices. • lobby as a cartel (and together with the providers) to increase the budget. PUZZLE: this did not happen in the recent past (in a situation without government).

16. Supplemental insurance • Importance growing, but still limited. • Supplied by both sickness funds and private insurers: • if with sickness fund, linked to compulsory insurance. • Mainly hospital insurance – supplements (in one-person rooms).

17. Who takes up supplemental insurance? Probit model – demographic and regional controls – rich health information (Schokkaert et al., Health Economics, 2010). Socio-economic gradient

18. 3. Belgium: provider markets • Patients: choice and OOP-payments • Price-setting behaviour: solidarity issues • Transparency? • Theoretical predictions and the Belgian reality

19. A. Patients: choice and OOP-payments • Very large freedom of choice, but at the same time large OOP-payments (25% of total health care payments). • For consultations with physicians: no “third payer”-system. • Co-payments are highly differentiated (e.g. medicines, lower if fixed GP): value-based design? • Recent study (KCE 126, 2010, Vrijens et al.) suggests that this does not lead to additional social inequalities. • Definitely price awareness in the ambulatory sector. • Social protection mechanisms: • reduced co-payments for low-income patients (OMNIO). • income-dependent ceilings (MAB): ex post.

20. MAB-ceilings: relative (2007)

21. B. Price setting behaviour • DRG-financing for non-medical services in hospitals: incentives for risk selection? • "Official fees" for medical services set through negotiations between insurers and providers within the context of RIZIV/INAMI. • HOWEVER: hospitals and providers can raise "supplements" (balance billing, extra-billing). Regulation does not extend to one-person rooms.

22. Supplements are substantial,...

23. ...and highly differentiated

24. Supplements and solidarity • Supplements are not included in the maximum billing system. • YET, they are (largely) covered by the supplemental (voluntary) hospital insurance. • Given the social gradient in hospital insurance, • Problems with (e.g. material) supplements in two-person and common rooms. • Social gradient in the choice of one-person rooms. Is this an issue?

25. C. Transparency? Limited in the hospital sector, better in the ambulatory sector. Most patients have no idea about the supplements. There is only little information on the quality of the hospitals, as both the sickness funds and the government are very reluctant to make that information available.

26. D. Theoretical predictions and the Belgian reality • competition mainly on service characteristics that are "observable" for the patients: • no real price competition: pressure on costs.

28. Theoretical predictions and the Belgian reality • PREDICTIONS: competition mainly on service characteristics that are "observable" for the patients: • no real price competition: pressure on costs. • no real "health care quality" competition: mediocre quality. • competition on more subjective features: • waiting lists. • level of personal service.

29. Source: Eurobarometer, 2010

30. And what about solidarity? • Danger of worse treatment in common rooms? No indications. • OOP-payments (including supplements) lead to problems for the chronically ill, the very poor, the psychiatric patients (Schokkaert et al., KCE, 2008). • YET, this is probably the price to be paid for the freedom! • “Countervailing forces": FFS on the one hand, relatively large OOP-payments on the other? • Belgium apparently (implicitly) has made the choice for demand-side rationing: how to trade off subjective satisfaction and “quality” of care?

31. Conclusion • Each system has its own (subtle) equilibria and countervailing forces. • To increase efficiency and transparency: • more information and some selective contracting on the provider market, • to be set up by more active sickness funds. • Real challenge for the future: mobilize willingness-to-pay of the rich to co-finance health care for the poor. Is this possible in a system with increasing financial incentives (and a larger role for profit-motivated players)?