Greater Efficiency through More Competition in the Health Care Sector?
More competition among health insurers is often recommended as a means towards enhancing efficiency in the health care sector. In this paper the effects of competition among health insurers on costs and quality of medical services are discussed. It is argued that if insurers competed with each other, costs would not decrease - on the contrary, they would increase since competing organisations are less capable of counterbalancing the strong market position of health care providers than the state or a cartel of health insurers. In addition, competition may lead to a segmentation of the market: on the one hand insurers with low premiums who only offer access to rather unpopular physicians. On the other hand insurers who guarantee free choice of medical practitioners but have higher premiums. A restriction of the free choice of medical practitioners weakens competition among physicians for patients.
