Political economy studies of health policy offer more than simple economic or political studies. Politics can have a greater influence on health policy decisions and their implementation than either economic or health considerations. Politics constrain how much of an optimal economic or health programme can be adopted and implemented. At the same time, the economic interests of the stakeholders drive their political positions on any potential policy change. We need more political economy studies to understand how to craft and execute politically viable ‘best’ health policies. This editorial uses the decision choices facing China’s health reform to illustrate the importance of political economic analysis and argues for more integrated political economy studies, particularly ones examining the roles of the health bureaucracy and the medical profession.

The influence of European Union (EU) law on private health insurance has not received as much attention as its impact on other parts of the health system (Hervey, 2007). Now is a good time to redress this relative neglect, as growing interest in private health insurance – in particular, its potential to relieve pressure on public budgets and enhance choice – raises questions about how best to create or expand and shape markets to achieve specific aims. There are no easy answers to these questions, but one thing seems clear: if policy makers intend to use private health insurance to achieve a particular objective, they must be able to direct market behaviour appropriately. Otherwise, the type of market most likely to emerge is one that simply provides access to acute care in the private sector for wealthier people. However, in newer markets lack of regulatory capacity often presents a barrier to effective policy direction (Thomson et al., 2007 forthcoming). In the established markets of the EU, many of the constraints facing policy makers come from single market legislation. Here we use the case of the Third Non-Life Insurance Directive to illustrate some of these constraints and to show how they can undermine the achievement of health policy goals such as financial protection, equity of access to health care and quality or efficiency in the organization, administration, and delivery of health services.

There is evidence that health care providers located in communities with relatively large uninsured populations face financial difficulties because of low service demand and high levels of uncompensated care. Data on 4,920 physicians from the 2000–2001 Community Tracking Study Physician Survey and from 25,637 adults from the 2003 Community Tracking Study Household Survey were used to analyze whether the relative size of the local uninsured population is associated with the level of career satisfaction and the quality of care provided by physicians and to assess whether patient trust is associated with the level of community uninsurance. The results indicate that the proportion of uninsured adults in a given community is negatively related to physicians’ career satisfaction and the perceived quality of health care provided. Community uninsurance is also negatively related to patient trust in their doctor and positively related to whether insured patients believed that their doctor was influenced by rules from health insurance companies. Physicians in communities with relatively large uninsured populations may have lower career satisfaction and lower perceptions of the quality of care provided due to financial difficulties. Patients in these communities are also less likely to trust their physician.

A competitive national health insurance system was introduced in Israel in 1995. Comsumer mobility has been traditionally a signal of market (managed) competition. However, since 1998, sickness funds’ switching rate has been stable at around 1% of the population. The low switching rate is explained by limited real options and similarity in the sickness funds functioning, and reluctance to change providers. The paper aims to characterize the 1% of the population who switches sickness fund in relation to the stayers, and to examine the implications for public policy. The National Insurance Institute Health Registry was used to conduct two analyses: (i) bivariate comparisons on selected socio-demographic characteristics of the switchers to those of the stayers in the years 1999–2000, and (ii) a multivariate logistic analysis of the propensity to switch for the entire adult (21+) population in the years 2005–2006. The main result is that switching is an inferior good. Both the bivariate and the multivariate analysis show that persons with lower labor-income, receiving income support or unemployment benefits are more likely to switch. Switchers have more children up to age 18. Arabs and Orthodox Jews are more likely to switch sickness funds. The 1% of switchers does not form a random draw from the age–sex-adjusted population. The over-representation of poor persons among switchers is unique to the Israeli scene, which might have resulted from demand-side initiatives, but also from implicit risk-selection strategies exercised by the sickness funds under the Israeli incomplete age-based risk-adjustment system.

Like many jurisdictions, mental health policy-making in Ontario, Canada, has a long history of frustrated attempts to move from a hospital and physician-based tradition to a coordinated system with greater emphasis on community-based mental health care. This study examines policy legacies associated with the introduction of psychiatric hospitals in the 1850s and of public health insurance (medicare) in the 1960s in Ontario; and their effect on subsequent mental health reform initiatives using a qualitative case study approach. Following Pierson (1993) we capture the resource/incentive and interpretive effects of prior policies on three groups of actors: government elites, interests, and mass publics. Data are drawn from academic and policy literature, and key informant interviews. The findings suggest that psychiatric hospital policy produced important policy legacies which were reinforced by the establishment of Canadian medicare. These legacies explain the traditional difficulty in achieving mental health reform, but are less helpful in explaining recent promising developments that support community-based care. Current reform of the Ontario health system presents an opportunity to overcome several of these legacies. Analysis of policy legacies in other countries which had an asylum tradition may help to explain the similarities and differences in their subsequent paths of mental health reform.

This article is a comparative study of three Scandinavian countries – Norway, Denmark, and Sweden – all of which have provided the individual patient with extensive rights to choose the hospital where he/she wishes to receive treatment. In the paper, we present an analysis of the utilization of the opportunity to choose between hospitals in these three countries. The analysis addresses two questions: (i) How many patients are exercising the right to choose between hospitals in these countries and who is making use of this opportunity? (ii) How can we explain the observed utilization pattern? The results of the study reveal clear similarities between the three countries and suggest that few patients have actually chosen their hospital. However, a gradual increase can be observed over the years. Few formal, legislative, or economic barriers exist for patients. Instead, limited knowledge amongst patients regarding reforms, combined with insufficient support from GPs and limited information, can explain why few patients choose to receive care outside of their local region.

Australia has a national, compulsory and universal health insurance scheme, called Medicare. In 1996 the Government changed the Medicare Benefit Schedule Book in such a way as to create different financial incentives for consumers or producers of out-of-hospital private psychiatric services, once an individual consumer had received 50 such services in a 12-month period. The Australian Government introduced a new Item (319) to cover some special cases that were affected by the policy change. At the same time, the Commonwealth introduced a ‘fee-freeze’ for all medical services. The purpose of this study is two-fold. First, it is necessary to describe the three policy interventions (the constraints on utilization, the operation of the new Item and the general ‘fee-freeze’.) The new Item policy was essentially a mechanism to ‘dampen’ the effect of the ‘constraint’ policy, and these two policy changes will be consequently analysed as a single intervention. The second objective is to evaluate the policy intervention in terms of the (stated) Australian purpose of reducing utilization of psychiatric services, and thus reducing financial outlays. Thus, it is important to separate out the different effects of the three policies that were introduced at much the same time in November 1996 and January 1997. The econometric results indicate that the composite policy change (constraining services and the new 319 Item) had a statistically significant effect. The analysis of the Medicare Benefit (in constant prices) indicates that the ‘fee-freeze’ policy also had a statistically significant effect. This enables separate determination of the several policy changes. In fact, the empirical results indicate that the Commonwealth Government underestimated the ‘savings’ that would arise from the ‘constraint’ policy.

This paper aims to describe the priority-setting procedure for new original pharmaceuticals practiced by the Swedish Pharmaceutical Benefits Board (LFN), to analyse the outcome of the procedure in terms of decisions and the relative importance of ethical principles, and to examine the reactions of stakeholders. All the ‘principally important’ decisions made by the LFN during its first 33 months of operation were analysed. The study is theoretically anchored in the theory of fair and legitimate priority-setting procedures by Daniels and Sabin, and is based on public documents, media articles, and semi-structured interviews. Only nine cases resulted in a rejection of a subsidy by the LFN and 15 in a limited or conditional subsidy. Total rejections rather than limitations gave rise to actions by stakeholders. Primarily, the principle of cost-effectiveness was used when limiting/conditioning or totally rejecting a subsidy. This study suggests that implementing a priority-setting process that fulfils the conditions of accountability for reasonableness can result in a priority-setting process which is generally perceived as fair and legitimate by the major stakeholders and may increase social learning in terms of accepting the necessity of priority setting in health care. The principle of cost-effectiveness increased in importance when the demand for openness and transparency increased.

In recent years, Medicaid has experienced a dramatic increase in spending on prescription drugs in general and psychotropic medications in particular. The purpose of this study is to examine the effects of increased Medicaid spending on psychotropic drugs on improving the mental health and well-being of participants at the population level. Specifically, we study the effect on outcomes that are strongly correlated with mood disorders, including depression and Attention Deficit/Hyperactivity disorder, controlling for concomitant increases in Medicaid eligibility thresholds and expansion into managed care for mental health services. Knowledge of the effects of changes in the Medicaid program is crucial to policymakers as they consider implementing and expanding mental health services. Our results show that increased spending on antidepressants and stimulants are associated with improvements in some outcomes, but not in others.

Rising pharmaceutical prices, increasing demand for more effective innovative drugs and growing public outrage have heightened criticism of the pharmaceutical industry. The public debate has focused on drug prices and access. As a consequence, the patent system is being reexamined as an efficient mechanism for encouraging pharmaceutical innovation and drug development. We propose an alternative to the existing patent system, instead rewarding the innovating firm with direct tax credits in exchange for marginal cost pricing. This concept is based on the fundamental assumption that innovation that benefits society at large may be financed publicly. As an industry which produces a social good characterized by high fixed costs, high information and regulatory costs, and relatively low marginal costs of production, pharmaceuticals are well-suited to such a mechanism. Under this proposal, drug prices fall, consumer surplus increases, access is enhanced, and the incentives to innovate are preserved.

The governance of medical performance is changing and new governing instruments are emerging. Existing analyses highlight the complexity of new governance arrangements, but the more or less dualistic perspective limits the possibility for exploring more fully this complexity. The present article therefore uses recent contributions to the literature on governance to explore the co-existence of different forms of governance with the aim of assessing the relative extent and the substantive nature of governance change. Using recent reforms of the governance of medical performance in Germany as a case study, the analysis suggests that the complexity of governance change takes three forms: first, the balance among (hybrid) forms of governance is shifting; second, the nature of individual (hybrid) forms of governance is changing; and, third, both types of change are reflected in tensions not only between but also within (hybrid) forms of governance. As such, the article also contributes to the recent literature on governance by highlighting the centrality of tensions in contemporary governance, which can also occur within both hybrid forms of governance and `pure' forms of governance.

A moratorium in the US on referrals of Medicare and Medicaid patients to new cardiac, orthopedic, or surgical specialty hospitals by physician-investors was recently lifted, yet the considerable controversy stirred by this growing hospital organizational form continues. This paper calls attention to the peculiar trade-offs introduced by entry of these specialty hospitals, and highlights distinctions among their different types. New policy approaches should be open to the notion that all physician-owned specialty hospitals need not necessarily be regulated in the same way. And caution will be required not to compromise the capacity of community general hospitals to service more complex patients and to maintain the social safety net.

As the share of supplementary health insurance (SI) in health care finance is likely to grow, SI may become an increasingly attractive tool for risk-selection in basic health insurance (BI). In this paper, we develop a conceptual framework to assess the probability that insurers will use SI for favourable risk-selection in BI. We apply our framework to five countries in which risk-selection via SI is feasible: Belgium, Germany, Israel, the Netherlands, and Switzerland. For each country, we review the available evidence of SI being used as selection device. We find that the probability that SI is and will be used for risk-selection substantially varies across countries. Finally, we discuss several strategies for policy makers to reduce the chance that SI will be used for risk-selection in BI markets.

The empirical association between high hospital procedure volume and lower mortality rates has led to recommendations for the regionalization of complex surgical procedures. While regionalization may improve outcomes, it also reduces market competition, which has been found to lower prices and improve health care quality. This study estimates the potential net benefits of regionalizing the Whipple surgery for pancreatic cancer patients. We confirm that increased hospital volume and surgeon volume are associated with lower inpatient mortality rates. We then predict the price and outcome consequences of concentrating Whipple surgery at hospitals that perform at least two, four, and six procedures respectively per year. Our consumer surplus calculations suggest that regionalization can increase consumer surplus, but potential price increases extract over half of the value of reduced deaths from regionalization. We reach three conclusions. First, regionalization can increase consumer surplus, but the benefits may be substantially less than implied by examining only the outcome side of the equation. Second, modest changes in outcomes due to regionalization may lead to decreases in consumer surplus. Third, before any regionalization policy is implemented, a deep and precise understanding of the nature of both outcome/volume and price/competition relationships is needed.

This paper examines whether delivery practice patterns (Cesarean sections or vaginal) are influenced by lawsuits or whether the hypothesized relationship is confounded by small area variation. The analysis uses multilevel analysis to deal with hospital- and Dartmouth Hospital Referral Region-level variation. The model includes patient clinical variables, patient socio-economic status, and hospital characteristics as control variables. The secondary data sources include hospital discharges from the 2002 Texas Health Care Information Council as well as 1988–2001 Texas Department of Insurance Closed Claim File data. After extracting the variation in delivery practice between hospitals and between Dartmouth Hospital Referral Regions in a multilevel model, the effects of lawsuits on defensive medicine are reduced but are still significant.

This article presents an investigation into whether individuals incorporate information on their family genetic (health) endowment into decision making regarding participation in behaviours related to the production of health capital. Competing theoretical perspectives exist as to how genetic endowment should affect participation in health-related behaviours. There is also a growing consensus that the availability of genetic information holds important consequences for the individual in terms of investment in human capital, the pricing and availability of health insurance, and labour market opportunity. Therefore, the question of how individuals use the greater availability of genetic data is important. Our empirical results indicate that poor genetic endowment tends to be associated with a lower probability of participation in cigarette smoking, but also a lower probability of participation in regular exercise.

The English National Health Service is introducing activity based tariff systems or Payment by Results (PbR) as the basis for hospital funding. The funding arrangements provide incentives for increasing activity, particularly day surgery, and, uniquely, are based on costing data from all hospitals. But prices should not be based on average costs and the potential of PbR to improve the quality of care is yet to be exploited. Without refinement, PbR threatens to undermine expenditure control, to divert resources away from primary care, and to distort needs based funding.

Cross-national comparisons that assess dimensions of health system performance indicate that the US provides higher rates of revascularization procedures than France and other developed nations, but we believe these findings are misleading. In this paper, we compare the use of these procedures in the US, France and their two world cities, Manhattan and Paris. In doing so, we address a number of limitations associated with existing cross-national comparisons of heart disease treatment. After adjusting for the prevalence of disease in these nations and cities, we found that residents of France aged 45–64 years receive more revascularization procedures than residents of the US and that Parisians receive more revascularizations than residents of Manhattan. Older residents 65 years and over (65+) in the US receive more of these procedures than their French counterparts, but the differences are not nearly as great as previous studies suggest. Moreover, our data on Manhattan and Paris where the population and level of health resources are more comparable, indicate that older Parisians obtain more revascularization procedures than older Manhattanites. Finally, we found that the use of revascularization procedures is significantly lower in Manhattan among persons without private health insurance and among racial and ethnic minorities.