Abstract
In this paper we analyze the bureaucratic negotiation processthat is implied by the budgeting system applied in Dutchhospital care. This system is based on centralized pricesetting while simultaneously allowing for decentralizednegotiations on volumes. We apply a variant of the bureaucracytheory, according to which the bureaucratic agency (in ourcase the joint hospitals) are not allowed to pricediscriminate, but will receive a flat price per unit ofoutput. We find that central price setting, where the insurercannot exploit its information on hospital costs, leads to asuboptimal supply of hospital care.
Similar content being viewed by others
References
Arrow, K.J. (1963). Uncertainty and the welfare economics of medical care. American Economic Review 53: 941-973.
Breton, A. and Wintrobe, R. (1975). The equilibrium size of a budget maximizing bureau. Journal of Political Economy 83: 195-207.
Janssen, R. (1993). Cost containment in the Netherlands, success and failure. In: Report on the WHO-meeting on the future of health care financing: increasing demand and limited resources, 171-188. WHO-Centre for Public Health Research. Kiel, Germany.
Janssen, R. and Hartog, M. den (1993). More market, less competition and more strategy. In: M. Malek, J. Rasquinha and P. Vacani (Eds.), Strategic issues in health care management, 189-209. Chichester: John Wiley and Sons.
Mueller, D.C. (1989). Public choice II. Cambridge: Cambridge University Press.
Niskanen, W.A. (1971). Bureaucracy and representative government. Chicago: Aldine Atherton.
Schut, F. (1995). Competition in the Dutch health care sector. Rotterdam: PhD-thesis, Erasmus University.
Staten, M.(1987). Marketshare and the illusion of power. Journal of Health Economics 7: 43-56.
Zorgnota 2001 (2000). Memorandum on the care sector. The Hague: SDU publishers (in Dutch).
Author information
Authors and Affiliations
Rights and permissions
About this article
Cite this article
Janssen, R.T., Leers, T., Meijdam, L.C. et al. Bureaucracy Versus Markets in Hospital Care: The Dutch Case. Public Choice 114, 477–489 (2003). https://doi.org/10.1023/A:1022646231170
Issue Date:
DOI: https://doi.org/10.1023/A:1022646231170