Competition in general may be seen as:

  • a process of disruptive innovations by pioneering entrepreneurs (Schumpeter);
  • a discovery procedure (v. Hajek);
  • a public good if its effects will be available for all, e.g. by reducing the pioneer profits in favor of lower prices for the consumer;
  • a stimulation of growth and welfare.

Prices and costs, quantities and quality are the major parameters. Competition needs rules and a legal framework that guarantees freedom for new ideas, new products, new procedures etc. The promotion of competition is part of economic policy.

Within healthcare there are several financing instruments of competition and, more specifically, differences in contribution rates (pay-roll taxes), risk-oriented premiums, co-payments or out-of-pocket expenditures. Depending on the health system (Bismarckian or Beveridge-type) there is a market for public and private insurances including a choice for different health services and plans for the individual. Freedom to choose between health plans, availability of innovations, waiting time, preferred provider models and treatment requires transparency.

Selective contracts between insurance funds and healthcare providers are possible; they offer, for example, choices in regard to customer services, waiting time, access, or bonus-malus incentives. User/patient/customer satisfaction is another important way of judging the advantages of competition. Incentives as a bonus/malus regulation is part of competition as well.

Many of these forms of competition are available in different health systems in the European Common Market. To avoid protectionism, state monopolies and barriers to entry, there is a European competition law and Government restrictions on competition are part of these rules (such as the German Act against restraints of competition, GWB). Regulated competition includes cartel prohibition, merger and abuse control and an antitrust law.

Irrespective of the anticipated benefits of competition in healthcare there are risks as well. These include:

  • competition leads to social chaos, anarchy of markets (K. Marx);
  • competition increases complexity, so-called transaction costs are rising;
  • incomplete and asymmetric information gain in importance;
  • hunt for subsidies and unproductive rent-seeking;
  • ruinous competition.

Given these differences in the evaluation of the pros and cons, some experts regard competition and solidarity as twins and call for a “socially bounded competition.” In detail, they combine their proposal with different forms of integrated care (IC)1. IC appears in many different versions, all of them are affiliated with competition as a compromise between free trade and protectionism:

  • IC is a concept bringing together inputs, delivery, management and organization and health promotion. It is a means to improve health services and health products in relation to access, quality, user satisfaction and efficiency;
  • IC is a worldwide trend in health care reforms and new organizational arrangements focusing on more coordinated and integrated forms of care provision (see above);
  • IC as a response to the fragmented delivery of health and social services being an acknowledged problem in many health systems (silo effect);
  • IC should avoid over, under and misuse of healthcare services and products.

To sum up: competition is not an end in itself, but an instrument in different areas. The opposite of free trade and competition is more protectionism and bureaucracy.

In the architecture of allocating scarce resources in healthcare it means a step by step approach. As there is no gold-standard and no panacea we need a flexible stop and go system or a piecemeal social engineering as Popper called it. Perhaps the future will be characterized with more competition and more cooperation at the same time.


1 Lisac, M., Reimers, L., Henke, K.-D., Schlette, S., (2010), Access and Choice – Competition under the roof of solidarity in German Health Care, An analysis of health policy reforms since 2004,in: Journal of Health Economics, Policy and Law, Vol. 5 pp32 – 52.