Can Public Healthcare Afford Marketization? Market Principles, Mechanisms, and Effects in Five Health Systems

Abstract

Abstract Policymakers now have four decades’ experience using marketization to address cost and quality problems in public‐sector health services. While much is known about the challenges, it is difficult to draw lessons because there remains no agreed‐upon definition of marketization. This article contributes a definition that focuses on the transaction, particularly the effects of funding arrangements on the intensity of competition among providers. Based on prior literature and 106 interviews with practitioners and researchers in five countries, the authors contribute a systematization of 12 concrete market mechanisms enacting three market principles. Furthermore, the authors analyze respondents' perceptions of healthcare marketization's effects on costs and quality. While marketization is a multi‐faceted, sometimes ambiguous phenomenon requiring further research before definite conclusions can be reached, most statements from our respondents about cost and quality effects were negative. Evidence for Practice Examining health systems in five countries, we identify 12 different market mechanisms, i.e. concrete procedural changes that stimulate competition among service providers. While these mechanisms sometimes enable improvements in cost and quality, our respondents identified many more examples of markets driving up costs and compromising quality. A substantial number of respondents also stated that effects were unclear. More research is needed to assess the effects of market mechanisms in healthcare, for which the article's conceptualization and findings can serve as a basis.