As COVID-19 has made many of us acutely aware, providing high quality mental health care is vital. However, the mental health care market is a difficult one for insurers; there is evidence that uncertainty and variation in treatments are greater compared to physical health conditions (for instance, see Frank et al. 2000). Thus uncertainty and variability make it difficult for payers to purchase care from providers based on volume or quality.
Today we consider how the Dutch pay for mental health care. Since 2006–with the introduction of the Health Insurance Act (HIA)–the Netherlands has had a system of managed competition. In this system, individuals with mental health issues are divided into those in outpatient settings (i.e., “curative”) and those requiring long-term residential care.
The inclusion of mental health care in the HIA was supported by the introduction of a new product classification system (Diagnosis Treatment Combinations or DTCs) that is used for reimbursing providers for the different mental health services. A DTC consists of all activities that are performed and the time (in minutes) carried out for these activities. DTCs in mental health care consist of different product groups that cover different amounts of time measured in ranges of minutes…Each DTC has its own price. In general, a DTC that covers a higher minute range is more expensive than a DTC that covers less minutes. After the DTC is closed, the insurer pays the contracted price to the provider…
Mental health providers negotiate with health insurers about DTC‐prices and an annual budget that serves as ceiling. Mental health care providers receive the negotiated DTC‐price for every DTC they produce until they hit the annual budget. In principle, providers do not receive additional payments if they produce over the budget…In practice, however, contracts may sometimes be supplemented with additional budget for example if the number of patients turns out to be larger than ex‐ante expected
Before 2014, providers negotiated prices with a single representative insurer in their area; in 2014, however, providers negotiated with each insurer separately. A paper by Brouns et al. (2021), uses this variation in how providers negotiate with insurers to examine how provider market power affects the negotiated rates for mental health services. Using a proprietary insurance claim dataset with information on all Dutch DTCs rates negoatiated between insurers and providers between 2013 and 2014, the authors find that:
In 2013, the majority of the contract prices equaled these maximum prices…In 2014…health providers reacted to this policy change by setting most contract prices below the new maximum prices…mental health providers with more market power…contracted significantly higher prices. Some insurers negotiated significantly lower prices than other insurers but these differences are unrelated to an insurers’ market share.
In short, more market power had strong pricing effects for providers, but less so for insurers in the Dutch mental health pricing arena.
Source:
- Brouns, C., Douven, R. and Kemp, R. (2021), Prices and market power in mental health care: Evidence from a major policy change in the Netherlands. Health Economics.