Is there evidence that competition in healthcare is a good thing? Yes.

The coalition government’s approach to competition in the English NHS represents a shift to a more systematic attempt to organise the NHS along the line of the former publicly owned utilities. There is to be supplier competition both in the market (providers seeking individual patients) and for the market (commissioners selecting providers for services to populations). But the market for tax financed, largely free at the point of use healthcare provided by strongly regulated professionals differs markedly from, for instance, the gas and telecommunications markets. Not only is public healthcare the subject of intense public and political concern, the quality of much care is difficult for users to assess, and most of the time patients are dependent on the doctor to act as their agent. As a result, standard market theory produces ambiguous predictions of the likely effect of competition. A recent review of international evidence on the effect of supplier competition in healthcare concluded that it is complex and equivocal. It is also challenging to implement and regulate competition, generating considerable transaction costs. Competition is clearly easier to apply to services such as elective surgery or routine diagnostics that are episodic, are relatively easier to define, and have outcomes that are more straightforward to assess. Competition between providers is also likely to have more predictably desirable effects when prices are set under a prospective payment system (such as the NHS payment by results system) rather than when they are allowed to vary. UK evidence