“Competition is a discovery procedure that enables us to adapt to new circumstances. It is through further competition, not through agreement, that we gradually increase our efficiency.”
This statement by economist F.A. Hayek best captures the essence of competition. Competition constantly separates the efficient from the inefficient. The invisible hand of the market is, in fact, the visible hand of the customer.
But what if that customer is primarily the state, one that has a particular outcome in mind? It wants a predefined product called “universal healthcare”, not a diverse outcome of a competitive process in which consumers decide. Yet, it also wants to benefit from the advantages of competition. Is that possible?
The answer to this question was offered more than 35 years ago by Professor Alan Enthoven, who introduced the concept of managed competition in healthcare. In this model, the public sector defines the parameters of the product (the patient’s entitlement under public health insurance) but leaves the competitive environment to achieve this result—possibly through different means. The reward is better resource allocation and, as a result, higher efficiency, greater output, and better quality.
Ambulance Services and Health Insurance Companies
We can take a look at the impact of competition in two very different segments of the Slovak healthcare system: ambulance services and health insurance companies.
Decisions regarding the provision of ambulance services are more about outsourcing than about markets or non-markets. Here, the customer is a monopson (the buyer-side equivalent of a monopol)— the state. It is, therefore, more of a public–private partnership (PPP) relationship.
A basic rule says outsourcing makes sense when the potential supplier has better access to capital and better know-how than the buyer—in this case, the state and its institutions. Yet the effects of innovation and learning are often overlooked. Large bureaucratic structures tend to become rigid. A higher number of competing (even indirectly) providers increases the chance of new ideas. The threat of losing the market, moreover, creates pressure for efficiency. The current government’s flirtation with a state monopoly on ambulance services, therefore, risks creating a rigid, inefficient, and corrupt behemoth.
The situation with health insurance companies is more complex. The patient here is not only a passive participant, as in the case of ambulance services, but also an active one. Unlike ambulances, patients can choose among insurers. For the purpose of this text, it doesn’t matter that Slovak health insurers function more as purchasers of healthcare than as insurers in the classical sense.
Health insurers direct their competitive activities toward two logical goals: reducing costs per unit of care and motivating clients to join and stay. In other words, they must balance their financial health with their attractiveness to insurees.
To achieve this delicate balance, insurers use a wide range of tools. One is contracting—shaping relationships with providers (payments, criteria) and with insurees (services beyond the minimum network, such as day surgeries). Another tool is innovation—electronic services, telemedicine, mobile apps, AI tools, and more.
A further tool is reducing the cost of care for insurees through chronic disease management programs and preventive measures aimed at both providers and patients. Each of these tools carries its own costs and benefits, which insurers must constantly balance. Competition ensures they can never stop improving.
The visible results of this competitive process include quality criteria in contracts with providers, electronic prescriptions, a wider range of healthcare options (day surgeries, rehabilitation, advanced diagnostics), and innovations such as telemedicine, AI, and digital applications.
This remains far below the potential of what a more developed competitive system could achieve. In addition to continuous system distortions (600+ legislative amendments, government declarations, favoritism toward the state insurer) and political attacks, the greatest obstacle is the inability to differentiate the core product—insurance packages that vary by price and coverage, as is common in the Netherlands or Switzerland.
Even so, even limited competition in Slovakia’s healthcare system still makes sense.
We discuss competition in greater depth in our publication What Competition Among Health Insurance Companies Has Brought. You can read it in Slovak here.
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