Market Power in Hospital Markets and Selection in Health Insurance Markets

In many countries, market mechanisms are used to generate incentives for efficiency in health care markets. However, markets may suffer from market failures, resulting in an inefficient use of resources. A potentially important source of market failure in health care is insufficient competition between health care providers. In that case, health insurers are not able to bargain effectively with providers. Another potential source of market failure is that health insurance markets can by affected by selection problems and information frictions. Adverse selection can induce insurers to offer health plans with the goal to encourage self-selection by healthy individuals. Furthermore, information frictions may hamper optimal consumer choice in health insurance markets. This thesis examines empirically these market failures in the context of the Dutch health care system. It focuses on (i) market power in the provider market and (ii) selection and inertia in the insurance market.