Assessing the impact of economic reform in medical services in the Netherlands

Price and income elasticities for medical services are estimated with annual data of the Netherlands. A zero labour productivity growth in medical services is assumed which allows a simple specification and avoids use of a questionable price deflator. Long run income and price elasticities are resp. around 1.25 and -0.15. Other variables (collective finance of medical services, collective burden of the economy and the population by age) have a negligible impact. With the currently suggested reform in medical services complete realization of the planned 1% annual rate of growth is unlikely. Substantial cost reduction and improved allocation, however, seem feasible.