DP9250 Free to Choose? Reform and Demand Response in the English National Health Service

Author(s): Martin Gaynor, Carol Propper, Stephan Seiler
Publication Date: December 2012
Keyword(s): Demand Estimation, Health Care Reform, Patient Choice
JEL(s): D12, I11, I18, L13, L30
Programme Areas: Public Economics
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=9250

The impacts of choice in public services are controversial. We exploit a reform in the English National Health Service to assess the impact of relaxing constraints on patient choice. We estimate a demand model to evaluate whether increased choice increased demand elasticity faced by hospitals with regard to clinical quality and waiting time for an important surgical procedure. We nd substantial impacts of the removal of restrictions. Patients became more responsive to clinical quality. Sicker patients and better informed patients were more a ected. We leverage our model to calculate potential bene ts. We nd increased demand responsiveness led to a signi cant reduction in mortality and an increase in patient welfare. The elasticity of demand faced by hospitals increased post-reform, giving hospitals potentially large incentives to improve their quality of care and nd suggestive evidence that hospitals responded strongly to the enhanced incentives due to increased demand elasticity. The results suggests greater choice can enhance quality.