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.