Healthcare accounts for about 10% of GDP and around 15% of public expenditure on average in the OECD.1 Spending has risen over the past decade in several OECD countries and is projected to continue increasing as populations age. Beyond its economic weight, healthcare is central to quality of life, labour participation and social welfare. These features help explain why governments intervene extensively in healthcare markets, through funding, regulation and, in many cases, direct provision. They also underscore why the design of regulation matters.
Poorly designed rules can entrench inefficiencies, weaken incentives for quality improvement and limit the scope for competition to contribute to better outcomes. This paper examines how to bring a competition lens to the regulation of healthcare markets, where market failures are persistent and regulation is not a temporary response but a permanent feature of system design.
Key messages include:
Introducing competition in healthcare markets can contribute to efficiency in delivery and quality of care. Many OECD countries allow some form of competition, particularly through patient choice of providers and, in some cases, insurer choice. At the same time, healthcare markets require ongoing regulation to address information asymmetries, equity concerns and safety. Competition is therefore not a substitute for regulation, but an instrument whose effects depend on regulatory design.
Healthcare systems differ widely and no model consistently outperforms others. This diversity does not weaken the case for the scrutiny of regulation. On the contrary, pro-competitive reforms within existing systems can yield gains. The central challenge for policymakers is to ensure that regulation and competition reinforce rather than undermine each other.
Regulatory interventions introduced to address market failures or equity concerns can inadvertently restrict competition. Licensing and entry requirements are a prominent example. While licensing of providers is necessary to assure minimum quality, specific rules such as needs‑based entry restrictions, minimum activity thresholds applied broadly, or incumbents’ involvement in licensing decisions can limit entry, reduce capacity and weaken incentives to improve quality.
Professional regulation poses similar concerns. Licensing and scope‑of‑practice rules protect patients from low‑quality care, but overly restrictive definitions of tasks and limited portability of licences can exacerbate workforce shortages, reduce access and increase waiting times. Professional bodies are typically granted regulatory powers to set entry and conduct requirements, raising the risk that they may restrict entry and limit professionals’ ability to compete, for example by restricting commercial communications.
Provider payment mechanisms play a central role in determining how providers compete. Each mechanism creates distinct incentives, such as encouraging overprovision or fostering efficiency, and typically has both desirable properties and detrimental effects. Awareness of these effects can help competition authorities develop their advocacy to help align incentives with objectives for quality, efficiency and access, and avoid unintended distortions.
The development of digital services can also be slowed down by regulatory barriers, such as the lack of interoperability between electronic records systems. The use of digital technologies in healthcare, such as telemedicine and electronic health records (EHR), is becoming more widespread, offering opportunities for greater efficiency and better access to healthcare. Regulations about professional licensing, as well as pricing and reimbursement rules, have the potential to slow down the development of telemedicine. The lack of access to health data and the lack of interoperability are among the regulatory barriers that are more relevant for the use of data and of EHR to support healthcare services.
Competition cannot work effectively unless patients and payers are equipped with usable information. Healthcare services are complex and marked by information asymmetries. Even when patients are free to choose providers, they often lack clear information on quality, outcomes and costs. The paper reviews policies aimed at improving information disclosure, including price transparency and publication of quality indicators. These information policies do not remove the need for regulation or enforcement, but they enable choice and competition to discipline providers and reward better performance.