The Netherlands has a high-quality health care system, but, like its counterparts in other developed nations, it faces tremendous strains. An aging population has put pressure on the budget (Exhibit 1). The public demands access to modern treatments and will no longer accept impersonal care and long waiting lists. In the struggle to make ends meet, the system pays too much attention to short-term curative care and too little to prevention. Moreover, many frustrated health care practitioners are leaving the system and recruitment has become rather more difficult (Exhibit 2).

McKinsey’s Amsterdam office teamed up in the fall of 1999 with three Dutch health care experts¹ to look for a better way. The resulting study concludes that traditional approaches can’t close the gap between growing demand and restricted supply; a radical transformation is required. The team proposed a system that would replace top-down regulation with demand-driven self-regulation. Citizens would take more responsibility for health care, and doctors would be responsible for the health care costs of their patients. Such a system is expected to deliver significant (but as yet unquantified) gains in productivity.

All Dutch citizens have access to excellent essential health care services, and their cost is relatively low, largely as a result of limits on the supply of beds, admissions, doctors, and budgets (Exhibit 3). Patients usually consult their general practitioners before going to specialists. Public, employer-paid, or private insurance covers everyone. Since this system is overburdened, however, the McKinsey study sug-gests a self-regulating alternative that resembles a roundabout. Roundabouts, which let drivers themselves regulate the flow of traffic, are much more effective than are traffic lights, which deal with the supply—that is, the anticipated number of vehicles.

To take responsibility for health care, people need freedom of choice, information on the quality of care and on alternatives, and adequate financial resources. The study argues that individuals should be free to choose and change their doctors—a right that they now have in theory but can exercise only with difficulty, since very little information about the performance of doctors and hospitals is available to them. The team recommends that citizens receive access to such information (particularly evaluations by patients and professional peers), for it is this, together with the freedom to switch, that will force doctors to deliver the best personal care to keep patients in their practices.

Of course, patients need financial resources as well as information. Because each individual’s requirements are different, the model is somewhat complex in this respect. The people of the Netherlands attach great value to social solidarity, so the team believes that the government should continue to decide what kind of care is essential and how large the national budget for it should be. The team also proposes that the government should use such parameters as age, sex, and medical histories to allocate a share of this national budget to each citizen, bypassing the insurance companies. A healthy youngster would therefore have a significantly lower allocation than a 70-year-old diabetes patient. Essential health care spending would be paid for from this budget; additional care could be bought separately from doctors or covered by supplementary insurance at the patient’s expense.

In many cases, individuals would be able to direct their own budgets—for example, diabetics who know exactly which provisions to buy and where to buy them would participate in a purely self-regulated market. But healthy people who become seriously ill face two challenges: they may not have the knowledge or desire to shop for the best services, and their budgets, based on their previous health status, will be too low.

To overcome these challenges, the team proposed that all patients assign their budgets to freely chosen doctors responsible for orchestrating all of their health care. These doctors would administer their patients’ budgets, so they would promote efficiency by focusing on the prevention of disease and by giving referrals only to specialists who delivered value for money. To attract additional patients, doctors would organize themselves in networks with other practitioners, such as specialists in hospitals, to improve their service packages. If they did not honor requests for second opinions, patients might leave them.

A self-regulating health care system of this kind, the team concludes, would adapt to new demand and encourage the introduction of innovative services. Doctors and their patients would be encouraged to seek the best solutions in the most efficient way. The medical profession would become more entrepreneurial and the sector more attractive to recruits.

Despite the vast differences in approaches to health care, the proposed system could serve as a model for other developed nations. Some Western countries are already undertaking experiments that make medical practitioners partly responsible for the health care budgets of registered citizens. In the United Kingdom, such experiments have had limited success because of design imperfections. In Switzerland, however, efforts to move away from a system controlled by the insurance companies toward one controlled by medical practitioners have been carried out over a longer period. In 1998 and 1999, networks owned by health care practitioners responsible for the budgets of clients covered by a variety of insurance companies were launched there.

Meanwhile, in the United States, health maintenance organizations controlled by insurance companies are finding that patients won’t accept constant cost cutting and restrictions on choice. Models that push insurers into the background, give patients greater choice, and permit medical practitioners to play a more powerful and innovative role are on the rise.