In 2015, a public debate erupted in the Netherlands around the perceived increase of rendementsdenken (i.e., focus on profitability and incentives) in public institutions such as schools and universities. One sector where the introduction of incentive contracts and market mechanisms is especially controversial is healthcare.
In many healthcare systems, people have mandatory health insurance. Also, in many cases insurance companies lack the information that is necessary to evaluate the doctors’ diagnoses. Use economic reasoning to explain how these two factors may lead to excessive costs in the healthcare system.