Competition and Inequality: Evidence from the English National Health Service 1991-2001

Competition is often prescribed as an efficiency-enhancing tonic for ailing health systems. However, critics claim that competition exacerbates socioeconomic inequality in health care. This claim is tested in relation to the "internal market" reforms of the English National Health Service (NHS) from 1991 to 97, which injected a small dose of hospital competition into a state-funded, state-owned health system responsible for more than 90% of national health expenditure. Our dependent variables are NHS hospital utilization rates for hip replacement and heart revascularization in 8,500 English small areas from 1991 to 2001. We estimate small area level associations between deprivation and hospital utilization, allowing for need and supply variables. We then compare year-by-year inequality differences between areas with "potentially competitive" and "noncompetitive" local hospital markets, as competition was phased in and out. No evidence is found that competition had any effect on socioeconomic health care inequality.