Private health insurance: a role model for European health systems.

European health care systems will face major challenges in the near future. Demographic change and technological progress induce rising costs. In order to deal with these developments and to preserve the current level of health care provision, health care systems need to be highly efficient. Yet existing health care systems show a lot of inefficiencies that result in waste of scarce resources. Therefore, improvements in performance are necessary. In this article, we argue that a change in financing health care accompanied by the liberalisation of the market for health care service providers offers a promising solution. We develop a market-based model for financing health care and show how it can be put into practice without generating additional costs for society while meeting social equity criteria.