In any health system there are stakeholders than have ‘vested or special interests’. That is, that pursue a private gain (e.g. profit) as its main goal. When special interests run the health system, it runs the risk of departing from attaining its collective mission of improving the health and welfare of its population. This has led to a strand of the literature that examines the mechanisms that such interest groups use to attain their goals. This includes the design of the underpinning institutions in place in each health system.

As we document in Chapter 1, as nations develop economically, healthcare becomes a major focus of government responsibility.1 More specifically, in 2018, 60 per cent of Americans agreed on increasing federal healthcare government responsibility.2 Across OECD countries, health expenditure is the most dynamic component of public expenditure. This expansion in government spending coincides with the democratisation of health systems, or the increasing collective decision-making in which patient citizens (PCs) indirectly (by electing the right representatives) make choices among competing projects. Such choice of PCs on the demand side is complemented with competition between Special Interest Groups (SIGs) in delimiting policies. In contrast, the supply side refers to the administrative procedures, ideological affiliation and other feature that define the selection of candidates and their policies.

Health systems are part of a wider macro-level design establishing the principles and ‘rules of the game’ a society should be guided by. Such choices include principles that constrain policy choices to respect for human and economics rights. Such choices, in turn, influence the behaviour and expectations of the patient citizen (PC). The morphology of a health system is determined by so-called first-level choices,1 representaives of the PC make, in constitutional commissions and in Parliament. Among those first-level choices, one should highlight the delineation of how political power is shared horizontally (between the executive, judiciary and legislative branches of government). In making such first-level choices, countries are deemed to decide whether healthcare is regulated as a human right. Specifically, the right to the highest attainable standard of health which was included in the Constitution of the World Health Organization (WHO) back in 1946. However, the way this right to health is implemented and prioritised differs across countries, and we still know little about how constitutions, which define the basic institutions of a country, influence healthcare activity alongside the PC’s access to health services.

Ernest A. Codman, a surgeon at Massachusetts General Hospital, proposed back in 1910 that each hospital should track every patient to determine whether the treatment the hospital provided was effective (McIntyre et al., 2001). This ‘end result system of hospital standardization’ proposed by Codman was one of the first systematic attempts to assess the performance of healthcare activity. In modern terms, Codman’s idea was to understand the extent to which monies were spent on high-value care instead of low-value treatments. To his surprise, the assessment of resource allocation was not an activity that was particularly appreciated by hospital managers, given that it made their actions more transparent, which in turn reduced the room for opportunistic behaviours of different kinds, including waste (and corruption). As Codman puts it, ‘our charitable hospitals do not consider it their duty to see that good results are obtained in the treatment of their patients … It is against the individual interests of the medical and surgical staffs of hospitals to follow up, compare, analyze, and standardize all their results’ because (i) ‘perhaps the results as a whole would not be good enough to impress the public very favorably’; (ii) it is ‘difficult, time-consuming, and troublesome’; and (iii) ‘neither the hospital trustees nor the public are as yet willing to pay for this kind of work’ (McIntyre et al., 2001, p. 9). Codman was clear in identifying the conflict of interest for medical and surgical performance measurement. But it is not only the medical or the surgical staff involved that he thought would be exposed. In publicly funded systems, politicians in charge of funding or regulating health care have more room to manoeuvre the less transparent healthcare practices are, or the harder it becomes for the general public to have access to performance information and subject the hospitals to closer connections between spending and performance.

Decision-making in healthcare is typically delivered and run by different levels of government. That is, the locus of political decisions tends to be scattered vertically between local, state and supranational powers, in multilevel governance structures. These structures (with a central and subcentral tiers of governments) require a well-informed patient citizen (PC) who is able to judge how well each level of government has managed its responsibilities. As we argue below, if this is the case, the PC will be able to reward successful innovation in health policy by re-electing the incumbent, or by “voting with their feet” to another jurisdiction that exhibits better healthcare performance. We contend that the PC will typically attempt to change the health system on a first instance through the political mechanisms in place, whilst mobility (Tiebout, 1956) is conceived as a last resort option. This chapter describes some of the main issues guiding multilevel health governance, and specifically the difficulty in dealing with the needs of centralising, and decentralising decisions related to global health problems which produce large effects beyond countries’ borders (what economists call spillover effects). This includes examining how best to organise a health system between local and central levels within countries. This is the case in legal federations, like the USA or Germany. But it is also the case in regional countries, like Italy or Spain, and also in unitary states, like the Nordic European countries, where municipal governments are the subnational entities. For the purpose of this chapter, we will generalise the observed variety of institutions by using neutral terms like ‘central government’ and ‘subnational governments’, and government interactions between them are generally regarded as ‘multilevel governance’.

The effects of health services and interventions increasingly transcend the borders of nations, and our most ambitious challenges today are driven by the pursuit of global health goals. Global healthcare policy includes the supply of health programmes, goods and services that by exceeding the boundaries of nations produce significant externalities (effects to other health systems). Examples include the control and eradication of epidemics, the access to essential medicines of the entire world population and the need to standardise the practices of health professionals to match the ‘best practices’, when known and available. Hence, it involves decisions around international mobility of healthcare inputs like health technologies, medicines, vaccines and health professionals and their role in promoting global health.

A large body of the literature in social sciences has documented the influence of ideas on public policymaking. Policy innovation, policy transfer and imitation have been carefully examined for more than two decades (Rose, 2004). However, the evidence on how ideas influence health policymaking and the role of the different stakeholders is rarely included in the standard theoretical approaches of the political economy of health systems. This chapter will attempt to bring together some of these contributions, and identify the specific links with the political economy literature.

The organisation of health services tends to reflect the values and priorities of each population. However, as we discussed in 2006), which influence the way the patient citizen (PC) expresses its demands for healthcare. As discussed in Chapter 4, the constitutional design of a country – including the electoral rules, the division of powers and the role of the judiciary – adds additional veto players into the health system reform process, and often extra ‘checks and balances’ that are not always in the interest of the PC. At the core of those institutions lie the mechanisms of accountability (to the PC) and representation (of the view of the PC). That is, a well-functioning democracy would be one where healthcare decisions are the expression of the PC’s demands. Such demands are typically revealed through electoral processes (which turn heterogeneous preferences into political mandates), as we discuss later in Chapter 6. However, as a first step to understand how health policy choices are made, we discuss whether and how democratic decision-making, unlike other political collective decision-making systems, affects the health system.

What is the role of the government in healthcare? Can healthcare services be efficiently delivered by markets alone? In a seminal 1963 article, Kenneth Arrow remarked that when economists argue that free markets are able to allocate scarce resources better than any alternative mechanism, they probably do not have healthcare in mind. More precisely, he pointed out that: ‘it is clear from everyday observation that the behavior expected of sellers of medical care is different from that of business’ (Arrow, 1963, p. 949). He later proceeded by stating: ‘it is the general social consensus, clearly, that the laissez-faire solution for medicine is intolerable’ (Arrow, 1963, p. 967). Arrow’s claims were likely in support of the controversial idea of adopting what would, only two years later, become the first widespread public health insurance scheme in the history of the United States (USA), the joint introduction of Medicare and Medicaid programmes. Arrow’s groundbreaking view has had an enduring effect on the health system choices of many different countries around the world.