Single vs multiple competing purchasing agencies: analysis of options for the health system in Cyprus (2017)

This report considers the requirements, advantages and risks associated with operating a proposed new national health system in Cyprus through a single purchasing agency versus through multiple competing purchasers. It analyses three options in the light of international experience and the context in Cyprus:

1. a single public purchasing agency;
2. competition among multiple private insurance companies; and
3. competition between the public purchasing agency and private insurance companies.

Option 1 offers the significant advantage of a unified risk pool for equity, efficiency and lower transaction costs.
Option 2 poses significant technical challenges in comparison to Option 1 and adds a great deal of complexity to the governance of the health system, implying high transaction costs.
The third option is the most likely of the three to result in two-tier access to health services, with lower financial protection and worse access for poorer, sicker and older people.

The report concludes that there are advantages, risks and challenges under all three options, and that none of the options will improve health system performance unless there is strong government capacity to set priorities, monitor performance and hold all stakeholders to account.