The Netherlands has a high-quality health care system, but, like its counterparts in other developed nations, it faces tremendous strains. An aging population has put pressure on the budget (Exhibit 1). The public demands access to modern treatments and will no longer accept impersonal care and long waiting lists. In the struggle to make ends meet, the system pays too much attention to short-term curative care and too little to prevention. Moreover, many frustrated health care practitioners are leaving the system and recruitment has become rather more difficult (Exhibit 2).

McKinsey’s Amsterdam office teamed up in the fall of 1999 with three Dutch health care experts¹ to look for a better way. The resulting study concludes that traditional approaches can’t close the gap between growing demand and restricted supply; a radical transformation is required. The team proposed a system that would replace top-down regulation with demand-driven self-regulation. Citizens would take more responsibility for health care, and doctors would be responsible for the health care costs of their patients. Such a system is expected to deliver significant (but as yet unquantified) gains in productivity.

All Dutch citizens have access to excellent essential health care services, and their cost is...