The Role of The European Union in the Healthcare Market


Margherita Anchini | PhD Candidate, Sapienza Law School (Rome)

1. Introduction

The role of the European Union in the sphere of public services has always been problematic. Before the creation of a European concept of public service, national authorities had wide discretion to define the concept, and they exercised this power for the purpose of removing particular sectors from the application of EU law (especially competition rules). If some space for national discretion persists, it is clearly limited. In an international context, the concept of public service is a convenient shorthand for utilities and welfare services. In light of the peculiar model in force in each Member State (MS), EU law has introduced new concepts in order to intervene in several socio-economic sectors. The main conceptual category is “Service of General Interest” (SGI), which includes Services of General Economic Interest (SGEI) and Social Services of General Interest (SSGI).

The qualification of health services as SGI is undisputed. By contrast, their inclusion in either of the sub-categories is a complex issue. Healthcare does not fall expressly within the SSGI category, which usually includes social security, employment and training services, social housing, child care, long-term care, and social assistance services: all activities managed according to solidarity rather than economic criteria.

On the other hand, healthcare clearly differs from postal services, telecommunications, and other services that are certainly included in SGEI. We can detect some common features, such as the corporate nature of suppliers (public or private entities); the distinction between public service (a concept linked to the public interest) and universal service (those which must be granted to everyone); the level playing field, in which public and private entities (should) lead their activities; the improvement of consumers’ (i.e. patients’) rights and the strict control of quality; the separation between regulation and management; and the commitment of the Commission in ensuring safety, high quality, and efficiency. In these ways, healthcare can be deemed closer to SGEI.

In light of the complexity of health services, EU law has avoided qualifying them expressly as SSGI or SGEI. Moreover, the modernization process led by national authorities to improve health services’ response to changing needs, societal challenges, and financial constraints, is diversifying the ways in which these services are organised, provided, and financed (e.g. increased decentralisation, outsourcing of certain tasks to private—profit or non-profit—providers). Consequently, EU bodies must investigate the nature of the activities performed by healthcare providers on a case-by-case basis in order to detect whether they come under the scope of Community rules on competition and the internal market. The qualification of the activity as SGEI or SSGI would determine the application of a different regime: when dealing with SGEI, EU law will be relevant and rules on the internal market, State aid, and competition will apply (with some exceptions – i.e. Brussels IRIS hospitals case). By contrast, in the context of non-economic SGI, EU law is irrelevant.

Traditionally, MSs aimed to hinder the “intrusion” of EU law in public services. For instance, concerning the ownership regime of these services, MSs invoked the neutrality principle (Article 345 TFEU) against EU intervention. According to this principle, States maintain broad discretion in the regulation of the matter.

More generally, the European Institutions’ intervention in social services and healthcare services has been the object of an intense debate. Some scholars hold that individual rights guarantees shall be put in place by States, which keep meaningful competences and powers in matters of social policy. In particular, several arguments point against EU action in the field of healthcare: i) MSs have experience in setting up and implementing national policies in this field; ii) health needs vary depending on the territory, therefore MSs are better positioned to respond; iii) financing is mainly secured through national resources over which EU has no influence; iv) medical treatments can be affected by the ethical framework, which is specific to each MS.[1] Another branch of the academic literature, taking account of the strong influence of international legal orders in contemporary reality, upheld the role of EU law in pursuing a balance between market needs and fundamental rights.[2] This position is grounded mainly in the EU task to realize a social market economy. This formula expresses the market economy commitment to respect social values and rights.

In fact, beginning in the 1980s, the EU demonstrated the possibility to open the market of SGEI to competition without threatening social welfare.

Nowadays, according to EU primary legislation, the rules contained in the Treaties—in particular the rules on competition—apply to undertakings entrusted with the operation of SGEI, with the only exception provided by article 106(2) TFEU (“in so far as the application of such rules does not obstruct the performance, in law or in fact, of the particular tasks assigned to them”).

As to this point, two types of EU actions must be distinguished: EU intervention in the field of social policies (if any) and EU intervention on social rights while dealing with market economy issues.

2. European health policies

The EU has always had a trivial role in health policy compared to MSs.[3] Under Article 6 TFEU, the Union supports, coordinates, and supplements the actions of MSs in the “protection and improvement of human health.” When dealing with healthcare regulation, Article 168(7) TFEU provides a “sector-specific subsidiarity clause.” Moreover, the primary role of MSs in healthcare regulation has been confirmed by the Charter of Fundamental Rights, which provides the right of everyone to access medical treatment “under the conditions established by national laws and practices.” EU intervention therefore has a limited effect in this area, if any. Nevertheless, the EU has payed increasing attention to fundamental features of MSs’ health systems. If it is true that each MS maintains exclusive competence for the organization of healthcare, giving birth to different systems for financing and delivering health services, it is also true that all these systems implement the principle of universal coverage, a feature that distinguishes European models from the American one. The Commission considers that MSs’ health systems must remain firmly rooted in principles and values such as universality, accessibility, equity, and solidarity. Therefore MSs must commit to enhancing efficiency while keeping healthcare services publicly funded (through taxation or health insurance) and integrating healthcare delivery.

More recently, the Commission has launched a broad consultation and put forward a preliminary outline of what should become the European Pillar of Social Rights. This should provide the reference framework to screen the employment and social performance of participating MSs, to drive the process of reforms at the national level, and “to serve as a compass for renewed convergence within the euro area.” The policy areas covered by the draft Pillar include healthcare and long-term care.

In conclusion, it is worth noting that a substantial (although indirect) interference in national welfare policies derives from recent European austerity measures. The budgetary constraints set by the Treaty on Stability, Coordination and Governance in the Economic and Monetary Union (so-called Fiscal Compact) have affected public expenditure on healthcare, especially in MSs implementing National Health System models, such as Italy and the UK. The outcome is an indirect but significant restriction of social rights.

3. The applicability of EU rules on the internal market to healthcare

The European Union pays attention to fundamental rights (such as the right to health) when dealing with market economy issues. Of course, the protection of “human health, human safety and public health” are all admissible public policy exceptions to the application of the Treaty rules and/or policy objectives of EU action. For instance, human health protection can justify prohibiting or restricting imports or exports of goods, so long as the measures do not constitute arbitrary discrimination (Art. 36 TFEU); it can limit the free movement of workers (Art. 45 TFEU); it can justify regulation providing special treatment for foreign nationals, thus limiting the right of establishment (Art. 52 TFEU).

The European Court of Justice (ECJ) has played a crucial role in pursuing the proper balance between economic imperatives and fundamental rights by upholding national measures that restricted economic freedoms in the name of non-economic interests, such as the right to health.[4] In particular, the ECJ’s scrutiny has focused on the operation of the triangular relationship between patients, healthcare providers, and the State, and on whether it allows market principles to infiltrate at the level of funding, provision, and access within each individual healthcare system. The European case law is thus exerting a strong influence on health systems, both on patients’ and providers’ rights.[5]

3.1. EU law and patients’ rights

On the demand side (i.e. patients rights), the ECJ has affected the transition of the concept of health care from a benefit under Social Security Coordination towards a service to be provided under Article 56 TFEU (free movement of services). Originally, healthcare was viewed as an adjunct to the free movement of workers; under the social security coordination route, the patient is primarily a worker and his mobility is governed by national prior authorization schemes, which are, in turn, governed by the social security regulation. In other words, only workers and their dependents had a right to health benefits.

Gradually, the EU case law has started to consider public healthcare as a remunerated service subject to the free movement of services under Article 56 TFEU. In the landmark case Luisi and Carbone, the ECJ established that the freedom to provide services includes the freedom for the recipients of services to go to another MS in order to receive healthcare services.

In Kohll and Decker, the ECJ took a further step in the intrusion process by establishing the right to reimbursement of medical treatment across national borders within the EU. In particular, the Court argued that a prior authorization requirement for reimbursement of medical services received in another MS represents an infringement of the freedom to purchase services. Such violation could be justified by the public health exception contained in Art. 46 ECT to the extent that the national measure served “the objective of maintaining a balanced medical and hospital service open to all.” Furthermore the reimbursement must be provided regardless of the healthcare model the country implements (National Health System or Social Health Insurance) (Peerbooms and Müller-Fauré). Obviously, these cases were widely perceived as an affront to the power of MSs to organize their healthcare systems, as well as to the sustainability and the legitimacy of the latter.[6] The ECJ’s rulings raised the need to clarify the rules for cross-border healthcare. Directive 2011/24, by referring to the Court’s principles, set out the conditions under which patients may travel to another EU country to receive safe and high quality medical care and have the cost reimbursed by their own health insurance scheme.[7] Despite the sector-specific subsidiarity clause provided by Article 168(7) TFEU, the directive was jointly based on the general harmonization provision of Article 114 TFEU and on Article 158 TFEU.[8]

However, the Directive on patient mobility coexists with the original Regulation on coordination of social security systems. These two pieces of EU legislation for cross-border healthcare employ different terms on a number of issues, such as prior authorization, tariffs, payment methods, provider, travel, and accommodation costs. The result is foreseeable legal uncertainty for patients and public administrations.

3.2. EU law and providers’ rights.

On the supply side, the ECJ case law has been concerned with freedom of establishment, antitrust law and State aid rules.

As to the freedom of establishment, there are five main regulatory measures that can limit this freedom: i) formal qualification to be fulfilled aiming at the protection of public health and the observance of health standards (MacQuen; Commission v. Italy; DocmorrisII); ii) healthcare planning, which sets prerequisites for access to the net of incumbent subcontracted healthcare providers (for instance, prior authorizations, quotas, and reimbursement requirements) (Commission v. Germany; Blanco Pérez and Chao Gòmez); iii) limits on the legal form of healthcare providers (Sodemare); iv) restriction for welfare entities from investing privately in another MS (Woningstichtung Sint Servatios); and v) compulsory affiliation of individuals to public welfare entities, impeding the establishment of private rivals from other MSs (Freskot).

According to the fundamental principle of free movement of workers, health professionals who are EU citizens enjoy the right to seek employment or to establish themselves in another country of the European Economic Area.

In assessing the regulatory conditions imposed on healthcare providers as to market access, the ECJ relies on the so-called Gebhard test. Conditions must: i) be nondiscriminatory; ii) be justified by imperative requirements in the general interest; iii) be suitable for securing the attainment of their objective; and iv) not go beyond what is necessary.

The Court accepts a long list of public interest justifications for national regulatory measures limiting freedom of establishment: solidarity, the protection of public health, and also the financial cohesion of the social security system.[9] According to the Gebhard test, nearly all health systems based on public provision or self-regulation are protected from market access and competitive entry, with only the limit of the proportionality test (necessity, appropriateness, and balance of values).[10] The Court’s approach is extremely cautious when addressing national measures connected with standard requirements, planning considerations, or solidarity. It has been underscored that the ECJ case law so far applied a one-directional proportionality test, by upholding the legitimacy of national measures aimed at the protection of the right to health only if they do not cause an excessive detriment to economic freedoms, instead of a bidirectional proportionality test (mutual proportionality), aimed at leveling economic and social rights.[11]

As far as antitrust law is concerned, its application to health systems is uncertain and linked mostly to qualification of healthcare providers as undertakings. According to the ECJ, an undertaking is anyone perform an “economic activity,” which consists of “every activity that results in offering goods or services on a given market.” In the landmark case Poucet and Pistre, the ECJ held that an entity shall not be considered an undertaking when: i) it fulfills “an exclusively social function”; ii) it performs an activity “based on the principle of national solidarity”; and iii) the benefits paid out are statutory and independent from the individual contributions of the participants.

In subsequent cases, the ECJ clarified that very few bodies involved in the organization of healthcare systems are not to be considered undertakings. Indeed, an entity that carries out both economic and non-economic activities is to be regarded as an undertaking with regard to the former. Moreover, the mere fact that an entity does not pursue a profit does not necessarily mean that its operations are not of an economic nature. For instance, doctors, hospitals, and clinics are economic entities providing health services for remuneration, therefore they can be qualified as undertakings in the sense of article 101 and 102 TFEU (Pavel Pavlov).

Moreover, the fact that health services are contracted into a social security scheme whereby patients may recover part or all of the expenses incurred does not affect the economic nature of the activity (Kohll).

The assessment of the nature of the activity is more complicated with regard to public hospitals that are financed directly from the State budget, and where the personnel have the status of civil servants. The Court affirmed that a body would not qualify as an undertaking where: i) it pursues aims genuinely linked to the public interest and ii) representatives of the public authorities participate in its board of directors (AOK; FENIN). Following the Court’s decision, the Commission clarified that where the national health system, by implementing the principle of solidarity, is mainly grounded on public hospitals that are funded directly from social security contributions or other State resources, and provide their services free of charge to affiliate persons on the basis of universal coverage, then “the relevant organisations do not act as undertakings.” According to the Commission, where such structure exists, even activities that in themselves could be of economic nature, but are carried out merely for the purpose of providing another non-economic service, are not of an economic nature. An organisation that purchase goods for the purpose of offering a non-economic service does not act as an undertaking simply because it is a purchaser in a given market.

However, since 1980s, reforms intended to improve efficiency in the health sector have encouraged privatization of public services and the gradual introduction of elements of competition (e.g. UK). Therefore, in many MSs, nowadays, healthcare providers offer their services for remuneration—be it directly from patients or from their insurance—and in doing so they compete with each other. Where there is a certain degree of competition, “the fact that a health service is provided by a public hospital is not sufficient for the activity to be classified as non-economic.” However, according to Court’s ruling in AOK, the “pursuit of efficiency does not in any way change the nature of the entity activity.” Hence competition as a form of cost-control was non-competition from the perspective of competition law. It appears that healthcare providers are categorized between two extremes depending on the nature of their system as tax (solidarity) or insurance (competition) based, even while in practice most national systems are, to some degree, a mixture of the two. By contrast, the Commission has recently differentiated between the management of the national health system, carried out by public bodies implementing the prerogatives of the State for this purpose, and the provision of hospital care for remuneration in a competitive environment. The latter, indeed, must be regarded as an economic activity (Brussels IRIS hospitals).

Healthcare providers qualified as undertakings may, nevertheless, be exempted from the application of competition rules by virtue of Article 106(2) TFEU, as engaged in the pursuit of a service of public interest.

Finally, State aid rules (Article 107 and 108 TFEU) serve to ensure that MSs do not confer discriminatory advantages upon undertakings that distort competition in the internal market. For a State aid to exist the measure must: i) be financed through State resources; ii) confer a selective economic advantage to an undertaking; iii) distort or threaten to distort competition; iv) affect trade between MSs.

As for antitrust law, the rules on State aid do not apply to national measures addressed to non-undertakings. The ECJ clarified that a purely social function of a system, under which an organisation is allocated specific tasks, is not in itself sufficient to exclude the economic nature of these tasks (Freskot). Therefore, the Commission has the task to investigate whether the performance can properly be qualified as “offering goods and service on a market” (i.e., the economic nature of the service at stake).

Assuming that the healthcare provider is qualified as an undertaking, if public funding merely compensates for the fulfilment of public service obligations, it is not regarded as State aid. In its Altmark judgment, the ECJ made clear that compensation for costs incurred to provide an SGEI does not amount to granting an advantage where four cumulative conditions are met: a) the recipient undertaking must actually be required to discharge public service obligations and those obligations must be clearly defined; b) the parameters on the basis of which the compensation is calculated must be established in advance in an objective and transparent manner; c) the compensation cannot exceed what is necessary to cover all or part of the costs incurred in the discharge of public service obligations, taking into account the relevant revenues and a reasonable profit; d) in case an undertaking entrusted to carry out public service obligations is not chosen pursuant to a public procurement procedure, which allows for selection of the tenderer capable of providing those services at the least cost to the community, the level of compensation needed must be determined on the basis of an analysis of the costs which a typical undertaking, well run and adequately equipped, would have incurred.

In many cases State funding to public hospitals does not fulfill the Altmark criteria and hence constitutes State aid. In particular, the first part of the fourth criterion is not met where, according to national law, the public service obligations are entrusted to a public hospital through an accreditation procedure or by means of agreements and other documents, such as strategic plans (Brussels IRIS hospitals). Moreover, a compensation mechanism covering the hospital’s deficit, without regard to the efficiency with which the entity is run, cannot fulfill the second part of the fourth Altmark criterion.

Insofar as the public financing of a hospital amounts to State aid in the sense of Article 107 TFEU, its compatibility with the internal market needs to be assessed.  The grounds on which a State aid measure can or must be declared compatible with the internal market are listed in Articles 106(2), 107(2), and 107(3) TFEU.

Since 2005 the Commission has taken a more refined economic approach to State aid based more on an analysis of market failures, with the objective of obtaining less and better targeted State aid. The 2012 SGEI Decision provides that State aid is compatible with the internal market where: i) the operation of the SGEI is entrusted to the undertaking concerned by way of one or more acts which clearly specify the content and duration of the public service obligations, the undertaking entrusted with these obligations, the territory concerned, and the nature of any exclusive or special rights assigned to the undertaking; ii) the entrustment act must contain a description of the compensation mechanism and the parameters for calculating, monitoring, and reviewing the compensation; iii) there must be arrangements in place for avoiding and recovering any overcompensation, and no overcompensation may be granted.

In conclusion, State aid measures can sometimes be effective tools for achieving objectives of common interest; they can correct market failures, thereby enhancing European competitiveness. However, they should only be used when they are appropriate for meeting a well-defined objective, create good incentives, are proportionate, and when they distort competition to the least extent possible (under the Art. 107(3) balancing test). 

  1. Conclusions

First, health services in EU law fall between the market and solidarity. They seem to be closer to SGEI than to SSGI.

Second, concerning EU interference in the organization of healthcare, there is a major political choice to be made: either States continue on a purely national logic which, is likely to prove complex and unsatisfactory, or the Community is given the express aim and the relevant competences (in the form of a sufficient legal basis) to coordinate MSs’ healthcare policies in order to pursue efficiency and protect fundamental values such as universality, accessibility, and quality.

Third, an intervention to harmonize rules on patient mobility across MSs is necessary to avoid legal uncertainty on the conditions to exercise the right to receive health care services in another MS.

Fourth, the rules on free movement of services—according to the ECJ—apply, with substantial exceptions, and healthcare is excluded from the scope of directive 2006/123/EC on services in the internal market. The ECJ does not apply competition rules—including norms on antitrust and State aid—in cases in which healthcare providers are not deemed to be undertakings. However, since the 1980s, many MSs have led reforms of their healthcare systems, starting processes of deregulation and privatization of activities that were traditionally reserved for the State. In this new scenario, entities involved in administering the social security system shall respect competition principles. A larger application of antitrust law could enhance efficiency, which would result in stronger protection of social welfare rights. These rules, however, should be clear, known in advance, and sector-specific. Since the degree to which different health care providers compete with each other in a market environment depends largely on the specific national health care system, the Commission shall investigate deeply the context in which health services are provided.


[1] Jason Nickless, The Internal Market and the Social Nature of Health Care, in The Impact of EU law on Health Care Systems 57 ((Martin McKee et al. eds. 2002).

[2]  Marco D’Alberti, La crisi globale e la sorte dei diritti fondamentali, 4 Rivista Italiana per le Scienze Giuridiche 195 ff. (2013). Vassilis Hatzopoulos, Health Law and Policy: The Impact of the EU, in EU Law and the Welfare State. In Search of Solidarity (Grainne de Búrca ed. 2005).

[3] Health Policy is an aspect of Social Policy while healthcare is a branch of health policy. Healthcare is “the organization of health services, according to various specialisations and geographic coverage.” Concerning the complementary action of EU in the field of health. See Vassilis Hatzopoulos, Health Law and Policy: The Impact of the EU, in EU Law and the Welfare State. In Search of Solidarity (Grainne de Búrca ed. 2005).

[4] Marco D’Alberti, Poteri pubblici, mercati e globalizzazione 118 ff. (2008); Marco D’Alberti, La crisi globale e la sorte dei diritti fondamentali, 4 Rivista Italiana per le Scienze Giuridiche 195 ff (2013).; G. L. Tosato, Appunti in tema di economia sociale di marcato, in Scritti in onore di Giuseppe Tesauro 2515 ff (2014).

[5] On the interference of EU law on the supply side and on the demand side see Kyriaki-Korina Raptopoulou, EU Law and Healthcare Services. Normative Approaches to Public Health Systems (2015). On the impact of EU law upon national administrative discretion and the consequent effects for the possibility of attaining democratic ideals see Christoffer C. Eriksen, The European Constitution, Welfare States and Democracy. The four freedoms vs national administrative discretion (2012). On the increasing engagement of EU with health law see T. K. Hervey & J. V. McHale, Health law & the European Union (2004).

[6] Vassilis Hatzopoulos, Killing national health and insurance systems but healing patients? The European market for health care services after the judgments of the ECJ in Vanbraekel and Peerbooms, 39 Common Mkt L. Rev. 683 (2002); Christopher Newdick, Citizenship, free movement and health care: Cementing individual rights by corroding social solidarity, 43 Common Mkt L. Rev. 1645 (2006).

[7] Wolf Sauter, Harmonization in health care: The EU Patients’ Rights Directive, in Social inclusion and social protection in the EU: Interactions between the law and policy 105 (B. Cantillon, H. Verschueren, P. Ploscar eds. 2012); Nicola Posteraro, Assistenza sanitaria transfrontaliera in Italia e rimborso delle spese sostenute, Rivista trimestrale di diritto pubblico, No. 2, 2016 at 489.

[8] C.f. Leigh Hancher, Wolf Sauter, EU competition and internal market law in the healthcare sector (2012).

[9] Elias Mossialos et al. (eds.), Health Systems Governance in Europe: The Role of European Union Law and Policy 481 (2010); Vassilis Hatzopoulos, Health Law and Policy: The Impact of the EU, in EU Law and the Welfare State. In Search of Solidarity (Grainne de Búrca ed. 2005).

[10] On the application of the “triple phase” test of proportionality by the ECJ see Jürgen Schwarze, European Administrative Law 685 ff. (1992). Nicholas Emiliou, The Principle of Proportionality in European Law. A Comparative Study 23 ff. (1996); Aldo Sandulli, La proporzionalità dell’azione amministrativa 58 ff. (1998); Aharon Barak, Proportionality. Constitutional Rights and Their Limitations (2012). See also Case Commission v. Germany, C-141/07, EU:C:2008:492; Docmorris II, Joined Cases C-171/07 and C-172/07, EU:C:2009:316; Blanco Pérez and Chao Gòmez v. Consejeria de Salud y Servicios Sanitarios and Principado de Asturias, Joined Cases C-570/07 and 571/07, EU:C:2010:300; Corporacion Dermoestética SA v. To Me Group Advertising Media, Case C-500/06, EU:C:2008:421; Hartlauer Handelsgesellschaft mbH v. Wiener Landersregierung and Oberosterreichische Landesregierung, Case C-169/07, EU:C:2009:141; Commssion v. France, Case C-89/09, EU:C:2012:374.

[11] Marco D’Alberti, La crisi globale e la sorte dei diritti fondamentali, 4 Rivista Italiana per le Scienze Giuridiche 195 ff. (2013).


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