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PubMed1994

The strange career of managed competition: from military failure to medical success?

Managed competition remains untested as the basis of a national health program. However, key principles of managed competition first emerged in the military. For this study, published works on systems analysis and the planning-programming-budgeting system (PPBS), developed by Alain Enthoven and colleagues at the US Department of Defense during the 1960s, were compared with published presentations of managed competition. The influence of PPBS waned after it generated controversy and opposition. PPBS and managed competition represent similar managerial strategies of policy reform. Although the origin of managed competition in failed military policy does not ensure failure in the medical arena, this history also does not augur success.

Cost-Benefit Analysis↗

PubMedDate not supplied

Stanford University's experience with managed competition.

Stanford University has a "managed competition" model of health insurance. Stanford contributes the cost of the low-cost plan, and employees are responsible for premium differences between this plan and other offerings. Each employee gets what he or she wants and is willing to pay for, and everyone has low-cost access to health insurance. Stanford risk-adjusts the premiums based on age and sex and plans soon to adjust including prescription drug data. In the past five years, premiums have risen rapidly, in line with the rest of the market. For competition to transform the delivery system, most employers in the region must adopt managed competition.

California↗

PubMedDate not supplied

Supplementing managed competition.

President Clinton's proposal for health care reform calls for managed competition within global expenditure targets. However, it is unlikely that health plans will have sufficient leverage with providers to negotiate arrangements consistent with expenditure targets in nonurban areas. This paper describes a reimbursement system based on competitive prospective payment and capitation (CPPC) which can supplement managed competition in less populous areas or replace managed competition should that strategy prove unsuccessful. The CPPC system is capable of enforcing an expenditure target while encouraging the formation of capitated networks and creating strong incentives for efficiency. It is generally compatible with the Clinton administration's version of managed competition.

Capitation Fee↗

PubMed2001

Managed competition, governmentality and institutional response in the United Kingdom.

This article traces the use of managed competition policy to transform the NHS from an administered public service to a set of interlocking markets and contracts. It reviews the overlooked origins of managed competition in the new managerialism and explains the relationship between managed competition and the cost crisis of the NHS by extending Foucault's concept of governmentality to revise the concept of the state. The paper then describes how the government structured health care markets, using managed competition as an instrument of governmentality. It summarises institutional responses by health authorities, hospital trusts, and GP fundholders. The terms "master institution", "dictated competition" and "coercive partnering" are introduced as new concepts for economic sociology and as strategies of governmentality. Implementation, however, led to resistance, opposition and eventual abandonment of managed competition as too disruptive and costly. Yet, this analysis contends, managed competition has left an enduring legacy of accountability to purchasers in economic terms such as efficiency, transaction costs, and cost effectiveness. The policies of the new government are based on coercive partnering and doctor-based "commissioning". This and the Internet imply revolutionary changes for the health professions and the delivery of health care services through networks of moebius-strip organisations interacting in flexible sequences and subject to communitarian pressures.

Contract Services↗

PubMed1993

Managed competition that works.

President Clinton has advocated managed competition within a global budget as a long-term strategy for simultaneously controlling health care costs and expanding access to medical care to all Americans. This proposal is intended to show how these two seemingly conflicting goals can be simultaneously accomplished. Managed competition, as it has been conceptualized to date, is primarily a strategy for reforming the system of providing health services. To work, it must be joined with a strategy for reforming our system of financing and paying for those services and of limiting overall system capacity. "Managed Competition That Works" is a proposal that would create a single trust-funded national system of health insurance, implemented through a system of vouchers to individuals. Global budgeting would be accomplished through establishment of the voucher's value each year. The trust fund would pay health plans for all medical care by capitation, but health plans would be free to negotiate a variety of payment arrangements with physicians, hospitals, and other providers. All plans would be required to offer a standard package of benefits, but would have great flexibility in offering benefits beyond the scope of the standard package, if those benefits replace high-cost with lower-cost services or permit the plan to compete more effectively for market share. This proposal would establish firm but acceptable national budget limits; provide universal, comprehensive, and uniform insurance coverage; eliminate cost shifting; encourage competition; reward efficiency-improving innovation; greatly reduce the need for centralized micromanagement of medical care; and retain local determination and a somewhat reduced level of consumer choice. Although this proposal is written as a national plan, trust funds could be implemented at the state level, if problems associated with portability of benefits among states could be solved.

Budgets↗

PubMedDate not supplied

Is managed competition a field of dreams?

In recent months, managed competition has gained the upper hand in the debate over how to reform the U.S. health system and likely will be a part of President-elect Clinton's proposal. But recent data reveal that managed care plans, an important piece of the managed competition approach, have not significantly altered the rate of increase in costs. These findings cast doubt on the assumption by managed competition advocates that the proper incentives exist to cause the health delivery system to reorganize itself.

Community Participation↗

PubMed1999

Managed competition: lessons from Britain.

As phrases like "managed care backlash" become part of the lexicon in American health care policy circles, it is instructive to examine a managed competition experiment in a vastly different context. Britain's Conservative government instituted reforms in 1991 to transform the National Health Service (NHS) from a centrally administered service to managed competition between purchasers and providers. Five years later, it replaced those reforms to promote cooperation rather than competition. This Issue Brief summarizes what the NHS can learn from decades of American experience with purchasing care, and what the American health system can learn from the British experiment with an internal market in the 1990s.

Health Policy↗

PubMed2002

Managed competition versus industrial purchasing of health care among the Fortune 500.

The theory of managed competition has found favor with many health policy analysts and academic economists alike. Three characteristics--consumer choice, defined contribution, and dissemination of information--signal managed competition strategy. By requiring private employers to provide their employees with a choice of health carriers, a fixed-dollar strategy (defined contribution), and quality information to make appropriate choices among carriers, managed competition offers to remedy imperfections in both the consumer and provider sides of the market for health insurance. In an extensive survey of health care purchasing practices among Fortune 500 companies we found that major companies are not using the managed competition approach to health care purchasing. Instead, most of the companies surveyed are purchasing health care in the same way as they do other inputs to production--a pattern we call industrial purchasing.

Community Participation↗

PubMed1993

Creating the market under managed competition: getting there will not be half the fun.

To develop a framework for managed competition, implementers of health care reform will need to encourage the development of a large number of new AHPs. If experience with the rapid growth in HMOs that occurred in the late 1980s can serve as a guide, it would be expected that many new IPAs will form and that their development will occur at different rates in different communities, depending in part on the supply of medical resources and population demographics. There is evidence from past studies that new IPA entrants can stimulate the price competition desired by health care reformers. Lower bid prices were submitted by plans in the AHCCCS program in markets where new IPAs were competitors. IPAs also can fail, however, particularly at low enrollment levels. Implementers need to be concerned about the political and operational consequences of AHP failures during the early stages of health reform. If managed competition is to contain costs, implementers will need to develop effective policies to stimulate AHP entry, to oversee the performance of new AHPs during initial periods of low enrollment, and to protect consumers from any adverse consequences of AHP failures. It is possible that a large number of failures could occur among newly formed AHPs and that such failures could undermine the confidence of the public in managed competition. This would probably lead to calls for the replacement of managed competition with a more centrally managed and closely regulated health care system.

Competitive Medical Plans↗

PubMed1993

Health care reform: managed competition and beyond.

Since the election, the health care reform debate has focused on three broad features: implementation of managed competition, changes in the tax treatment of health insurance, and the imposition of budget caps or targets. The basic element of managed competition is the creation of sponsors who act as collective purchasing agents for large groups of individuals. One of the potentially most politically difficult issues in implementing any health care reform proposal is likely to be defining the minimum standard benefit package. It will determine the costs society bears, the income of providers, the health of many individuals, and the attributes of a workable health care reform package. Managed competition is intended to foster competition among health plans on the basis of cost and quality. The measures of quality actually employed in the health care system will determine in large part the incentives faced by insurers, providers, and consumers. The problem of adverse selection is potentially the most important issue in reforming the health insurance market. If individuals can opt not to purchase health benefits, poorer risks will be more likely to purchase health insurance than good risks, and at minimum the price of these benefits will be higher than would otherwise be the case. Managed competition requires that individuals share at least some of the financial consequences of their choices among health plans. As a result, most managed competition proposals change the tax code by limiting the exclusion of employer contributions to health insurance from worker's taxable income. Changing the health insurance market, mandating employer health benefits, and changing the tax code may have significant effects on the health care delivery system, but they are unlikely to reduce health care cost inflation in the near term. One of the proposals for restraining the growth in health care costs is the imposition of a budget on the amount spent on health care services. The combination of the constraints placed on federal governmental action by the budget and the significant political problems involved in reaching a consensus on the important elements of health care reform may limit the ability of the federal government to implement national health care reform in the near term. As a result, individual states may be encouraged by the federal government to continue to experiment with their own health reform programs.

Budgets↗

PubMed1993

Managed competition in Minnesota.

The state of Minnesota Employee Group Insurance Program is one of the longest-operating examples of the managed competition approach to health insurance purchasing. The program, now in its fifth year of managed competition, has achieved many of the outcomes projected by managed competition theorists, including significant savings in health care costs and expansion of managed care in rural areas. The program's experience may offer insights into the potential success of managed competition in other settings.

Competitive Medical Plans↗

PubMed1993

Managed competition.

People don't like change. That includes materiel managers, administrators, and clinical providers. Managed competition or managed care will work if, and only if, the American professions and the American public recognize the value of highly educated and qualified clinical and nonclinical providers and if the health care industry responds in kind.

Attitude to Health↗

PubMed1993

Employers give managed competition a new spin.

Redefining managed competition, employers adopt group purchasing and competitive bidding for provider services. The common underpinning is rewarding quality and efficiency.

Competitive Bidding↗

PubMed1996

Managed competition with prefunding: the solution for long-term care?

Managed competition with prefunding could be a useful approach to long-term care. One version, described here, has two main components: First, people would be required to save over their working lives to cover a portion of the expected cost of a minimum required level of long-term-care insurance. Second, people would begin purchasing long-term-care insurance around the time of retirement from one of a number of competing insurers, under a system of managed competition. Potentially large social gains would arise from improving insurance arrangements, distributing long-term-care costs more equitably across and within generations, and eliminating many of the distortions inherent in the current Medicaid program.

Humans↗

PubMed1997

Countervailing agency: a strategy of principaled regulation under managed competition.

Despite the failure of recent attempts to reform health care, strategies of managed competition remain the dominant prescription for government oversight of managed care. A number of assumptions and prescriptions in the conventional managed competition model are challenged. More specifically, externalities in the costs and benefits associated with health care and asymmetric information between providers and patients make it unlikely that a managed care system designed to be responsive to consumers will, in practice, produce socially desirable outcomes. An alternative approach for the regulation of managed care more explicitly protects the role of health care professionals as agents for their patients while defining the appropriate role of managed care as the agent for broader societal interests. This strategy of "countervailing agency-" acknowledges that oversight of managed care inevitably involves value-laden choices. It is based on institutional arrangements and regulatory strategies that are intended to balance competing interests and values.

Capitation Fee↗

PubMed1996

Potential effects of managed competition in rural areas.

This article assesses the extent to which managed competition could be successful in rural areas. Using 1990 Medicare hospital patient origin data, over 8 million rural residents were found to live in areas potentially without provider choice. Almost all of these areas were served by providers who compete for other segments of their market. Restricting use of out-of-State providers would severely limit opportunities for choice. These findings suggest that most residents of rural States would receive cost benefits from a managed competition system if purchasing alliances are carefully defined, but consideration should be given to boundary issues when forming alliances.

Catchment Area, Health↗

PubMedDate not supplied

Trends in managed care and managed competition, 1993-1997.

According to the recent literature, we are experiencing a managed care "revolution," and managed competition is increasingly being embraced by private- and public-sector policymakers. Using two large employer health insurance surveys, this paper presents new estimates that both confirm and add to our understanding of changes taking place in employment-based health plans. The dramatic shifts in enrollment from indemnity to managed care largely reflect employers' choices about the types of plans to offer. Employees are limited in the number and types of plans from which they can choose. When choice is available, it is generally not governed by managed competition principles.

Costs and Cost Analysis↗

PubMed2001

Implementing managed competition in Israel.

As of January 1, 1995, Israel's National Health Insurance (NHI) Law laid the foundations for regulating competition among the country's four private, not-for-profit sick funds. Prior to NHI the sick funds (SFs) had competed without governmental control. Extensive research on NHI implementation and the behavior of the sick funds (SFs) after passage of NHI reveals a paradoxical development: The NHI bill drew on the rhetoric of managed competition and did indeed establish a legal and structural framework for regulating competition among the SFs. Nevertheless, in practice, SF autonomy was constrained and competition over provision of statutory care was limited. Rather than fostering competition, the main thrust of the NHI reforms was to enhance central government's control over SF expenses in order to constrain government expenditures. The NHI reforms did encourage the SFs to cut costs and make visible service improvements. However, the reforms did not lead the SFs to reorganize, expand the scope of their services, or improve clinical quality, as the reformers had hoped. Nor did the reforms help eliminate the SF's operating deficits or insure financial stability for the whole health system. Furthermore, the reforms had unanticipated and undesired outcomes, including aggressive and illegal marketing by SFs and collaboration among SFs to restrict the extent of care provided under compulsory insurance. The Israeli case suggests that the theory of managed competition contains unrealistic assumptions about the types of competitive behavior that result from exposure to managed competition and the capacity of government and health providers to monitor quality. In addition to stemming from universal limitations to the managed competition model, the implementation pattern in Israel reflects local, historical forces and the interplay of Israel's powerful health system actors.

Facility Regulation and Control↗