Managed Competition as Financing Reform: A View from the United States

Joshua M. Weiner

Since 1992 the dominant framework for health care reform in the United States has been “managed competition”. All managed competition schemes depend on private insurance to finance care and price competition among health plans to control costs. Among the various proposals, only President Clinton’s plan has anything like the “global budgets” found in Canada, Germany and other countries.

This paper examines managed competition and looks at the reasons for pursuing this course, given that the financing of health care in other countries, with its universal coverage and lower costs, is the envy of the United States. The core reason is that other industrialised countries allow government to play a larger role in health care. Thus advocates of managed competition extol the virtues of the market and denounce regulation. To the surprise of many of them, making the market work turns out to be complicated, regulatory and bureaucratic.  And it is, in fact, the regulatory approaches of global budgets and rate regulation, not price competition, that have the proven record of controlling costs in health care.

The paper concludes that countries exploring competitive approaches should take care they do not compromise what they treasure most about their health insurance systems.