Regulating Managed Care: Theory, Practice, and Future Options

By Stuart H. Altman; Uwe E. Reinhardt et al. | Go to book overview

Chapter Four
Macro-Versus
Microregulation
Thomas Rice

Economic theory holds that if certain assumptions are met, then allowing markets to operate free of government interference will result in a state called pareto optimality. This is a state in which it is impossible to make someone better off without making someone else worse off. This is generally thought of as an “efficient” state of the world. Efficiency so defined, however, is only one measure of overall social welfare. The other is the public's satisfaction with the distribution of resources that results from reliance on markets, which is often referred to as equity. What assumptions must be met to ensure that a competitive market will lead to the highest possible levels of social welfare, which includes both efficiency and equity considerations?

Of fifteen assumptions (listed in Exhibit 4.1), fourteen are related to economic efficiency and one is related to equity. None of them is met in health care markets (Rice, 1998). So theory does not provide a justification for reliance on markets to improve efficiency in health care or to assure equity. Rather, such questions must be answered by examining each policy choice, compiling information on its expected effects, and drawing conclusions about the policy measures that will result in the highest gain in social welfare.

What has been missing in much past analysis is consideration of the range of assumptions necessary. It is well known, for example, that markets may fail to be efficient in the presence of a monopoly, or when consumers do not have good information. But

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Regulating Managed Care: Theory, Practice, and Future Options
Table of contents

Table of contents

  • Title Page *
  • Contents vii
  • Foreword ix
  • Acknowledgments xiii
  • The Editors xv
  • The Contributors xvii
  • Introduction - The Philosophy of Regulation xxi
  • Notes xxxii
  • Regulating Managed Care xxxiv
  • Section I - The Role of Regulation in a Market-Oriented Health Care System 1
  • Chapter One - An Overview 5
  • Notes 27
  • Chapter Two - The Current Status of State and Federal Regulation 29
  • References 51
  • Chapter Three - Why Should Managed Care Be Regulated? 53
  • Chapter Four - Macro-Versus Microregulation 75
  • Reference 85
  • Section II - Regulatory Issues 87
  • Chapter Five - Consumer Choice Under “private Health Care Regulation” 91
  • Notes 114
  • Chapter Six - A Model for Health Care Consumers 117
  • Notes 133
  • Reference 133
  • Chapter Seven - Ensuring Equal Access to Care 135
  • Notes 143
  • Chapter Eight - Regulating Quality and Clinical Practice 145
  • Chapter Nine - The Scope of Managed Care Liability 160
  • Notes 185
  • Reference 186
  • Chapter Ten - Erisa and the Regulation of Group Health Plans 189
  • Notes 200
  • References 203
  • Section III - Perspectives on Regulation 205
  • Chapter Eleven - Understanding the Managed Care Backlash 209
  • Notes 224
  • Chapter Twelve - Core Principles for Regulating Health Care Quality 229
  • Notes 237
  • Chapter Thirteen - Balancing Market Forces and Regulation 239
  • Notes 262
  • Chapter Fourteen - Regulation from a Consumer's Perspective 263
  • Notes 274
  • Chapter Fifteen - Regulation from an Insurance Industry Perspective 276
  • Notes 281
  • Chapter Sixteen - Regulation Misses the Big Issue—the Uninsured 282
  • Notes 297
  • Section IV - Managed Care Regulation in Practice 299
  • Chapter Seventeen - A Practical Approach 301
  • Chapter Eighteen - California's Struggle with Regulation 312
  • Notes 329
  • Chapter Nineteen - How the Estimates Vary 331
  • Notes 343
  • Index 345
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