Since the middle of the 1980s, health care reform has been one of the top policy initiatives of most Western industrialized states. A new wave of reform has emerged that focuses on harnessing competition to more efficiently achieve social justice ends. This book analyzes this wave of health care reform and compares two types of competition-oriented reform models—internal market reform and managed competition reform. These models are looked at in the context of their implementation in the UK, New Zealand, the US, and the Netherlands. This book tries to determine which reform model best solves the complex optimization problem of how to strike a balance between individual needs and societal interests and more generally between equity and efficiency.
Managed competition reform and internal market reform models represent an important change from the traditional approach to health care reform. This traditional approach focuses on reducing the resources available to a health care system (e.g. the hospital beds, nursing services, technology, etc.). This traditional approach assumes that physicians, when faced with restricted resources, will allocate resources optimally amongst various medical needs. By contrast, the new reform models require purchasers—government-appointed authorities, private insurers, or risk-bearing groups of health providers—to proactively manage and allocate resources amongst different health care needs. Purchasers are expected to manage treatment decision-making by physicians and other health providers. Managed competition and internal market reform combine elements of both government planning and market approaches. Managed care, another concept that is often referred to in the context of health care reform, is the mechanism through which managed competition proposals seek to obtain cost savings, but as described further below, can be employed in any health care system.
Before describing the competition-oriented reform models, a preliminary question must be addressed: why is health care reform needed? A number of factors have converged creating strong pressures for health care reform in developed countries. These factors include: