Managed Competition: The Policy Context

Melbourne Institute Working Paper No. 15/99

Date: June 1999


Richard Scotton


Among OECD countries, there has been a growing advocacy of health system reforms involving a greater use of market and quasi-market relationships and incentives, in order to introduce a degree of self-regulating capacity within health care systems. This advocacy (and the corresponding reforms) are framed in the context of universal national programs offering a guaranteed package of care, in general financed publicly through taxation or earmarked social security contributions. The central question considered in this paper is whether, and to what extent, a model of this kind would have advantages in the Australian context. The managed competition model offers a framework within which the objective of increased efficiency could be pursued without sacrificing the goal of universal access and without the impairment of health outcomes and social cohesion which the abandonment of this access would involve. It would do this by removing the present multitude of structural impediments to rational decision making and allocating to governments and markets the functions which they perform best.

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