HIPCs would contract with participating employers and would accept all qualifying employment groups in their area. They would not be allowed to exclude groups or individuals because of health status. HIPCs would manage competition, applying business judgment in determining the numbers and identities of competitors, and would carry out all of the sponsor functions described above.
HIPCs would select the participating health plans. Whether or not market forces would resolve the problems arising from this arrangement is a debatable proposition about which reasonable people can differ. I would prefer to see that HIPCs have some authority to select and drop health plans. The presumption should favor competition.
Thus it would make sense for a HIPC to encourage participation by all provider groups in the territory, but some discretion might be appropriate for the following reasons.
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First, federal qualification and state regulation do not guarantee financial solvency. Some overlap may not be undesirable. But too many carriers all offering essentially the same set of providers can add to administrative costs and weaken the sponsor's purchasing power with providers.
As noted above, managed competition seeks to motivate providers to create efficient delivery systems. Third, HIPCs should be able to drop health plans that persistently achieve very low market penetration. HIPCs would administer health benefit contracts. The HIPC should act like a competent, effective employee benefits office servicing beneficiary inquiries and complaints.
It should interpret the contracts for beneficiaries, stand behind patients in disputes with health plans, and resolve disputes on terms that are fair to beneficiaries. This should be much more efficient than taking disputes to litigation. The HIPC also should monitor what is happening in the health care settings. It should survey consumer experience and make the information available for consumers. It should investigate complaints and should aggregate complaint data to identify problem areas. HIPCs should not bear risk. Health plans should bear all risk for medical expenses, for several reasons.
First, if HIPCs were to bear risk, we would have a whole new class of risk-bearing entities that would have to be capitalized and regulated, and we have more than enough of them now. Second, HIPCs should be unbiased, honest brokers among risk-bearing entities. Third, providers—doctors and hospitals—must be at risk for the cost of care to give them powerful incentives to reduce cost. Finally, HIPCs could contract with government agencies to cover publicly sponsored populations, such as Medicaid, the otherwise uninsured, and public employees.
Creating HIPCs means that persons and groups with low health care costs in a given year share in the costs of persons and groups with high costs. If given a choice, people expecting low costs are not likely to do so voluntarily. Once the HIPC is operating at a large scale, there will be important benefits for small employers, even those with good health risks— including economies of scale, stable rates, competition, and individual choice of plan.
But to get HIPCs going and to prevent a spiral of adverse selection, there must be compelling incentives or legal requirements for all small employers to participate. In the Jackson Hole initiative, small-group participation in a HIPC would be a condition for exclusion of employer contributions from employees' taxable income. CalPERS arranges coverage and manages competition for more than , people who are employees, retirees, and dependents of the state and more than public agencies, some of which have as few as two employees. Managed competition is not based on a mere hope that the market will somehow generate better models of care.
It is based on demonstrations of successful, high-quality, cost-effective, organized systems of care that have existed for years. To date, the strongest evidence of their economic superiority relates to prepaid multispecialty group practices. Successful large-scale HMOs based on individual practice styles have emerged in recent years. These HMOs carefully select participating physicians and arm physicians and management with strong information systems about practice patterns.
These models can expand rapidly, and they offer a practice style that is familiar to many doctors and patients. While we do not have proof of their efficacy in the form of a randomized controlled trial, we do know that some of them now compete effectively with Kaiser Permanente and Group Health Cooperative.
Compared to the traditional fee-for-service model, there are many things such organizations can do—and, if appropriately motivated, will do—to improve quality and cut cost. Organized systems can attract the loyalty, commitment, and responsible participation of doctors.
They can align the incentives of doctors and the interests of patients in high-quality, economical care by appropriate risk-sharing arrangements. Organized systems can gather data on outcomes, treatments, and resource use; evaluate practice patterns; and motivate doctors to choose economical practices that produce good outcomes. Organized systems select doctors for quality and efficient practice patterns, monitor performance, and take corrective action where needed. Organized systems can match the numbers and types of doctors to the needs of enrolled populations. At least some systems can match all resources used to the needs of the enrolled population.
Organized systems can allocate all resources—capital and operating—across the total spectrum of care, including less costly settings. Such surgery done in low volumes has higher costs and higher death rates than when done in high volumes. Such regional concentration in the most cost-effective hospitals could save a great deal of money. Traditional third-party coverage is usually based on the casualty insurance model: It pays very generously for costly inpatient episodes but not for the preventive services and management of chronic conditions that can reduce the need for inpatient care.
Organized systems can use systematic management processes to make sure these services are actually delivered, not merely covered. And they can be held accountable for their enrolled populations. People do not find it hard to visualize managed competition in San Francisco or Boston. What about Wyoming, Vermont, or southern Texas, where there are not enough people to support competing systems? Creation of a HIPC in such states would consolidate purchasing power so that it could be used more effectively to meet the needs of the covered population.
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Organized systems are needed to accomplish this; traditional fee-for-service solo practice has not produced satisfactory results. In a state with a small population but with perhaps two or three competing health plans, no one plan might be large enough to purchase tertiary care effectively. A doctor with a monopoly in a small town might refuse to contract with any of the health plans on terms acceptable to doctors in other areas. Or, no one of several health plans might have enough patients in town to be able to support its own doctor.
The vision of competition in such circumstances should not be limited to large medical center-based prepaid group practices. That is but one model But, as noted above, modern information technology has enabled primary care individual practice networks to perform management functions that previously required physical proximity.
Why attempt to bring about these changes through competition and market forces? Why not expect the government simply to order them? First, we have an extremely wasteful and inefficient system that has been bathed in cost-increasing incentives for over fifty years. We badly need a radically more efficient system.
That will mean closing hospitals and putting surgeons out of work. As a consequence, efficiency-creating changes are not seriously impeded. Thus we find it extraordinarily difficult to close an unneeded school or air base. Second, to offset the expenditure-increasing effects of an aging population and an expanding array of medical technologies, we need to foster a process of continuing productivity improvement and of development of cost-reducing technologies. Only ongoing competition to provide value for money can do this.
Third, as medical technology and social and economic conditions of the population change, we need a health care system that is flexible and can come up with entirely new ways of organizing and delivering care. Fourth, we need and want a system that is user-friendly. Government monopoly public service agencies are notoriously user-unfriendly. These should be made by consumers who are using their own money at the margin. For example, given a choice, many might prefer a much less costly style of care, based on limited access in tightly controlled facilities, with more use of physician-extenders, and so on.
They might have other worthy uses for their money, such as their children's education. Others may be happy to pay more for wider access and greater convenience. Note that under managed competition, consumers would be exercising this preference with their own net after-tax dollars, not with pretax dollars and substantial tax subsidies for the more costly choice as happens today. In this country we are now spending nearly 14 percent of gross domestic product GDP on health care services. It is altogether possible that a very efficient competitive system could get us back to 9 or 10 percent.
This would free up resources that are badly needed for education and other investments in long-term economic growth. In practice, this would be extremely difficult to do if all of the cost-increasing incentives of fee-for-service and all of the wastefulness of the present system were to remain in place. The reduced spending would mean care denied to people who need it and a sustained barrage of complaints by health care providers. The global budget would be hard for our government to sustain politically.
Finally, competition is the way to achieve a system that is driven by the informed choices of consumers who are responsible for the cost consequences of their choices. A government-controlled system is driven by political forces. Today, millions of Americans either have no health care coverage or have coverage that will disappear or become extremely costly when they need it.
Nobody defends the proposition that people without coverage or money to pay should go without necessary medical care or should be allowed to suffer, be disabled, or die for lack of reasonable care. For this reason our society has developed a complex patchwork of institutions to care for and finance the care of the uninsured.
These institutions are extremely wasteful and often unfair, permitting preventable medical bankruptcies and disabilities. They lead to delayed care, which can often mean serious and costly illness that could have been prevented by early treatment. They lead to care in costly settings—particularly, hospital emergency departments—when care could have been delivered at much lower cost in the primary care physician's office.
They permit epidemics of communicable diseases that could have been prevented. They generate requirements for costly eligibility determinations.
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They lead to cost shifting from those who do not pay and those who provide free care to those who do pay for health insurance. They lead to the closing of hospital emergency departments, which are the major point of entry for patients who cannot pay.
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This, in turn, deprives whole communities of an important resource. By putting market pressure on providers to cut costs, market reforms promoting competition—if not accompanied by universal coverage—could exacerbate access problems. This would be true of any serious cost containment program.
It would be more humane, economical, and rational simply to adopt a policy providing coverage to virtually everybody through an integrated financing and delivery organization that provides primary and preventive care as a part of a comprehensive benefit package. A necessary condition for universal coverage is that everybody who can contribute to financing the system must do so.
A system of universal coverage will not work if everybody is covered, but only those who voluntarily choose to do so pay for it. Such a system would be destroyed by free riders. The level and growth of tax-supported and tax-subsidized national health expenditures is an appropriate object of public concern. Excessive growth in these expenditures, relative to other priorities, crowds out other programs important to our nation's future.
Managed competition offers the most powerful force for reducing national health expenditures. That is, it makes economical decisions about health resource use in everybody's personal interest—an almost complete reversal of the cost-increasing incentives that drive the present system. However, as is the case with any other policy, there is no guarantee that managed competition will automatically hold spending growth to acceptable levels, even if implemented optimally as I have proposed here. Patients would be insured, thus not using their own money when demanding care.
The health insurance and health services industries have an extensive history of market imperfections, not all of which will be corrected by managed competition. Very costly technologies might emerge. And directly or indirectly through tax subsidies , government pays about half the bill. What should government do if national health expenditure growth is excessive under managed competition? Such global budgets today would have to be imposed on sectors such as hospitals, doctors, and pharmacies and enforced by price controls.
The most plausible candidate for price controls would be Medicare payment methods and volume performance standards, which penalize sectors that increase volume by offsetting reductions in next year's prices. Such controls block efficiency-improving reallocations across sectors, such as doctors working harder to keep people out of the hospital. They leave all of the cost-increasing incentives in place and even intensify them as providers struggle to maintain target incomes.
Top-down global budgets, if imposed on capitation rates of integrated financing and delivery organizations, would avoid some of the worst inefficiencies and disincentives. But they would focus the whole health services industry on political efforts to raise or maintain the ceiling as a percentage of gross national product GNP.
Hospital rate regulators are notoriously unwilling to force unneeded or inefficient hospitals to close. Insurance rate regulators are responsible for the solvency of insurers. So such regulation becomes cost reimbursement. Only impersonal market forces can close down unneeded, inefficient activities. Thus the history of such regulation is that it does not really lower cost to consumers.
Moreover, regulatory authorities are not czars. They must observe the due process requirements of the Administrative Procedures Act and the Fifth Amendment. They must hold hearings, consider arguments, and base conclusions on evidence—all of which can be costly. Such global budgets would raise a whole maze of paradoxes and conundrums: Would they be equal per capita across states, and if unequal, on what basis?
How would one deal with high- versus low-cost states? Could one justify locking Massachusetts and Arkansas, with a nearly twofold difference in per capita spending, into the same percentage rate of increase forever? Who decides? Finally, for managed competition to work well, the managed care industry must make a great deal of investment in corporate restructuring, service expansion, and information and reporting systems, all of which are much less likely to appear attractive if government threatens to set prices and expropriate the return on investment.
How then should government respond? The answer is that the managed competition framework gives government a number of tools to use to influence the outcome. These would be market-determined global budgets and would encompass all publicly supported and tax-subsidized national health expenditures.
Government could then decide on a public policy that sets a target for this global budget relative to GNP. If the global budget grows faster than the target, the president and Congress should direct the National Health Board to develop and implement a set of targeted interventions designed to reduce health spending based on solid and current data.
The list might include, for example, reducing covered benefits; raising copayments and deductibles except for the poor ; removing from coverage and inclusion in the uniform effective covered benefit package those drugs and other technologies of very high cost in relation to the benefits produced with protection against tort litigation for providers who comply ; antitrust action against local cartels; and possibly taxing the excess of premiums over the premiums of the low-cost benchmark plan in each area.
In other words, government should examine the causes of excess spending and apply specific remedies, rather than trying to sweep the problems under the carpet of a national global budget. Managed competition is not a lot of things it has been called by people who do not understand it or who prefer central governmental controls to decentralized markets. A free market does not and cannot work in health insurance and health care. If not corrected by a careful design, this market is plagued by problems of free riders, biased risk selection, segmentation, and other sources of market failure.
Managed competition uses market forces within a framework of carefully drawn rules. In managed competition, sponsors work actively to perfect the market. Everyone is given an opportunity to enroll. It is new rules, not no rules. On the contrary, managed competition emphasizes the importance of individual not employer choice of plans.
Many systems and styles would be able to compete effectively, including familiar solo doctor styles in some selective individual practice models. However, managed competition does make people bear the economic consequences of their choices.
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On the contrary, far more often than not, quality and economy in medical care go hand-in-hand. The correct diagnosis done promptly, and the appropriate procedure done by someone very proficient, without errors or complications, is best for the patient and the payer. Competing managed care plans would have powerful incentives to improve the quality of care. We know that some types of managed care can cut cost substantially. We know that there are wide variations in costs for many procedures and that the best producers have the lowest costs.
We know that when given responsible choices and information, most people choose value for money.
We know that HIPC-like arrangements work well. The challenge is to put these best practices together into one complete managed competition system. The rest is extrapolation based on generally accepted principles of rational economic behavior. All reform proposals must rely on similar extrapolation. It has been explained, developed, and debated in the academic literature for more than a decade.
Managed competition is not just a grab bag of ideas that sound good. Its authors do not claim that it can solve America's problems of racism, poverty, homelessness, the frail elderly, and others. It cannot be counted on to bring comprehensive care to Nome, Alaska. Managed competition is aimed at care for the 90 to 95 percent of Americans whose medical needs can be met by programs that look like prevailing employment-based coverage.
For most Americans managed competition can mean higher-quality care at a much lower cost, organized and delivered in a much more coherent and satisfactory way.
Special programs, usually publicly sponsored, will be needed for special populations. If managed competition is successful, more public money will be available for them. It does not depend merely on the steady growth of existing prepaid group practices. In response to managed competition, thousands of hospitals and their medical staffs could quickly form integrated organizations and begin accepting capitation contracts.
Many individual practice and network HMOs could expand very rapidly. The managed competition idea attracted widespread support in , in recognition of the urgent need to do something serious about costs and as an alternative to federal price controls. Paul Tsongas adopted it as his health platform during his presidential bid. In developing its proposal, the Bush administration began with a managed competition model. Like any serious reform proposal, attempts to enact a national managed competition model will be controversial. Some of the most powerful congressional leaders distrust market mechanisms and prefer direct government price controls.
Many of the specific features of managed competition will be opposed by private-sector interests seeking to hold onto the present market imperfections that favor them. However, recent months have seen considerable movement among the private sector toward support of real managed competition as it becomes apparent that government will be forced to act decisively to contain costs. In the coming debate, managed competition has the important advantage that it is compatible with strong American cultural preferences, as articulated by Alexis de Tocqueville, for limited government, voluntary action, decentralized decision making, individual choice, multiple competing approaches, pluralism, and personal and local responsibility.
Published online 1 January Research Article Health Affairs Vol. Alain C. Patient responsiveness to a differential deductible: empirical results from The Netherlands. Does managed competition constrain hospitals' contract prices? Evidence from the Netherlands. The Managerial Lineages of Neoliberalism. Patient choice and policy change in the Finnish and Swedish health-care systems.
Modelling competition in health care markets as a complex adaptive system: an agent-based framework. Prioritization not Rationing in Cancer Care. Advice from the health insurer as a channelling strategy: a natural experiment at a Dutch health insurance company. How does managed competition affect hospital prices in a social health insurance system?
The Colombian case. Enthoven and Laurence C. Reforming the French health-care system: the quest for accountability. References for Part I. Managing imperfect competition by pay for performance and reference pricing. Improving risk equalization with constrained regression. Paying Medicare Advantage plans: To level or tilt the playing field.
Measuring customer preferences in the German statutory health insurance. Statutory health insurance in Germany: a health system shaped by years of solidarity, self-governance, and competition. Coopetition in health care: A multi-level analysis of its individual and organizational determinants. Performative policy: the case of Swedish healthcare reforms.
Health plan choice in the Netherlands: restrictive health plans preferred by young and healthy individuals. Selective contracting and channelling patients to preferred providers: A scoping review. Understanding competition between healthcare providers: Introducing an intermediary inter-organizational perspective. Response to the letter to the editor regarding: Stuck in the middle? A perspective on ongoing pro-competitive reforms in Dutch mental health care.
Regulating self-selection into private health insurance in Chile and the United States. Thomas G. Why patients may not exercise their choice when referred for hospital care. An exploratory study based on interviews with patients. Stuck in the middle? Improving access and managing healthcare demand with walk-in clinic. Demand for Health Insurance. Differences in price elasticities of demand for health insurance: a systematic review. Krankenversicherungen als Agenten und Akteure in einem Gesundheitssystem der Zukunft. Price elasticities in the German Statutory Health Insurance market before and after the health care reform of Reforming private drug coverage in Canada: Inefficient drug benefit design and the barriers to change in unionized settings.
Health Economics. Internationale Systemvergleiche im Gesundheitswesen. The single versus multiple payer debate. Governing healthcare through performance measurement in Massachusetts and the Netherlands. Competition, Managed. Health Care Organization, Policy, and Financing. The use of quality information by general practitioners: does it alter choices? A randomized clustered study. Risk selection in a regulated health insurance market: a review of the concept, possibilities and effects. Effects of regulated competition on key outcomes of care: Cataract surgeries in the Netherlands.
Purchaser—provider splits in health care—The case of Finland. Deciding How to Choose the Healthcare System. Free choice of healthcare providers in the Netherlands is both a goal in itself and a precondition: modelling the policy assumptions underlying the promotion of patient choice through documentary analysis and interviews. Dutch healthcare reform: did it result in better patient experiences in hospitals? Do health plans risk-select? An audit study on Germany's Social Health Insurance. Health Care. The U. Health-Care Marketplace: Future Tense.
The Historical Background on the Emergence of the U. Implementing Insurance Exchanges — Lessons from Europe. Health insurance system financing reforms in the Netherlands, Germany and France: Repercussions for coverage and redistribution? Reformen der Finanzierung der Krankenversicherungssysteme in den Niederlanden, in Deutschland und in Frankreich: Auswirkungen auf die Abdeckung und Umverteilung. Reforming Medicare by Reforming Incentives. Reflections on commissioning and the English coalition government NHS reforms. Supplement 2. Discursive Recontextualization in a Public Health Setting.
Health system reform in China: What role for private insurance? Economic Evaluation and Cost-Effectiveness Thresholds. Letter from America: the political economics of US healthcare reform. Does Managed Care Affect Quality? The new Dutch health insurance system and its implications for pharmaceutical innovation.
Demand Management and Case Management. Elasticities of market shares and social health insurance choice in germany: a dynamic panel data approach. Managing competition in the countryside: Non-profit and for-profit perceptions of long-term care in rural Ontario. Health Policy. Exploring limits to market-based reform: Managed competition and rehabilitation home care services in Ontario. Consumer preferences in social health insurance. Healthcare reform implementation: stakeholders and their roles—the Israeli experience.
The Mexican Welfare State. Enthoven and Brian Talbott. Tuberculosis control and managed competition in Colombia. Does Consumer Satisfaction Information Matter? The KM infrastructure: making implicit knowledge assets explicit. Consumer choice of social health insurance in managed competition.
Competition, Payers, and Hospital Quality1. Health Care Marketplace in the United States. A strategy, based on managed competition, to free employers from the health care cost spiral and produce effective managed care. Risk factors and dementia P Psychosocial interventions 1 P Alzheimer Nederland — Technology and ehealth P Inclusion of people with dementia P Young onset dementia P Acute and hospital care P Home and residential care I P Psychosocial interventions II P Alzheimer Nederland — Patient involvement in research and policy P Connecting with minority groups P Meaningful day-time activities and respite P Legal and ethical issues P Home and residential care II P Training and education of care professionals QOP1.
Care and services I QOP2. Societal perspectives I QOP3. Welcome Conferences Previous conferences Vienna Detailed Programme, abstracts and presentations. Oktober Eric B. Larson USA :Prospects for prevention of dementia in our increasingly ageing society — Good news on the horizon? Elisabeth L. Zeilinger Austria :Instruments for the early detection of dementia in persons with intellectual developmental disorder P1. Els Derksen Netherlands :Diagnostic Disclosure: evaluation of a communication model in dementia care P1.
Charles Scerri Malta :Dementia: Diagnosis, disclosure and prescribing practices among primary care physicians in Malta Delphine J. Rahib Chattat Italy :Cognitive stimulation and maintenance: availability in dementia care P2. Marianna Tsatali Greece :Does cognitive training with the use of a virtual museum improve neuropsychological performance in aMCI? Alain Pesce Monaco :Kodro: a new application for seniors P3.
Anthea Innes United Kingdom :Telehealth for the diagnosis, assessment and management of dementia in remote Scottish communities P3. Juliette Sablier France :Tracking or talking? What do people with Alzheimer disease and their caregivers expect from assistive technologies? Example of a GPS-based tracking system Matthew P. Kritika Samsi United Kingdom :How do carers decide for their relatives with dementia?
Ariadne Van den Broeck Belgium :License to steal? Preventing abuse of powers of attorney P5. Jane Youell United Kingdom :Ethical considerations and challenges when working with people with dementia and their carers P5. Michelle Kelly Ireland :Lifestyle interventions to protect against dementia: Practical recommendations based on empirical evidence P7. John T. Gerdine Douma Netherlands :Mirror neurons and physical rehabilitation in dementia P8.
Anouk Spijker Netherlands :Adherence to a psychosocial intervention protocol: the hassles of ever-changing practice in community mental health services Towards a cognitive screening system P9. The MobileSage project P9. Peter J. Ashley United Kingdom :Developing Technology in the support of people with dementia, their carers and professionals Cost of informal care provided to people with dementia P Heinz Katschnig Austria : Dementia and pathways of health service utilisation in Austria: A record linkage study in a country with a fragmented provider payment system Eva Dierckx Belgium : Are depressive symptoms in Mild Cognitive Impairment patients predictive for conversion to dementia?
Jacqueline Parkes United Kingdom : The effects of behavioural variant frontotemporal dementia: developing supportive care strategies for both the sufferer and their carers Mary Cosgrave Ireland : Comparing end-of-life care in dementia and severe mental illness in the elderly P Elisabeth K. Myrra Vernooij-Dassen Netherlands : The organisation of palliative care in Europe: building bridges between cancer and dementia palliative care Renate Stemmer Germany : Maintaining everyday practical and cognitive competencies in people with dementia in a home setting P Susan H.
Perla Werner Israel : Lay persons' beliefs and knowledge about Alzheimer's disease — Are there gender differences? Tanja Kalytta Germany : The impact of a short-term telephone based psychological intervention on encouraging family caregivers to identify their needs for support P Gemma Kam Chu Wong HongKong : Empowering the experienced caregivers to act as mentors to the caregivers with newly acquired caregiving role — A preliminary study P June Andrews United Kingdom : Dementia friendly design in acute general hospitals as an element of dementia-friendly communities P Petra Plunger Austria : Caring for people living with dementia in community pharmacies Maria S.
Judith Mollard France : Actions offered to help young people with dementia P Paul van Houten Netherlands :New incontinence in vulnerable elderly people — Ensuring it is noticed quickly and a methodical analysis is carried out This symposium is sponsored by SCA Hygiene Products.