managed competition

A theory of health care delivery services that holds that the quality and efficiency of such services would improve if, in a market controlled by the federal government, independent groups had to compete for health care consumers.

managed competition

A healthcare system of historic interest proposed by the Jackson Hole Group, in which insurance companies and providers (i.e., physicians and others) would create health plans to compete with each other for large blocks of consumers.

Under managed competition (MC), individual employees would have received a fixed sum from the employer and chosen a health plan; if the plan chosen cost more than the employer’s fixed sum, the employee would be responsible for the priced options because the employee would be able to deduct only the amount of the lowest cost option. The proposal’s proponents believed that this would encourage individual consumers of healthcare to be more price conscious; they also believed that this would have caused healthcare insurers to hold down the cost of their plans and make them more competitive. Because insurance under this proposed system was not tied to employer, employees would not lose coverage when they changed jobs, and under the proposed system, there was no provision to set premiums that appropriately cover the risk of an individual patient or a specific patient population.

MC was defined by its key architect, Alain Einthoven of Stanford University, as a purchasing strategy with empowered (consumer) demand designed to reward cost-efficient quality care. In MC, consumers would have been organised into large health-purchasing groups to buy insurance; healthcare providers would have been organised in a network that would vie for the health-purchasing group’s business, which would have sufficient clout to bargain with the network to obtain the best value (i.e., cost per individual).