Exploring limits to market-based reform: Managed competition and rehabilitation home care services in Ontario

Abstract

The rise of neo-liberalism, which suggests that only markets can deliver maximum economic efficiency, has been a driving force behind the trend towards using market-based solutions to correct health care problems. However, the broad application of market-based reforms has tended to assume the presence of fully functioning markets. When there are barriers to markets functioning effectively, such as the absence of adequate competition, recourse to market-based solutions can be expected to produce less than satisfactory, if not paradoxical results. One such case is rehabilitation homecare in Ontario, Canada. In 1996, a “managed competition” model was introduced as part of a province-wide reform of home care in an attempt to encourage high quality at competitive prices. However, in the case of rehabilitation home care services, significant obstacles to achieving effective competition existed. Notably, there were few private provider agencies to bid on contracts due to the low volume and specialized nature of services. There were also structural barriers such as the presence of unionized employees and obstacles to the entry of new providers. This paper evaluates the impact of Ontario's managed competition reform on community-based rehabilitation services. It draws on data obtained through 49 in-depth key informant interviews and a telephone survey of home care coordinating agencies and private rehabilitation provider agencies. Instead of reducing costs and improving quality, as the political rhetoric promised, the analysis suggests that providing rehabilitation homecare services under managed competition resulted in higher per-visit costs and reduced access to services. These findings support the contention that there are limits to market-based reforms.