Managed Competition That Works

Abstract

President Clinton has advocated managed competition within a global budget as a long-term strategy for simultaneously controlling health care costs and expanding access to medical care to all Americans. This proposal is intended to show how these two seemingly conflicting goals can be simultaneously accomplished. Managed competition, as it has been conceptualized to date, is primarily a strategy for reforming the system of providing health services. To work, it must be joined with a strategy for reforming our system of financing and paying for those services and of limiting overall system capacity. "Managed Competition That Works" is a proposal that would create a single trust-funded national system of health insurance, implemented through a system of vouchers to individuals. Global budgeting would be accomplished through establishment of the voucher's value each year. The trust fund would pay health plans for all medical care by capitation, but health plans would be free to negotiate a variety of payment arrangements with physicians, hospitals, and other providers. All plans would be required to offer a standard package of benefits, but would have great flexibility in offering benefits beyond the scope of the standard package, if those benefits replace high-cost with lower-cost services or permit the plan to compete more effectively for market share. This proposal would establish firm but acceptable national budget limits; provide universal, comprehensive, and uniform insurance coverage; eliminate cost shifting; encourage competition; reward efficiency-improving innovation; greatly reduce the need for centralized micromanagement of medical care; and retain local determination and a somewhat reduced level of consumer choice. Although this proposal is written as a national plan, trust funds could be implemented at the state level, if problems associated with portability of benefits among states could be solved.