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Managed competition in health care

Workshop proceedings

The proceedings were released on 10 December 2002. The workshop, held in Canberra on 23 August 2002, was attended by fifteen leading analysts and practitioners to examine a model for reform in Australia proposed by Dr Richard Scotton. The Scotton model is designed to harness market incentives to improve the funding and delivery of health services. This report was prepared to enable wider dissemination and discussion of the ideas that emerged from the Workshop and to guide possible future research in this area. It includes the introductory comments and summaries of the general discussion for each of the four Workshop sessions.

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  • Key points
  • Media release
  • Contents

'Managed competition' seeks to use market incentives to increase economic efficiency, but within a framework which maintains equity and universal access for health care services.

In essence, it involves the government funding — through a system of risk-adjusted payments — competing 'budget holders' to purchase health care services, on behalf of their enrollees, from competing providers.

Dr Richard Scotton's managed competition model for Australia is one of a number of similar proposals for addressing perceived weaknesses in health care systems across a number of countries.

The introduction of managed competition would involve substantial changes to Australia's health financing and service delivery arrangements. As such, it would represent a 'big-bang' reform.

Among workshop participants, there was limited support for the implementation of the full Scotton model. The model is complex and presents a number of challenging implementation issues. These relate, for example, to the restructuring of the existing multiple program structure and the development of effective contractual arrangements between budget holders and service providers.

Many judged that it would be preferable to give priority to related incremental reforms offering the prospect of clearer net gains to the community in the short to medium term.

A number of proposals consistent with the Scotton model were identified as worthy of further investigation, including:

  • evaluating the merits of giving doctors, through the Divisions of General Practice, greater responsibility for purchasing medical services and pharmaceuticals for their patients; and
  • assessing the merits of giving regionally based, public non-competing budget holders the responsibility for purchasing a full range of health services for their residents.

Background information

Anthony Housego 02 6240 3304

A variety of 'managed competition' arrangements covering the financing, purchasing and delivery of health care services operate in a number of countries, such as the United States, the Netherlands and Israel. Drawing on these models, health economist Dr Richard Scotton has developed a managed competition proposal as a means of addressing perceived shortcomings in Australia's health system. His model has attracted growing interest.

In recognition of this, the Commission arranged a Workshop on Managed Competition in Health Care to provide an opportunity for a more detailed discussion of the Scotton proposal by a group of leading health policy analysts.

The Workshop featured four sessions covering a description and review of the Scotton proposal, the payment framework for programs and services, implementation issues and potential outcomes of the proposal in terms of dealing with a number of specific problems in our health system.

The proceedings include introductory comments from Richard Scotton on each session, comments from Ron Donato of the University of South Australia on payment-related issues and summaries of the general discussion in each session. They also include a summary of the views of participants and alternative proposals for more incremental change.

Further information

02 6240 3330 /

Cover, Copyright, Foreword, Contents, Acknowledgments, Abbreviations, Glossary, Key points, Summary

Opening remarks
Helen Owens

1   The Scotton proposal
Richard Scotton

General discussion

2   Payment for programs and services Introductory comments
Richard Scotton

Competition and capitation
Ron Donato

General discussion

3   Implementation issues
Richard Scotton

General discussion

4   Outcomes of managed competition
Richard Scotton

General discussion

Appendix A   Workshop program

Appendix B   Workshop participants

Appendix C   Managed competition
Richard Scotton

Appendix D   Managed competition: the policy context
Richard Scotton