ABSTRACT
Internal market reform and managed competition reform both seek to achieve efficiency gains through proactive purchasing. The concept of a proactive purchaser is a significant development from the historical role of government and private insurers as passive indemnity insurers. In a managed competition system, competition between insurers is managed or regulated to provide incentives for insurers to compete along price and quality dimensions in purchasing and/or providing care. Insurers are expected to act as proactive purchasers and/or managers of the supply of care rather than traditional insurers, although they are still expected to manage financial risk within certain parameters. Managed competition models generally assume that insurer/ purchasers will implement managed care arrangements, which are one or more of a variety of methods designed with the goal of influencing the clinical decision-making of health care providers. In a managed competition system, insurer/purchasers are free to choose the most efficient supply arrangement and, subject to anti-trust laws, may or may not be vertically integrated with health care providers. By contrast, the Health Authorities in the internal markets of the UK and New Zealand are precluded from supplying health care services themselves and must contract out for the supply thereof. The goal of internal market reform is to stimulate competition directly between health care providers rather than, as in the managed competition model, between insurer/purchasers.
