ABSTRACT
The general objective of managed competition is to establish structures in which market incentives can increase economic efficiency— that is, make better use of resources to improve health outcomes and satisfy consumer wants. It is a complex concept, with implications for every aspect of the health care system. While managed competition involves the use of market tools to guide resource allocation, it also includes a regulatory framework designed to eliminate sources of market failure found in unregulated markets for health services. The relevance of European experience of managed competition to Australian health policy is that it relates to its development within a national program. Budget-holders funded on a capitation basis and being at risk for costs incurred by their enrolled populations are central to any managed competition or purchaser/provider regimen. Managed competition is designed to have a profound impact on the structure and functioning of the health care delivery system.
