Accountability of Health Service Providers:Comparing Internal Markets and ManagedCompetition Reform Models

A numberof countries, including the U.K., NewZealand, the Netherlands, and the U.S., have attempted to reform their health care systems using "internal market" or "managed competition" reform models. These models signal a departure from reliance on passive indemnity payers or insurers and require proactive purchasers to intervene actively and manage allocation decisions made by physicians. The author explores how these models will ensure the accountability of these new decision-makers to the citizens and patients they ultimately represent. Neither model is found to address accountability issues sufficiently. However, the managed competition model offers the promise of tailoring market (exit), political (voice) and regulatory mechanisms to create the optimal mix of incentives. It is argued that every type of health system (including Canada's) has long overlooked accountability and governance mechanisms. Decision-makers must have incentives to make decisions which strike the right balance between patients' needs and societal interest, and more generally between equity and efficiency. Solving this key problem demands the attention of policymakers, lawyers, and economists.