Creating the market under managed competition: getting there will not be half the fun

Area of Science:

• Health economics
• Health services research
• Healthcare policy

Background:

• Managed competition frameworks require the development of new Alternative Health Plans (AHPs).
• Past growth of Health Maintenance Organizations (HMOs) suggests new Independent Practice Associations (IPAs) will emerge at varying rates.
• Community-specific factors like medical resource availability and demographics influence IPA development.

Purpose of the Study:

• To explore the role of new AHPs, particularly IPAs, in managed competition.
• To identify challenges and potential consequences of AHP failures in early health reform stages.
• To inform policy development for stimulating AHP entry and ensuring consumer protection.

Main Methods:

• Analysis of evidence from past studies on IPA entry and price competition.
• Examination of factors influencing IPA development and failure rates.
• Review of policy implications for managing new AHPs.

Main Results:

• New IPA entrants have demonstrated the ability to stimulate price competition, as seen in lower bid prices within the AHCCCS program.
• IPAs are susceptible to failure, especially with low enrollment levels.
• A high rate of AHP failures could erode public confidence in managed competition.

Conclusions:

• Effective policies are needed to encourage AHP entry and oversee their performance.
• Protecting consumers from adverse consequences of AHP failures is crucial for sustained managed competition.
• Failure to manage AHP entry and failures may lead to calls for more centralized healthcare regulation.