Managed competition: issues for Australia.

Rising costs and slower economic growth are resulting in progressive stress on the current structure of health care finance in Australia. As in other developed countries, managed competition offers a potential solution, by increasing system efficiency. The case for restructuring current financing arrangements is even stronger than in other countries because of inefficiencies arising from inconsistencies and overlaps between Commonwealth, State and private sector functions. This paper outlines an illustrative model for managed competition in Australia. In addition, it discusses in more detail two specific issues which have received some attention in the literature: whether to have multiple payers, in the form of competing public and private budget holders; and whether 'catastrophic risks' such as long-term institutional care should be incorporated in a managed competition program.