Purchaser/provider separation and managed competition: reform options for Australia's health system.

A purchaser/provider separation and managed competition have been recommended as options for reform of Australia's health system. This paper presents the theoretical basis and supposed advantages of each model. The introduction of the purchaser/provider separation in the United Kingdom and New Zealand is described, as are the proposals for implementation of managed competition in the United States and the Netherlands. The potential for either model to deliver its promised benefits is critically evaluated in the light of existing evidence. As yet neither model can command unqualified support but both are worthy of further consideration.