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Managed Competition of Alternative Delivery Systems

The markets for health insurance and health care are not naturally competitive: they are susceptible to many forms of market failure. Health plans and consumers may use strategies that lead to inequity and inefficiency. But experience with successful models of competition suggests that tools are available to enable sponsors (active collective agents on the demand side who contract with health plans to structure and manage competition) to use competition to achieve a reasonable degree of efficiency and equity for their sponsored populations. All this implies a more complex, dynamic, and sophisticated view of competition than one usually finds in apologia for free markets. A free market is not possible in health insurance.

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