Reimbursing insurance carriers: the case of 'MUFACE' in the Spanish health care system.

This article aims at contributing to the analysis of financial incentives in managed competition, on the basis of the literature on procurement and regulation under incomplete information. More specifically, we focus on MUFACE, the publicly funded health care system for Spanish civil servants and dependants. MUFACE makes up an internal market, where competing public and private insurers are reimbursed a flat capitation payment. Some of our results are that theoretically, both pre-contractual (adverse) selection of insurers contracted by MUFACE, and post-contractual risk selection of enrollees undertaken by insurers, should occur under flat capitation.