Key issues in managed competition.

All managed competition proposals for health system reform must confront several key issues. The premiums paid to health care purchasing cooperatives will need to be subsidized for those who cannot pay full fare; the amount and sources of the subsidies are controversial political issues. The payments passed on by purchasing cooperatives to health plans must be risk adjusted to account for differences in the health care needs of their enrolled populations. This is essential to create a level playing field for competition and to eliminate incentives for plans to use risk assessment for attracting enrollees. The data and methods needed for risk adjustment, however, are not adequate at present. The Clinton Administration's plan to limit expenditure increases raises a host of thorny issues. Maintaining quality of care will require health plan quality report cards to be supplemented by external quality assurance systems. Assuring quality will be particularly problematic for traditional indemnity plans. The structure and governance of the system, administration simplification, and other issues need to be addressed. The size and voluntariness of the purchasing cooperatives greatly influence all of these considerations. Physicians should inform their political representatives on how these issues should be resolved as compromise bills are drafted by the United States Congress this year.