Introduction

To many, the very notion of a market in health care is anathema, or, at the very least, a ‘contradiction’. A more measured approach might be to question the place of markets in our publicly funded systems. Thus, rather than being a contradiction in terms, the phrase ‘markets and health care’ becomes a conundrum, to be informed by theory and evidence.

Part of that conundrum has been examined already. In Chapter Two it was argued that the market is not a good basis for an efficient, never mind equitable, system of health care financing. Moreover, in Chapter Three, we saw that, equally, user charges are neither equitable nor efficient. These arguments notwithstanding, the discussion in this chapter moves us on to recognising that market failure does not preclude competition on the supply side of health care – for example, among different providers, such as hospitals, competing for public funds. These are so-called ‘internal markets’, whereby people’s care is still tax-funded, but entities within the system, such as hospitals, have to compete for patients and, thus, for these funds. Proponents of such internal markets would say that they retain some of the theoretical advantages of full-blown markets while mitigating many of the problems outlined in Chapters Two and Three. Indeed, this recognition has informed the reform of many health care systems around the world during the past 20 years. Unfortunately, these reforms have not been informed in turn by robust evidence. We review the evidence here such as it is and consider why so many systems are obsessed with emulating the US experience, in this case its attempts to inject managed care into the health care market.

Public finance or public provision?

Public financing of health care relates to how the funds are raised, whether through insurance premiums, taxes and so on. Provision varies, and is more about the institutions through which care is delivered. So far, the arguments in previous chapters have been about justifying public financing of health care, not about public provision. This is why the apparent contradiction becomes more of a conundrum – there may be scope for markets, or competition, on the provision side, which then requires evidence to establish the degree to which this should occur.