Managed competition also has attracted an unusual array of economic interests. Support ranges from the AFL-CIO to the U.S. Chamber of Commerce, the National Federation of Independent Business (which represents small business) and the Business Roundtable (the nation’s 200 largest companies).3 It even includes those who have been portrayed by the Clinton administration as villains in the health care debate. For example, despite the fact that the administration has repeatedly attacked the health insurance industry, the so-called "big five" commercial insurers " Aetna, Travelers, Cigna, Prudential and Met Life " are actively promoting managed competition through magazine advertisements, lobbying efforts and other means.4 No industry has suffered more verbal abuse from the Clintons than pharmaceuticals, and company stock prices have plummeted because of it.5 Yet the Pharmaceutical Manufacturers Association (PMA) also has endorsed managed competition. So have others whom the Clintons have portrayed as greedy and profiteering - including a number of physicians’ organizations.6

"Managed competition is the centerpiece of the Clinton health care plan."

Support for managed competition also spans the political spectrum - from the liberal editorial page of the New York Times7 to the normally conservative Heritage Foundation.8 While the Clinton health care proposal is generally viewed as left of center, managed competition forms the basis for the "centrist" bipartisan bill proposed in the House of Representatives by Jim Cooper (D-TN) and Fred Grandy (R-IA) and in the Senate by John Breaux (D-LA) and Dave Durenberger (R-MN); the "moderate" Republican bill proposed by Senator John Chafee (R-RI); and the "conservative" bill proposed by Senator Don Nickles (R-OK) and Representative Cliff Stearns (R-FL), although they object to the "managed competition" label. [See the sidebar on Varieties of Managed Competition.]

One reason why managed competition is difficult to define is that there are so many variations on the core idea. For example:

• The Clinton administration proposal combines managed competition with the Canadian system of global budgets and price controls.9
• Both the Chafee bill and the Nickles-Stearns bill combine managed competition with Medical Savings Accounts (MSAs), and the Cooper-Grandy bill creates the opportunity for MSAs.10
• The Cooper-Grandy bill, thought to be the purest version of managed competition, does not require anyone to purchase health insurance, whereas the other three plans contain individual and/or employer mandates.11
• And although the original idea behind managed competition was to encourage managed care through health maintenance organizations (HMOs), the sponsors of all four plans are stressing provisions of their proposals that appear to give individuals the freedom to choose physicians.12

Adding to the confusion is the shifting position of the Jackson Hole Group - the health policy analysts who are credited as the intellectual architects of managed competition. This group, discussed below, originally favored universal coverage through government mandates and opposed medical savingsaccounts.13 However, its most recent "draft proposal" drops the endorsement of mandates and includes Medical Savings Accounts.14

Proposals for managed competition also contain other important reforms. For example, all four bills would provide tax relief for those who purchase their own health insurance, in contrast to the current system of restricting tax subsidies to employer-provided coverage.15 All four also would provide more generous tax relief to lower-income families, in contrast to the current system of giving the most generous subsidies to higher-income families.16 And in contrast to the current system of subsidizing generous and even wasteful employer-provided health insurance, Nickles-Stearns would limit the tax subsidy (depending on family income) and the Cooper-Grandy and Chafee bills would limit the amount employers could deduct to the cost of a basic plan.17 All four bills also would give Medicaid enrollees an opportunity to become full participants in the private health insurance marketplace and give Medicare beneficiaries an opportunity to participate as well. Elsewhere, we have argued that each of these reforms is desirable, whereas global budgets, price controls and mandates are not.18

"The idea is backed by the largest health insurance companies and other powerful interest groups."

Given that there are so many varieties of managed competition and that the core idea has been combined with so many other reforms " some good, some bad " small wonder that there is so much confusion about the concept, even within the health insurance industry. In what follows, we sift through the complexities and identify the common ideas that unite the proposals.