MANAGING THE HEALTH-CARE MARKET IN DEVELOPING-COUNTRIES - PROSPECTS AND PROBLEMS

There is increasing interest in the prospects for managed market refor ms in developing countries, stimulated by current reforms and policy d ebates in developed countries, and by perceptions of widespread public sector inefficiency in many countries. This review examines the prosp ects for such reforms in a developing country context, primarily by dr awing on the arguments and evidence emerging from developed countries, with a specific focus on the provision of hospital services. The pape r begins with a discussion of the current policy context of these refo rms, and their main features. It argues that while current and propose d reforms vary in detail, most have in common the introduction of comp etition in the provision of health care, with the retention of a publi c monopoly of financing, and that this structure emerges from the dual goals of addressing current public sector inefficiencies while retain ing the known equity and efficiency advantages of public health system s. The paper then explores the theoretical arguments and empirical evi dence for and against these reforms, and examines their relevance for developing countries. Managed markets are argued to enhance both effic iency and equity. These arguments are analysed in terms of three disti nct claims made by their proponents: that managed markets will promote increased provider competition, and hence, provider efficiency; that contractual relationships are more efficient than direct management; a nd that the benefits of managed markets will outweigh their costs. The analysis suggests that on all three issues, the theoretical arguments and empirical evidence remain ambiguous, and that this ambiguity is a ttributable in part to poor understanding of the behaviour of health s ector agents within the market, and to the limited experience with the se reforms. In the context of developing countries, the paper argues t hat most of the conditions required for successful implementation of t hese reforms are absent in all but a few, richer developing countries, and that the costs of these reforms, particularly in equity terms, ar e likely to pose substantial problems. Extensive managed market reform s are therefore unlikely to succeed, although limited introduction of particular elements of these reforms may be more successful. Developed country experience is useful in defining the conditions under which s uch limited reforms may succeed. There is an urgent need to evaluate t he existing experience of different forms of contracting in developing countries, as well as to interpret emerging evidence from developed c ountry reforms in the light of conditions in developing countries.