Countervailing Agency: A Strategy of Principaled Regulation under Managed Competition

Despite the failure of recent attempts to reform health care, strategies of managed competition remain the dominant prescription for government oversight of managed care. A number of assumptions and prescriptions in the conventional managed competition model are challenged. More specifically, externalities in the costs and benefits associated with health care and asymmetric information between providers and patients make it unlikely that a managed care system designed to be responsive to consumers will, in practice, produce socially desirable outcomes. An alternative approach for the regulation of managed care more explicitly protects the role of health care professionals as agents for their patients while defining the appropriate role of managed care as the agent for broader societal interests. This strategy of "countervailing agency-" acknowledges that oversight of managed care inevitably involves value-laden choices. It is based on institutional arrangements and regulatory strategies that are intended to balance competing interests and values.