The health economist Alain Enthoven is best known for his role in championing “managed competition.” In a brief 2008 note to the left-of-center Physicians for a National Health Plan, Enthoven described his broad goals:

In 1977-8, when I designed and proposed Consumer Choice Health Plan, a plan for universal health insurance based on regulated competition in the private sector, I observed that, in the United States, there were many alternatives to inflationary uncoordinated fee-for-service which dominates our scene. They were mainly prepaid multi-specialty group practices (PGPs), also other multi-specialty group practices, all proven to be able to reduce and manage costs, as well as physician-created individual practice associations some of which were and are being successful in managing and reducing costs. So the main idea was to subject inflationary uncoordinated fee for service to competition to produce value for money from organized alternatives that were reducing costs, and ultimately to replace uncoordinated fee for service almost entirely.
Unfortunately, the USA has not created market conditions favorable to efficient economical health care (most employers do not even offer PGPs as a choice), so these systems have not been able to prove themselves on a national scale. And Medicare has remained dominated by fee for service, and it is a huge strain on Federal finances. In smaller regional situations, however, competing multi-specialty group practices have been proved to be far less costly than fee for service when embedded in a competition model. Perhaps the best example is the public employee’s Employee Trust Funds in the State of Wisconsin. The state employees plan is a good model of managed competition. Employees are offered a variety of choices and the state pays approximately the low priced plan. They have some excellent multi specialty group practices with their own insurance plans, and some group health cooperatives which are similar. The great majority of employees have chosen HMOs. And the costs in Madison, the state capitol where the market is dominated by public employees are far less than they are on the east coast of Wisonsin dominated by fee for service (a difference of approximately $4000 per family per year.)

With this in mind, it makes sense that Enthoven has written a defense of Rep. Paul Ryan’s Medicare reform proposal:

At the root of the waste and excess is Medicare’s open-ended fee-for-service system, which pays health-care providers for doing more and more costly services, whether or not they’re in the patients’ best interests. Last year’s health-care reform legislation acknowledged that fundamental change is needed from the traditional fee-for-service model to a system in which doctors and hospitals team up to offer coordinated care and are held accountable for per-capita cost and quality. Hospitals and suppliers may participate in this Shared Savings Program by creating or joining an Accountable Care Organization (ACO).
Unfortunately, the incentives to form ACOs and to dramatically cut costs are far too weak and the regulations far too complicated. The rules alone for joining the Shared Savings Program number more than 400 pages, and to fully understand them is a daunting challenge for medical professionals. The program is voluntary, and, not surprisingly, it now appears that there will not be many takers.
In a recent letter to the administrator of the Centers for Medicare and Medicaid Services, the American Medical Group Association wrote: “On its face, [the rule to form an ACO] is overly prescriptive, operationally burdensome, and the incentives are too difficult to achieve to make this voluntary program attractive. . . . In a survey of AMGA members, 93 percent said they would not enroll as an ACO under the current regulatory framework.”
A better way to encourage accountable care is the “premium-support” model proposed by House Budget Committee Chairman Paul Ryan, among others. This is a managed competition model in which government would make a defined contribution and beneficiaries would have a choice from a variety of health plans with no discrimination based on health status. Standard coverage contracts would make comparisons possible for ordinary people. Competition would drive health plans to innovate in ways that cut waste and improve quality. And the use of exchanges would drastically reduce marketing costs, so insurance companies would not be taking 20% off the top, as is currently the norm. [Emphasis added]

Enthoven acknowledges problems with Ryan’s approach, including a growth rate he (and many others, myself included) consider unrealistic. But the basic argument in the passage above — that PPACA’s approach to encouraging provider consolidation has been highly prescriptive while the Ryan’s approach is far less so — is an important one that is often lost in the health reform debate.