While the pervasiveness of serious market failures in the health care sector means that markets alone cannot produce efficient outcomes, the introduction of regulated competition in some areas of health care supply can improve user choice, efficiency and innovation. Establishing a separation between purchaser and provider functions is at the heart of the creation of market-type mechanisms. With such settings, the purchaser is in principle able to maximise value-for-money for its residents by buying medical services from competing suppliers, either public or private, though this requires sufficient size and expertise. More choice is provided to users, though control over patients’ choices remains tighter than in insurance-based systems, where choices are individual rather than made by purchasing organisations.