This thesis examines the effect of managed care on health care expenditures and the utilization of preventive care. National level time series data on health care expenditures and prices for the years 1960 to 2003 are used to isolate the demand and supply effects of Health Maintenance Organization (HMO) penetration, controlling for other factors. Using state level panel data, the effect of HMO penetration on health care expenditures is examined for several health care sectors. Results show that HMO penetration has significantly increased health care prices and expenditures, but managed care has been more successful in containing utilization. Cross-section data from the Medical Expenditure Panel Survey (MEPS) for the year 1996 are used to compare the patterns of preventive care utilization by individuals covered by managed care versus those covered by non-managed care plans, taking the uninsured individuals as the benchmark and correcting for self-selection bias. The results indicate that, for most forms of prevention, managed care enrollees consume more services than do non-managed care enrollees.