Managed Care

By 1993, over 70% of all Americans with health insurance were enrolled in some form of managed care plan. The term managed care encompasses a diverse array of institutional arrangements, which combine various sets of mechanisms, that, in turn, have changed over time. The chapter reviews these mechanims, which, in addition to the methods employed by traditional insurance plans, include the selection and organization of providers, the choice of payment methods (including capitation and salary payment), and the monitoring of service utilization. Managed care has a long history. For an extended period, this form of organization was discouraged by a hostile regulatory environment. Since the early 1980s, however, managed care has grown dramatically. Neither theoretical nor empirical research have yet provided an explanation for this pattern of growth. The growth of managed care may be due to this organizational form's relative success in responding to underlying market failures in the health care system - asymmetric information about health risks, moral hazard, limited information on quality, and limited industry competitiveness. The chapter next explores managed care's response to each of these problems. The chapter then turns to empirical research on managed care. Managed care plans appear to attract a population that is somewhat lower cost than that enrolled in conventional insurance. This complicates analysis of the effect of managed care on utilization. Nonetheless, many studies suggest that managed care plans reduce the rate of health care utilization somewhat. Less evidence exists on their effect on overall health care costs and cost growth.

Who Pays for Health Care When Workers Are Uninsured?

Quantifies the costs to the public, in taxpayer bills to fund public insurance or uncompensated care programs, of employers not insuring workers. Compares public costs for uninsured employees of small, multi-location, and large firms and their families

The Widening Health Care Gap Between High- and Low-Wage Workers

Compares the changes in insurance status, out-of-pocket costs, access to care, use of prescription drugs, and health-related outcomes of low-wage workers and high-wage workers between 1996 and 2003. Discusses the implications of the growing disparities

How Do Doctors Behave When Some (But Not All) of Their Patients are in Managed Care?

Most physicians today treat a variety of patients within their practices and operate in markets where a variety of insurance arrangements co-exist. In this paper, we propose several theoretical explanations for physician treatment patterns when the patient population is heterogeneous at the practice and market level. Data from the 1993-1996 National Ambulatory Medical Care Survey (NAMCS) are used to test how practice-level and market-level HMO penetration affect treatment intensity. Practice composition has strong effects on treatment. HMO-dominated practices have shorter, but otherwise more treatment intensive visits than do other practices. Market characteristics are less important determinants of treatment. As HMO practice share rises, the differences between the treatment of non-HMO and HMO patients are attenuated. These results provide strong evidence for a model of physician behavior with fixed costs of effort in the form of visit duration. For tests ordered, medications prescribed, and return visits specified, the empirical evidence supports a model with marginal cost pricing for excess capacity. HMO and non-HMO treatment patterns are most distinct at the level of the practice, not the patient. HMO-dominated practices appear to use a practice style that is quite different from that used in other practices. These findings suggest that practices are likely to become more segregated over time.

Macroeconomic Conditions, Health Care Costs, and the Distribution of Health Insurance

Prior studies have examined the relationship between macroeconomic factors and health insurance for the adult population and have evaluated changes in the composition of health insurance across the income distribution. We combine these types of analysis and examine how labor market fluctuations, health care costs, income, and economic structure are related to the distribution of health insurance coverage across educational groups. We find that there are substantial differences in how these factors affect insurance coverage for different groups. Variations in unemployment are more important in determining insurance coverage for more educated people. The price of medical care, by contrast, is a much more important determinant of private coverage for the least educated than for the most educated. This finding is consistent with differences in the valuation of cost-increasing health care technologies across education groups.

Health Inequality, Education and Medical Innovation

Recent studies suggest that health inequalities across socio-economic groups in the US are large and have been growing. We hypothesize that, as in other, non-health contexts, this pattern occurs because more educated people are better able than to take advantage of technological advances in medicine than are the less educated. We test this hypothesis by relating education gradients in mortality with measures medical innovation. We focus on overall mortality and cancer mortality, examining both the incidence of cancer and survival conditional on disease incidence. We find evidence supporting the hypothesis that education gradients are steeper for diseases with more innovation.

Analysis of Five Health Insurance Options for New York State

Estimates the increase in coverage, private insurance crowd-out, net cost, and change in overall health spending of five options for expanding health insurance, including a single-payer program, "building block" proposals, and a market-oriented option

The Effect of Health Savings Accounts on Health Insurance Coverage

Looks at how many currently uninsured people might be encouraged to buy coverage through Health Savings Accounts, and what the impact might be on the group and non-group health insurance markets