MANAGED CARE AND HMOs

1. MANAGED CARE AND HMOs

2. Management of Health Care If traditional fee-for-service creates incentives for overprovision, is it possible to manage health care delivery so as to overcome this effect? Do some forms of managed care generate incentives for underprovision?

3. What is Managed Care? Provision of care to defined enrollees at a fixed (capitated) rate Means all levels of care (outpatient, inpatient, hospital services, labs, etc.) must be integrated under a fixed budget (vertical integration) Under FFS, more volume means more profit; under managed care, more volume means less profit

4. HMOs Organization that provides enrollees with comprehensive care in exchange for a prepaid premium Staff model HMO hires salaried staff physicians Group model HMO is primarily an insurance provider which contracts with physician group to provide the care

5. Incentives HMO incurs the cost of treatment Thus, incentive to reduce cost of each treatment and to reduce treatments Also incentive to avoid need to treat preventive care

6. PPOs Consumer given financial incentives to receive health care from selected panel of providers Providers chosen on basis of low cost practice styles Can PPOs successfully choose providers with efficient practice styles?

7. Development of HMOs Slow, until recently Organized medicine resisted resisted loss of physician control HMOs prevent price discrimination

8. Price Discrimination If a monopolist can separate customers into groups that have different demands, then price discrimination is possible Different prices for different customers Price discrimination increases the monopoly�s profits Only possible if the good or service cannot be resold

9. Price Discrimination Illustrated

10. The Pros and Cons of HMOs

12. HMO Cost Advantages

14. Are HMO Costs Lower?

15. The Problem of Selection Bias

16. The Rand Experimental Study

17. Quality of Care

18. Empirical Results

19. Growth In Costs