We use data across states to examine the relation between HMO enrollment and medical spending. We find that increased managed care enrollment significantly reduces hospital cost growth. While some of this effect is offset by increased spending on physicians, we generally find a significant reduction in total spending as well. In analyzing the sources of hospital cost reductions, we find preliminary evidence that managed care has reduced the diffusion of medical technologies. States with high managed care enrollment were technology leaders in the early 1980s; by the early 1990s those states were only average in their acquisition of new technologies. This finding suggests managed care may have a significant effect on the long-run growth of medical spending.
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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number
6140.
Length: Date of creation: Aug 1997 Date of revision: Publication status: published relationship to a non-chapter. This should not happen. Please contact NBER. Handle: RePEc:nbr:nberwo:6140
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David M. Cutler & Louise Sheiner, 1999.
"The Geography of Medicare,"
American Economic Review,
American Economic Association, vol. 89(2), pages 228-233, May.
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