IDEAS home Printed from https://ideas.repec.org/a/bla/jemstr/v6y1997i1p129-150.html
   My bibliography  Save this article

Competition among Health Maintenance Organizations

Author

Listed:
  • William E. Encinosa
  • David E. M. Sappington

Abstract

We develop a model of competition among health maintenance organizations (HMOs) to analyze the effects of market power, scale economies, and asymmetric knowledge of health risk on market outcomes. We find that competition among HMOs may, but need not, ensure socially preferred outcomes. Market power or scale economies can sometimes admit socially preferred outcomes when they would otherwise not arise. Asymmetric knowledge of health risk may or may not be constraining. When it is constraining, a variety of patterns of incomplete health insurance can arise, along with excessive or insufficient treatment and preventive care for either high‐risk or low‐risk individuals.

Suggested Citation

  • William E. Encinosa & David E. M. Sappington, 1997. "Competition among Health Maintenance Organizations," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 6(1), pages 129-150, March.
    • Handle: RePEc:bla:jemstr:v:6:y:1997:i:1:p:129-150
    DOI: 10.1111/j.1430-9134.1997.00129.x
    as

    Download full text from publisher

    File URL: https://doi.org/10.1111/j.1430-9134.1997.00129.x
    Download Restriction: no
    File URL: https://libkey.io/10.1111/j.1430-9134.1997.00129.x?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Newhouse, Joseph P., 1984. "Cream skimming, asymmetric information, and a competitive insurance market," Journal of Health Economics, Elsevier, vol. 3(1), pages 97-100, April.
    2. Ma, Ching-to Albert, 1994. "Health Care Payment Systems: Cost and Quality Incentives," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 3(1), pages 93-112, Spring.
    3. Pauly, Mark V, 1986. "Taxation, Health Insurance, and Market Failure in the Medical Economy," Journal of Economic Literature, American Economic Association, vol. 24(2), pages 629-675, June.
    4. Marquis, M. Susan, 1992. "Adverse selection with a multiple choice among health insurance plans: A simulation analysis," Journal of Health Economics, Elsevier, vol. 11(2), pages 129-151, August.
    5. Sloan, Frank A., 1992. "Adverse selection: Does it preclude a competitive health insurance market?," Journal of Health Economics, Elsevier, vol. 11(3), pages 353-356, October.
    6. Michael Rothschild & Joseph Stiglitz, 1976. "Equilibrium in Competitive Insurance Markets: An Essay on the Economics of Imperfect Information," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 90(4), pages 629-649.
    7. repec:bla:jemstr:v:3:y:1994:i:1:p:93-112:a is not listed on IDEAS
    8. Joseph P. Newhouse, 1996. "Reimbursing Health Plans and Health Providers: Efficiency in Production versus Selection," Journal of Economic Literature, American Economic Association, vol. 34(3), pages 1236-1263, September.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Daniel McFadden & Carlos Noton & Pau Olivella, 2015. "Minimum coverage regulation in insurance markets," SERIEs: Journal of the Spanish Economic Association, Springer;Spanish Economic Association, vol. 6(3), pages 247-278, August.
    2. Ching‐To Albert Ma & Thomas G. Mcguire, 2002. "Network Incentives in Managed Health Care," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 11(1), pages 1-35, March.
    3. Thomas G. McGuire & Jacob Glazer, 2000. "Optimal Risk Adjustment in Markets with Adverse Selection: An Application to Managed Care," American Economic Review, American Economic Association, vol. 90(4), pages 1055-1071, September.
    4. Olivella, Pau & Vera-Hernandez, Marcos, 2007. "Competition among differentiated health plans under adverse selection," Journal of Health Economics, Elsevier, vol. 26(2), pages 233-250, March.
    5. Belli, Paolo, 2001. "How adverse selection affects the health insurance market," Policy Research Working Paper Series 2574, The World Bank.
    6. Pau Olivella & Marcos Vera-Hernandez, 2010. "How complex are the contracts offered by health plans?," SERIEs: Journal of the Spanish Economic Association, Springer;Spanish Economic Association, vol. 1(3), pages 305-323, July.
    7. Bradley Herring, 2010. "Suboptimal provision of preventive healthcare due to expected enrollee turnover among private insurers," Health Economics, John Wiley & Sons, Ltd., vol. 19(4), pages 438-448, April.
    8. Laurence C. Baker & Kenneth S. Corts, 1995. "The Effects of HMOs on Conventional Insurance Premiums: Theory and Evidence," NBER Working Papers 5356, National Bureau of Economic Research, Inc.
    9. Shiv Dixit, 2023. "Contract Enforcement and Preventive Healthcare: Theory and Evidence," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 51, pages 1048-1094, December.
    10. Glazer, Jacob & McGuire, Thomas G., 2011. "Gold and Silver health plans: Accommodating demand heterogeneity in managed competition," Journal of Health Economics, Elsevier, vol. 30(5), pages 1011-1019.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Barros, Pedro Pita, 2003. "Cream-skimming, incentives for efficiency and payment system," Journal of Health Economics, Elsevier, vol. 22(3), pages 419-443, May.
    2. Cutler, David M. & Zeckhauser, Richard J., 2000. "The anatomy of health insurance," Handbook of Health Economics, in: A. J. Culyer & J. P. Newhouse (ed.), Handbook of Health Economics, edition 1, volume 1, chapter 11, pages 563-643, Elsevier.
    3. Pablo Picasso, 2000. "Capitation," Macroeconomics 0004064, University Library of Munich, Germany, revised 24 Feb 2002.
    4. Agnès Couffinhal, 2000. "De l'antisélection à la sélection en assurance santé : pour un changement de perspective," Économie et Prévision, Programme National Persée, vol. 142(1), pages 101-121.
    5. Stéphane Jacobzone, 1997. "Systèmes mixtes d'assurance maladie, équité, gestion du risque et maîtrise des coûts," Économie et Prévision, Programme National Persée, vol. 129(3), pages 189-205.
    6. K. P. M. Winssen & R. C. Kleef & W. P. M. M. Ven, 2017. "A voluntary deductible in health insurance: the more years you opt for it, the lower your premium?," The European Journal of Health Economics, Springer;Deutsche Gesellschaft für Gesundheitsökonomie (DGGÖ), vol. 18(2), pages 209-226, March.
    7. K. P. M. Winssen & R. C. Kleef & W. P. M. M. Ven, 2018. "Can premium differentiation counteract adverse selection in the Dutch supplementary health insurance? A simulation study," The European Journal of Health Economics, Springer;Deutsche Gesellschaft für Gesundheitsökonomie (DGGÖ), vol. 19(5), pages 757-768, June.
    8. van de Ven, Wynand P. M. M. & van Vliet, Rene C. J. A. & Schut, Frederik T. & van Barneveld, Erik M., 2000. "Access to coverage for high-risks in a competitive individual health insurance market: via premium rate restrictions or risk-adjusted premium subsidies?," Journal of Health Economics, Elsevier, vol. 19(3), pages 311-339, May.
    9. Bakker, F. M. & van Vliet, R. C. J. A., 1995. "The introduction of deductibles for prescription drugs in a national health insurance: compulsory or voluntary?," Health Policy, Elsevier, vol. 31(1), pages 53-65, January.
    10. Brian Nolan, 1994. "Affordability versus Quality, Effectiveness and Equity in Health Care: Is there a Trade-Off?," Papers WP055, Economic and Social Research Institute (ESRI).
    11. Belli, Paolo, 2001. "How adverse selection affects the health insurance market," Policy Research Working Paper Series 2574, The World Bank.
    12. Zhang, Licheng & Wang, Hong, 2008. "Dynamic process of adverse selection: Evidence from a subsidized community-based health insurance in rural China," Social Science & Medicine, Elsevier, vol. 67(7), pages 1173-1182, October.
    13. van de Ven, Wynand P. M. M. & van Vliet, ReneC. J. A., 1995. "Consumer information surplus and adverse selection in competitive health insurance markets: An empirical study," Journal of Health Economics, Elsevier, vol. 14(2), pages 149-169, June.
    14. Feldman, Roger & Dowd, Bryan, 2000. "Risk segmentation: goal or problem?," Journal of Health Economics, Elsevier, vol. 19(4), pages 499-512, July.
    15. Jack, William, 2001. "Controlling selection incentives when health insurance contracts are endogenous," Journal of Public Economics, Elsevier, vol. 80(1), pages 25-48, April.
    16. Olga Milliken & Rose Anne Devlin & Vicky Barham & William Hogg & Simone Dahrouge & Grant Russell, 2008. "Comparative Efficiency Assessment of Primary Care Models Using Data Envelopment Analysis," Working Papers 0802E, University of Ottawa, Department of Economics.
    17. Ettner, Susan L., 1997. "Adverse selection and the purchase of Medigap insurance by the elderly," Journal of Health Economics, Elsevier, vol. 16(5), pages 543-562, October.
    18. Ronald Eduardo Gómez Suárez, 2007. "Cream-Skimming And Risk Adjustment in Colombian Health Insurance System:: The Public Insurer Case," Archivos de Economía 4295, Departamento Nacional de Planeación.
    19. Selden, Thomas M., 1999. "Premium subsidies for health insurance: excessive coverage vs. adverse selection," Journal of Health Economics, Elsevier, vol. 18(6), pages 709-725, December.
    20. Gaynor, Martin & Vogt, William B., 2000. "Antitrust and competition in health care markets," Handbook of Health Economics, in: A. J. Culyer & J. P. Newhouse (ed.), Handbook of Health Economics, edition 1, volume 1, chapter 27, pages 1405-1487, Elsevier.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bla:jemstr:v:6:y:1997:i:1:p:129-150. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiley Content Delivery (email available below). General contact details of provider: http://www.kellogg.northwestern.edu/research/journals/JEMS/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.