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Managed Care


  • Sherry Glied


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.

Suggested Citation

  • Sherry Glied, 1999. "Managed Care," NBER Working Papers 7205, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:7205
    Note: HC HE

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    References listed on IDEAS

    1. Wholey, Douglas & Feldman, Roger & Christianson, Jon B., 1995. "The effect of market structure on HMO premiums," Journal of Health Economics, Elsevier, vol. 14(1), pages 81-105, May.
    2. Welch, W. P., 1985. "Health care utilization in HMO'S : Results from two national samples," Journal of Health Economics, Elsevier, vol. 4(4), pages 293-308, December.
    3. Randall P. Ellis, 2012. "risk adjustment," The New Palgrave Dictionary of Economics, Palgrave Macmillan.
    4. Wholey, Douglas & Feldman, Roger & Christianson, Jon B. & Engberg, John, 1996. "Scale and scope economies among health maintenance organizations," Journal of Health Economics, Elsevier, vol. 15(6), pages 657-684, December.
    5. Newhouse, Joseph P. & Lindsey, Phoebe, 1988. "Do second opinion programs improve outcomes?," Journal of Health Economics, Elsevier, vol. 7(3), pages 285-288, September.
    6. Selden, Thomas M., 1990. "A model of capitation," Journal of Health Economics, Elsevier, vol. 9(4), pages 397-409, December.
    7. 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.
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    Cited by:

    1. Núria Mas, 2013. "Responding to financial pressures. The effect of managed care on hospitals’ provision of charity care," International Journal of Health Economics and Management, Springer, vol. 13(2), pages 95-114, June.
    2. Nell, Martin, 2001. "Managed Claims: Zur Notwendigkeit einer vertikalen Integration von Versicherungs- und Reparaturleistungen," Working Papers on Risk and Insurance 2, University of Hamburg, Institute for Risk and Insurance.

    More about this item

    JEL classification:

    • I1 - Health, Education, and Welfare - - Health
    • L10 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - General

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