Study: Managed Care Worked

During the late 1990s, there was a substantial cultural, media and legal backlash against the cost-containment practices of managed care organizations (particularly, HMOs). Most states passed a variety of laws in this period that restricted the cost-cutting measures that managed care firms could use…I find that the backlash had a strong effect on health care costs, and can statistically explain much of the rise in health spending as a share of U.S. GDP between 1993 and 2005 (amounting to 1% – 1.5% of GDP)…I conclude that managed care was largely successful in keeping health care costs on a sustainable path relative to the size of the economy.

Paper here. HT: Tyler Cowen.

Comments (7)

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  1. Eric Novack says:

    except for one thing — the actual customers- patients- hated it.

    Now, if we want to recognize that the payor is the customer instead of the patient… I will agree it was successful, at least over the short run.

  2. Vicki says:

    Yes, but weren’t some patients denied care???

  3. Bruce says:

    Ditto Vicki.

  4. Susan says:

    Patients were denied care but if done properly this was unnecessary care. Almost all studies including the Institute of Medicare say there’s 20-30% spend on unnecessary services. People didn’t like it – but they did like the low premium increases.

  5. Dorothy Calabrese, M.D., says:

    Where is the data tracking HMO insured patients who had to switch to PPO insurance because the medically necessary services they needed weren’t covered in their HMO contract?

    If an HMO contract doesn’t cover certain organ transplants (as is allowed by law) and the patient changes insurance to PPO and the transplant is covered and performed at a transplant center – wasn’t the transplant medically necessary?

    Preeumptiona cannot be made – the data needs to be complete – and the relevant and complete data is not publicly available.

    And what if only one life is lost because the HMO doesn’t cover the treatment needed when a PPO does cover it??

    What if that life is your?

    Dorothy Calabrese MD
    Allergy & Immunology San Clemente, CA

  6. Al says:

    It is true denial of care whether necessary or unecessary lowers cost. The idea behind health care is to provide the necessary care something the HMO’s were frequently denying. The author of the study clearly states that the results of denial of care “cannot trade them off against the cost savings.” so basically he has told us very little.

  7. Thomas says:

    Fully support these findings.