IDEAS home Printed from https://ideas.repec.org/a/eee/jhecon/v22y2003i1p23-45.html
   My bibliography  Save this article

Enrollee mix, treatment intensity, and cost in competing indemnity and HMO plans

Author

Listed:
  • Altman, Daniel
  • Cutler, David
  • Zeckhauser, Richard

Abstract

Why do indemnity insurance plans cost substantially more per capita—77% more in our study—than HMOs? We answer this question using data from a large organization’s insurance pool, covering 215,000 lives. We decompose cost differences for eight major medical conditions into four sources: demographics, incidence within demographic groups, treatment intensity, and prices per service. Greater incidence of disease in the indemnity plan (both from demographics themselves and within demographic groups) and higher prices each explain nearly 50% of the difference. Contrary to conventional wisdom, indemnity plans do not have greater treatment intensity.
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • Altman, Daniel & Cutler, David & Zeckhauser, Richard, 2003. "Enrollee mix, treatment intensity, and cost in competing indemnity and HMO plans," Journal of Health Economics, Elsevier, vol. 22(1), pages 23-45, January.
  • Handle: RePEc:eee:jhecon:v:22:y:2003:i:1:p:23-45
    as

    Download full text from publisher

    File URL: https://www.sciencedirect.com/science/article/pii/S0167-6296(02)00094-2
    Download Restriction: Full text for ScienceDirect subscribers only
    ---><---

    As the access to this document is restricted, you may want to look for a different version below or search for a different version of it.

    Other versions of this item:

    References listed on IDEAS

    as
    1. Sarah Feldman & David Scharfstein, 1998. "Managed Care Provider Volume," NBER Working Papers 6523, National Bureau of Economic Research, Inc.
    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. David M. Cutler & Richard J. Zeckhauser, 1998. "Adverse Selection in Health Insurance," NBER Chapters, in: Frontiers in Health Policy Research, Volume 1, pages 1-32, National Bureau of Economic Research, Inc.
    4. Altman, Daniel & Cutler, David M & Zeckhauser, Richard J, 1998. "Adverse Selection and Adverse Retention," American Economic Review, American Economic Association, vol. 88(2), pages 122-126, May.
    5. Ellis, Randall P, 1989. "Employee Choice of Health Insurance," The Review of Economics and Statistics, MIT Press, vol. 71(2), pages 215-223, May.
    6. Maskarinec, G., 1997. "Diabetes in Hawaii: Estimating prevalence from insurance claims data," American Journal of Public Health, American Public Health Association, vol. 87(10), pages 1717-1720.
    7. David M. Cutler & Mark McClellan & Joseph P. Newhouse & Dahlia Remler, 1998. "Are Medical Prices Declining? Evidence from Heart Attack Treatments," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 113(4), pages 991-1024.
    8. Cutler, David M & McClellan, Mark & Newhouse, Joseph P, 1998. "What Has Increased Medical-Care Spending Bought?," American Economic Review, American Economic Association, vol. 88(2), pages 132-136, May.
    9. David M. Cutler & Mark McClellan & Joseph P. Newhouse, 2000. "How Does Managed Care Do It?," RAND Journal of Economics, The RAND Corporation, vol. 31(3), pages 526-548, Autumn.
    10. McClellan, Mark & Cutler, David & Newhous, Joseph P., 2000. "How Does Managed Care Do It?," Scholarly Articles 2643884, Harvard University Department of Economics.
    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. Ronen Avraham & Leemore S. Dafny & Max M. Schanzenbach, 2009. "The Impact of Tort Reform on Employer-Sponsored Health Insurance Premiums," NBER Working Papers 15371, National Bureau of Economic Research, Inc.
    2. Ana Aizcorbe & Tina Highfill, 2015. "Medical Care Expenditure Indexes for the US, 1980-2006," BEA Working Papers 0121, Bureau of Economic Analysis.
    3. Cutler, David & Lincoln, Bryan & Zeckhauser, Richard, 2010. "Selection stories: Understanding movement across health plans," Journal of Health Economics, Elsevier, vol. 29(6), pages 821-838, December.
    4. Randall P. Ellis & Wenjia Zhu, 2016. "Health Plan Type Variations in Spells of Health-Care Treatment," American Journal of Health Economics, MIT Press, vol. 2(4), pages 399-430, Fall.
    5. Run Liang & Hao Wang, 2017. "Health insurance, market power, and social welfare," International Journal of Economic Theory, The International Society for Economic Theory, vol. 13(4), pages 427-442, December.
    6. Rudy Douven, 2000. "Regulated competition in health insurance markets," CPB Research Memorandum 171.rdf, CPB Netherlands Bureau for Economic Policy Analysis.
    7. Henri de Groot & Peter Mulder, 2011. "Energy-intensity developments for 19 OECD countries and 51 sectors," CPB Discussion Paper 171.rdf, CPB Netherlands Bureau for Economic Policy Analysis.
    8. Paul Veenendaal & Ton Manders, 2008. "Border tax adjustment and the EU-ETS, a quantitative assessment," CPB Document 171.rdf, CPB Netherlands Bureau for Economic Policy Analysis.
    9. Ding, Yu & Liu, Chenyuan, 2021. "Alternative payment models and physician treatment decisions: Evidence from lower back pain," Journal of Health Economics, Elsevier, vol. 80(C).
    10. David Bardey & Jean‐Charles Rochet, 2010. "Competition Among Health Plans: A Two‐Sided Market Approach," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 19(2), pages 435-451, June.
    11. Abe Dunn & Adam Hale Shapiro, 2018. "Physician Competition and the Provision of Care: Evidence from Heart Attacks," American Journal of Health Economics, MIT Press, vol. 4(2), pages 226-261, Spring.
    12. Stephan F. Gohmann, 2005. "Preventive Care And Insurance Coverage," Contemporary Economic Policy, Western Economic Association International, vol. 23(4), pages 513-528, October.
    13. Henke, Klaus-Dirk & Rich, Robert F. & Steinbach, Axel & Borchardt, Katja, 2004. "Auf dem Wege zu einer integrierten Versorgung: Neue sozialrechtliche Rahmenbedingungen unter Berücksichtigung der Erfahrungen aus den USA und am Beispiel Berlins," Discussion Papers 2004/12, Technische Universität Berlin, School of Economics and Management.
    14. David J. Cooper & James B. Rebitzer, "undated". "Physician Incentives In Managed Care Organizations: Medical Practice Norms and the Quality of Care," Economics Public Policy Brief Archive ppb_70, Levy Economics Institute.
    15. Karen Eggleston & Anupa Bir, 2009. "Measuring Selection Incentives in Managed Care: Evidence From the Massachusetts State Employee Insurance Program," Journal of Risk & Insurance, The American Risk and Insurance Association, vol. 76(1), pages 159-175, March.
    16. Rudy Douven, 2000. "Regulated competition in health insurance markets," CPB Research Memorandum 171, CPB Netherlands Bureau for Economic Policy Analysis.
    17. Galina Besstremyannaya, 2016. "Differential Effects of Declining Rates in a Per Diem Payment System," Health Economics, John Wiley & Sons, Ltd., vol. 25(12), pages 1599-1618, December.
    18. David J. Cooper & James B. Rebitzer, 2002. "Managed Care, Physician Incentives, and Norms of Medical," Microeconomics 0209001, University Library of Munich, Germany.
    19. David J. Cooper & James B. Rebitzer, 2002. "Managed Care, Physician Incentives, and Norms of Medical Practice: Racing to the Bottom or Pulling to the Top?," Economics Working Paper Archive wp_353, Levy Economics Institute.
    20. Sacks, Daniel W., 2018. "Why do HMOs spend less? Patient selection, physician price sensitivity, and prices," Journal of Public Economics, Elsevier, vol. 168(C), pages 146-161.

    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. Cutler, David & Lincoln, Bryan & Zeckhauser, Richard, 2010. "Selection stories: Understanding movement across health plans," Journal of Health Economics, Elsevier, vol. 29(6), pages 821-838, December.
    2. David Bardey & Jean‐Charles Rochet, 2010. "Competition Among Health Plans: A Two‐Sided Market Approach," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 19(2), pages 435-451, June.
    3. Benjamin R. Handel & Jonathan T. Kolstad, 2021. "The Affordable Care Act After a Decade: Industrial Organization of the Insurance Exchanges," NBER Working Papers 29178, National Bureau of Economic Research, Inc.
    4. Marton, James & Yelowitz, Aaron & Talbert, Jeffery C., 2014. "A tale of two cities? The heterogeneous impact of medicaid managed care," Journal of Health Economics, Elsevier, vol. 36(C), pages 47-68.
    5. Abe Dunn & Adam Hale Shapiro, 2018. "Physician Competition and the Provision of Care: Evidence from Heart Attacks," American Journal of Health Economics, MIT Press, vol. 4(2), pages 226-261, Spring.
    6. Sacarny, Adam, 2018. "Adoption and learning across hospitals: The case of a revenue-generating practice," Journal of Health Economics, Elsevier, vol. 60(C), pages 142-164.
    7. Lu Ji & Fei Liu, 2007. "HMO versus non-HMO private managed care plans: an investigation on pre-switch consumption," Health Care Management Science, Springer, vol. 10(1), pages 67-80, February.
    8. Carine Franc & Marc Perronnin & Aurélie Pierre, 2010. "Subscribing to Supplemental Health Insurance in France: A Dynamic Analysis of Adverse Selection," Working Papers DT35, IRDES institut for research and information in health economics, revised Dec 2010.
    9. Lucarelli, Claudio & Nicholson, Sean & Tilipman, Nicholas, 2022. "Price Indices and the Value of Innovation with Heterogenous Patients," Journal of Health Economics, Elsevier, vol. 84(C).
    10. John A. Rizzo, 2005. "Are HMOs bad for health maintenance?," Health Economics, John Wiley & Sons, Ltd., vol. 14(11), pages 1117-1131, November.
    11. Karen Eggleston & Anupa Bir, 2009. "Measuring Selection Incentives in Managed Care: Evidence From the Massachusetts State Employee Insurance Program," Journal of Risk & Insurance, The American Risk and Insurance Association, vol. 76(1), pages 159-175, March.
    12. Robert Nuscheler & Thomas Knaus, 2005. "Risk selection in the German public health insurance system," Health Economics, John Wiley & Sons, Ltd., vol. 14(12), pages 1253-1271, December.
    13. Michael Geruso & Timothy J. Layton & Jacob Wallace, 2023. "What Difference Does a Health Plan Make? Evidence from Random Plan Assignment in Medicaid," American Economic Journal: Applied Economics, American Economic Association, vol. 15(3), pages 341-379, July.
    14. Aouad, Marion, 2021. "An Examination of the Intracorrelation of Family Health Insurance," IZA Discussion Papers 14541, Institute of Labor Economics (IZA).
    15. repec:pri:cepsud:232rosen is not listed on IDEAS
    16. Alex R. Horenstein & Manuel S. Santos, 2012. "A Cross-Country Analysis of Health Care Expenditures," Working Papers 2013-05, University of Miami, Department of Economics.
    17. David Dranove & Christopher Ody & Amanda Starc, 2021. "A Dose of Managed Care: Controlling Drug Spending in Medicaid," American Economic Journal: Applied Economics, American Economic Association, vol. 13(1), pages 170-197, January.
    18. Müller, Tobias & Schmid, Christian & Gerfin, Michael, 2023. "Rents for Pills: Financial incentives and physician behavior," Journal of Health Economics, Elsevier, vol. 87(C).
    19. Marcus C. Christiansen & Martin Eling & Jan-Philipp Schmidt & Lorenz Zirkelbach, 2016. "Who is Changing Health Insurance Coverage? Empirical Evidence on Policyholder Dynamics," Journal of Risk & Insurance, The American Risk and Insurance Association, vol. 83(2), pages 269-300, June.
    20. Craig, Stuart V. & Ericson, Keith Marzilli & Starc, Amanda, 2021. "How important is price variation between health insurers?," Journal of Health Economics, Elsevier, vol. 77(C).
    21. Magnus Henrekson & Jesper Roine, 2007. "Promoting Entrepreneurship in the Welfare State," Chapters, in: David B. Audretsch & Isabel Grilo & A. Roy Thurik (ed.), Handbook of Research on Entrepreneurship Policy, chapter 5, Edward Elgar Publishing.

    More about this item

    JEL classification:

    • I1 - Health, Education, and Welfare - - Health

    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:eee:jhecon:v:22:y:2003:i:1:p:23-45. 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: Catherine Liu (email available below). General contact details of provider: https://www.elsevier.com/locate/inca/505560 .

    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.