Economics

Abstract

Last year, both the Clinton administration and those who advocated marketplace reforms to restrain health care costs proposed managed care as the principal way to reorganize the financing and provision of medical services. Advocates of managed care asserted that it would improve the quality of care while reducing costs. Researchers studying both government- and private-sponsored managed care systems have recently published their findings on the capacity of managed care to achieve these goals. Earlier studies of health maintenance organizations (HMOs) had found that 10% to 40% savings could be attained, principally through reduced hospitalizations.^1,2However, researchers were unable to determine whether these savings resulted from HMOs attracting patients who are likely to have lower health care costs and physicians with more parsimonious practice styles or an effect of managed care itself.²In addition, recent changes in the forms and operation of managed care organizations have made these earlier