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"This paper investigates the impact of Medicare HMO penetration on the medical care expenditures incurred by Medicare fee-for-service enrollees. We find that increasing penetration leads to reduced health care spending on fee-for-service beneficiaries. In particular, a one percentage point increase in Medicare HMO penetration reduces such spending by .9 percent. We estimate similar models for various measures of health care utilization and find penetration-induced reductions, consistent with our spending estimates. Finally, we present evidence that suggests our estimated spending reductions are driven by beneficiaries who have at least one chronic condition"--National Bureau of Economic Research web site

This article reviews twenty-four studies that compare health maintenance organization (HMO) use ofdiagnostic testing services tofee-for-service(FFS) use. Diagnosticservices contribute to both the high level and the growth of health care costs. This review of a series of studies is important because any single study is commonly limited to a small set of diagnostic tests and generally provides analysis restricted to one, or afew, HMOs. Combining evidence from each of the studies yields thefollowing conclusions. Relative to FFS enrollees, HMO enrollees receive fewer inpatient diagnostic tests. Evidence concerning HMO utilization of outpatient testing relative to FFS plans, though mixed, tends to suggest that HMOs do not perform more ofthese services and may performfewer for patients with chronic illnesses. Quality of care does not appear to suffer in HMOs despite lower testing rates, suggesting HMOs reduce testing in situations in which the incremental value is small.

Physicians, health plans, and health systems are increasingly evaluated and rewarded based on Health Plan Effectiveness Data and Information Set (HEDIS) and HEDIS-like performance measures. Concurrently, employers and health plans continue to try to control expenditures by increasing out-of-pocket costs for patients. The authors use fixed-effect logit models to assess how rising copayment rates for physician office visits and prescription drugs affect performance on HEDIS measures. Findings suggest that the increase in copayment rates lowers performance scores, demonstrating the connection between financial aspects of plan design and quality performance, and highlighting the potential weakness of holding plans and providers responsible for performance when payers and benefit plan managers also influence performance. Yet the effects are not consistent across all domains and, in many cases, are relatively modest in magnitude. This may reflect the HEDIS definitions and suggests that more sensitive measures may capture the impact of benefit design changes on performance.

This article examines the relationship between 1996 health plan enrollment and both HEDIS-based plan performance ratings and individual HEDIS measures. Data were obtained from a large firm that collected, aggregated, and disseminated plan performance ratings to its employees. Plan market share regressions are estimated controlling for out-of-pocket price and model type in addition to the plan ratings and HEDIS measures. The results suggest that employees did not respond strongly to the provided ratings. There are several potential explanations for the lack of response, including difficulty understanding the ratings and never having seen them. In addition, employees may base their plan choices on information that is obtained from their own past experience, friends, family, and colleagues. The pattern of results suggests that such information is important. Counterintuitive signs most likely reflect an inverse correlation between some HEDIS ratings (or measures) and attributes employees observe informally.

This article reviews the literature relating quality to consumer choice of health plan or health care provider. Evidence suggests that consumers tend to choose better performing health plans and providers and are responsive to initiatives that provide quality information. The response to quality and quality information differs significantly among consumers and across population subgroups. As such the effect of quality information on choice is apparent in only a relatively small, though perhaps consequential, number of consumers. Despite the wealth of findings on the topic to date, the authors suggest directions for future work, including better assessment of the dynamic issues related to information release, as well as a better understanding of how the response to information varies across different groups of patients.