Managed Care and the Growth of Medical Expenditures

David Cutler and Louise Sheiner

No 6140, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We use data across states to examine the relation between HMO enrollment and medical spending. We find that increased managed care enrollment significantly reduces hospital cost growth. While some of this effect is offset by increased spending on physicians, we generally find a significant reduction in total spending as well. In analyzing the sources of hospital cost reductions, we find preliminary evidence that managed care has reduced the diffusion of medical technologies. States with high managed care enrollment were technology leaders in the early 1980s; by the early 1990s those states were only average in their acquisition of new technologies. This finding suggests managed care may have a significant effect on the long-run growth of medical spending.

Date: 1997-08
Note: EH PE
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Published as Cutler, David M. and Louise Sheiner. "Managed Care And The Growth Of Medical Expenditures," Forum for Health Economics and Policy, 1998, v1, Article 4.
Published as Managed Care and the Growth of Medical Expenditures , David M. Cutler, Louise Sheiner. in Frontiers in Health Policy Research, Volume 1 , Garber. 1998

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