POTENTIAL EFFECTS OF MANAGED COMPETITION IN RURAL-AREAS

This article assesses the extent to which managed competition could be successful in rural areas. Using 1990 Medicare hospital patient origi n data, over 8 million rural residents were found to live in areas pot entially without provider choice. Almost all of these areas were serve d by providers who compete for other segments of their market. Restric ting use of out-of-State providers would severely limit opportunities for choice. These findings suggest that most residents of rural States would receive cost benefits from a managed competition system if purc hasing alliances are carefully defined, but consideration should be gi ven to boundary issues when forming alliances.