TESTING THE HMO COMPETITIVE STRATEGY - AN ANALYSIS OF ITS IMPACT ON MEDICAL-CARE RESOURCES

Competitive approaches to health care reform, including managed compet ition, are hypothesized to reduce health care expenditures and the res ources devoted to medical care. Empirical evidence has been limited. T he short- and long-run effects of an experiment closely resembling man aged competition are analyzed. We examine effects on hospitals, techno logy diffusion, physicians, and health insurance premiums. The strateg y reduces capital in hospitals, has minor effects on physicians and te chnology, and has only initial effects on average premiums.