Hmos and Health Externalities: A Local Public Good Perspective

Abstract

This article introduces a Health Maintenance Organization (HMO) model that characterizes HMO decisions on enrollment, utilization levels, and quality. Facing global budgets dependent on revenue raising capacity, HMOs must determine standards of care and the corresponding premiums to cover costs. Revenues are allocated among HMO providers by gatekeepers who are often subject to strict utilization controls. Our model identifies various uncompensated health and pecuniary externalities that may result from patient disenrollments, thereby affecting treatment costs. As a result of these externalities HMOs may provide less than socially efficient levels of care; and they may also enroll less than socially efficient numbers of members. The model also predicts that HMOs may promote socially cost inefficient treatment options for conditions where multiple options are available.

Are HMOs bad for health maintenance?

“…On the other hand, supply-side effects could cut in the opposite direction if patient turnover reduces the attractiveness of these future cost savings. In this regard, Goodman and Stano [36] have noted that high disenrollment rates cause HMOs to under appreciate the benefits of their treatment decisions, leading to an under provision of treatment relative to the socially optimal level. Demand-side factors would come in to play if HMO enrollees have differential access to care and/or out-of-pocket expenses.…”

“…For empirical studies that seek to develop forecast equations, these problems are a source of great concern. (p. 36) As a growing body of literature attests [39][40][41], estimation with weak instruments can lead to quite serious bias and errors in inference. Fortunately, we are able to obtain good instruments in this study.…”

Behavior in the Market for U.S. Army Recruits: PLS and 2SPLS Analysis of the Impact of Health Insurance Unavailability in the Non-Military Sector, 2003-2007

“…This attention covers a broad spectrum of topics, ranging from hospital costs, profitability, and efficiency issues to medical malpractice to physician staffing to health care inflation (Chirikos, 1998-99;Daniels & Gatsonis, 1999;Given, 1996;Glied, 2003;Goodman & Stano, 2000;Jordan, 2001;Karsten, 1995;Okunade, 2001Okunade, , 2003Olsen, 1996). These issues notwithstanding, the issue that has received the greatest growth in attention is that of health insurance coverage (Bharmal & Thomas, 2005;Cebula, 2006;Cutler, 1994;Dushi & Honig, 2003;Frick & Bopp, 2005;Gruber, 2003;Harris & Keane, 1999;Kronick & Gilmer, 2002;Newhouse, 1994;Nyman, 2003;Swartz, 2001Swartz, , 2003.…”

Does a Lack of Health Insurance Elicit an Increase in the Rate of Voluntary Military Enlistment in the U.S.? The “Military Health Care Magnet Hypothesis,” 1974-2007

“…The topics debated range from hospital costs, profitability, and efficiency issues to medical malpractice to physician staffing to the health care inflation rate (Chirikos, 1998-99;Daniels and Gatsonis, 1999;Given, 1996;Glied, 2003;Goodman and Stano, 2000;Hart et al, 1997;Jordan, 2001;Karsten, 1995;Koch, 1992;Okunade, 2001Okunade, , 2003Olsen, 1996).One of the most important and contentious issues in U.S. healthcare that has received the greatest increase in attention in recent years is health insurance coverage (Bharmal and Thomas, 2005;Bundorf and Pauly, 2002;Cebula, 2006;Dushi and Honig, 2003;Frick and Bopp, 2005;Gruber, 2003;Harris and Keane, 1999;Holahan et al, 2003;Kronick and Gilmer, 2002;Marstellar et al, 1998;de Meza, 1983;Newhouse, 1994;Nyman, 2003;Swartz, 2001;.…”