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Estimating Health Expenditure Growth Under Managed Competition: Title and subTitle BreakScience, Simulations, and Scenarios FREE

Robert H. Miller, PhD; Harold S. Luft, PhD
[+] Author Affiliations

Interpretations are those of the authors and not necessarily of the Office of Technology Assessment.

Reprint requests to University of California, San Francisco, Institute for Health Policy Studies, 1388 Sutter St, 11th Floor, San Francisco, CA 94109 (Dr Miller).


JAMA. 1995;273(8):656-662. doi:10.1001/jama.1995.03520320066043
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The estimated impact of health system reform proposals on health expenditures influences the health system reform debate. Health expenditure growth rate (HEGR) estimates are particularly critical because small differences in rates over time create large differences in health expenditures. There currently is no hard scientific basis for estimating the impact of managed care/managed competition legislation and market developments on the HEGR. For the 1994 health system reform debate, the two leading nonpartisan modelers developed qualitative scenarios about future health system developments in which managed care/managed competition would have little or no impact on the HEGR. We conclude that there are alternative plausible scenarios, based on current health system changes interacting with potential legislation, in which managed care/ managed competition will substantially lower the HEGR. We recommend that simulation models should provide a range of estimates that better reflect both market trends and the profound uncertainty about the effects of health system reform.

(JAMA. 1995;273:656-662)

REFERENCES

Pear R.  Second thoughts on health data: Budget Office estimates carry weight (some say too much). New York Times . (May 9) , 1994;:A7.
Miller RH, Luft HS.  Managed care plan performance since 1980: a literature analysis. JAMA . 1994;; 271:1512-1519.
GabelJ, DiCarlo S, Sullivan C, Rice T.  Employersponsored health insurance, 1989. Health Aff (Millwood) . 1990;;9( (3) ):161-175.
Sullivan CB, Miller M, Feldman R, Dowd B.  Employer-sponsored health insurance in 1991. Health Aff (Millwood) . 1992;;11( (4) ):172-185.
KPMG Peat Marwick. Health Benefits in 1993 . Newark, NJ: KPMG Peat Marwick; 1993;.
Gabel J, Formisano R, Lohr B, DiCarlo S.  Tracing the cycle of health insurance. Health Aff (Millwood) . 1991;;10( (4) ):48-61.
Gabel JR.  Perspective: a look at insurance data. Health Aff (Millwood) . 1992;;11( (4) ):186-190.
Miller RH, Luft HS.  Managed care plans: classification, growth, and premium performance. Annu Rev Public Health . 1994;;15:437-459.
Hoy EW, Curtis RE, Rice T.  Change and growth in managed care. Health Aff (Millwood) . 1991;;10 ( (4) ):18-36.
Getzen TE.  Macro forecasting of national health expenditures. Adv Health Econ Health Serv Res . 1990;;11:27-48.
Congressional Budget Office. Effects of Managed Care: An Update . Washington, DC: Congressional Budget Office; 1994;.
Lewin-VHI Inc. The Financial Impact of the Health Security Act . Fairfax, Va: Lewin-VHI Inc; 1993;.
Miller RH, Luft HS. Assessing the Assumptions Behind Health Reform Projections: Cost Savings Due to HMOs . San Francisco: Institute for Health Policy Studies, University of California, San Francisco; 1994;. Report to the Office of Technology Assessment.
Congressional Budget Office. An Analysis of the Managed Competition Act . Washington, DC: Congressional Budget Office; 1994;.
Paringer L. Assessing the Definitions and Projections of National Health Expenditures . Washington, DC: Office of Technology Assessment; 1994;.
Congressional Budget Office. Projections of National Health Expenditures, October 1992 . Washington, DC: Congressional Budget Office; 1992;.
Congressional Budget Office. Managed Competition and Its Potential to Reduce Health Spending . Washington, DC: Congressional Budget Office; 1993;.
Congressional Budget Office. The Potential Impact of Certain Forms of Managed Care on Health Care Expenditures . Washington, DC: Congressional Budget Office; 1992;.
Edlin M.  Purchasing coalitions get a head start on reform. Managed Healthcare News . (July) 1993;; 3(7):45-46.
Pine D.  The state of health care in America: employers. Business Health . 1994;;12(suppl A to No. (3) ):58-62.
Starr B.  Employers give managed competition a new spin. Business Health . 1993;;11( (11) ):42-48.
Tweed V.  Making HMOs compete. Business Health . 1994;;12( (10) ):27-38.
Palsbo SE, Miller VP, Pan L, Bergsten C, Hodges DN. HMO Industry Profile . 1993 ed. Washington, DC: Group Health Association of America; 1993;.
Starr P. The Social Transformation of American Medicine . New York, NY: Basic Books Inc Publishers; 1982;.
Kraus N, Porter M, Ball P. Managed Care: A Decade in Review . Minneapolis, Minn: Interstudy; 1991;. The Interstudy Competitive Edge Special Edition.
 Interstudy. The Interstudy Competitive Edge . Minneapolis, Minn: Interstudy; 1994;.
Shortell SM, Gillies RR, Anderson DA, Mitchell JB, Morgan KL.  Creating organized delivery systems: the barriers and facilitators. Hosp Health Serv Admin . 1993;;38:447-466.
Grant PN.  Evolving health system models. California Hosp . (March/April) 1992;:12-15.
Davidson RJ.  Community care networks: cornerstone of health care reform. J Am Health Policy . 1992;;2( (3) ):12-15.
Grant PN.  Medical practices changing course. California Physician . (September) 1991;:32-38.
Anderson HJ.  Hospitals seek new ways to integrate health care. Hospitals . (April 5) , 1992;;66(7): 26-36.
Ackerman FK.  The movement toward vertically integrated regional health systems. Health Care Manage Rev . 1992;;17:81-88.
Findlay S.  How new alliances are changing health care. Business Health . 1993;;11( (12) ):28-34.
Meyer H.  Fee for service dying as big doctor groups take over L.A. Am Med News . (April 12) , 1993;:1, 6, 8.
Cerne F.  Trading up: the right vehicle for the new integrated terrain. Hosp Health Netw . 1994;; 68( (9) ):32-34.
Findlay S.  Networks of care may serve as a model for health reform. Business Health . 1993;;11 ( (2) ):27-31.
Gillies RR, Shortell SM, Anderson DA, Mitchell JB, Morgan KL.  Conceptualizing and measuring integration: findings from the Health Systems Integration Study. Hosp Health Serv Admin . 1993;; 38:467-489.
Petersen C.  Constructing a health care fortress. Managed Healthcare . 1993;;3( (12) ):1, 32.
Madison DL, Konrad TR.  Large medical group-practice organizations and employed physicians: a relationship in transition. Milbank Q . 1988;;66:240-282.
Fiscus JW.  Primary care docs opt for paycheck, security. Managed Health Care News . 1993;;2( (11) ):1, 34.
Packer-Tursman J.  Why doctors join managed health care. HMO Magazine . (November/December) 1992;:39-45.
Newhouse JP.  An iconoclastic view of health cost containment. Health Aff (Millwood) . 1993;;12 ( (suppl) ):152-171.
Schwartz WB.  The inevitable failure of current cost-containment strategies: why they can provide only temporary relief. JAMA . 1987;;257:220-224.
Ginzberg E.  High-tech medicine and rising health care costs. JAMA . 1990;;263:1820-1822.
Weisbrod BA.  The health care quadrilemma: an essay on technological change, quality of care and cost containment. J Econ Lit . 1991;;24:523-552.
Grumbach K, Lee PR.  How many physicians can we afford? JAMA . 1991;;265:2369-2372.
Ginzberg E.  Physician supply policies and health reform. N Engl J Med . 1992;;268:3115-3118.
Welch WP, Miller ME, Welch HG, Fisher ES, Wennberg JE.  Geographic variation in expenditures for physicians' services in the United States. N Engl J Med . 1993;;328:621-627.
Barer ML, Evans RG, Labelle RJ.  Fee controls as cost control: tales from the frozen north. Milbank Q . 1988;;66:1-64.
Office of Technology Assessment. Pharmaceutical R&D: Risks and Rewards . Washington, DC: US Government Printing Office; 1993;. OTA-H-522.
Enthoven AC.  Why managed care has failed to contain costs. Health Aff (Millwood) . 1993;;12( (3) ): 27-43.
Weiner JP.  Forecasting the effects of health reform on US physician workforce requirement: evidence from HMO staffing patterns. JAMA . 1994;; 272:222-230.
Kronick R, Goodman DC, Wennberg J, Wagner E.  The marketplace in health care reform: the demographic limitations of managed competition. N Engl J Med . 1993;;328:148-152.
Mallory JS.  Strategies for the 1990s. Bests Rev . (April) 1990;:36, 38, 40, 42, 111-112.
Goldsmith J.  Hospital/physician relations: a constraint to health reform. Health Aff (Millwood) . 1993;;12( (3) ):160-169.
Congressional Budget Office. HR1200, American Health Security Act of 1993 . Washington, DC: Congressional Budget Office; 1993;.
Congressional Budget Office. An Analysis of the Administration's Health Proposal . Washington, DC: Congressional Budget Office; 1994;.
Enthoven AC, Singer SJ.  A single-payer system in Jackson Hole clothing. Health Aff (Millwood) . 1994;;13( (1) ):81-94.
Evans RG, Lomas J, Barer ML, et al.  Controlling health expenditures: the Canadian reality. N Engl J Med . 1989;;320:571-577.
US General Accounting Office. Managed Health Care: Effect on Employers' Costs Difficult to Measure . Washington, DC: US General Accounting Office; 1993;.
Schwartz WB, Mendelson DN.  Eliminating waste and inefficiency can do little to contain costs. Health Aff (Millwood) . 1994;;13( (1) ):224-235.
Evans RG.  Tension, compression, and shear: directions, stresses, and outcomes of health care cost control. J Health Polit Policy Law . 1990;;15: 101-128.
Rice T, Brown ER, Wyn R.  Holes in the Jackson Hole approach to health care reform. JAMA . 1993;;270:1357-1362.
Miller RH, Luft HS. Research on the Cost-effectiveness of Managed Care Health Plans: A Literature Analysis . San Francisco: University of California, San Francisco; 1994;. Report to the Office of the Assistant Secretary of Health, US Dept of Health and Human Services.

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Pear R.  Second thoughts on health data: Budget Office estimates carry weight (some say too much). New York Times . (May 9) , 1994;:A7.
Miller RH, Luft HS.  Managed care plan performance since 1980: a literature analysis. JAMA . 1994;; 271:1512-1519.
GabelJ, DiCarlo S, Sullivan C, Rice T.  Employersponsored health insurance, 1989. Health Aff (Millwood) . 1990;;9( (3) ):161-175.
Sullivan CB, Miller M, Feldman R, Dowd B.  Employer-sponsored health insurance in 1991. Health Aff (Millwood) . 1992;;11( (4) ):172-185.
KPMG Peat Marwick. Health Benefits in 1993 . Newark, NJ: KPMG Peat Marwick; 1993;.
Gabel J, Formisano R, Lohr B, DiCarlo S.  Tracing the cycle of health insurance. Health Aff (Millwood) . 1991;;10( (4) ):48-61.
Gabel JR.  Perspective: a look at insurance data. Health Aff (Millwood) . 1992;;11( (4) ):186-190.
Miller RH, Luft HS.  Managed care plans: classification, growth, and premium performance. Annu Rev Public Health . 1994;;15:437-459.
Hoy EW, Curtis RE, Rice T.  Change and growth in managed care. Health Aff (Millwood) . 1991;;10 ( (4) ):18-36.
Getzen TE.  Macro forecasting of national health expenditures. Adv Health Econ Health Serv Res . 1990;;11:27-48.
Congressional Budget Office. Effects of Managed Care: An Update . Washington, DC: Congressional Budget Office; 1994;.
Lewin-VHI Inc. The Financial Impact of the Health Security Act . Fairfax, Va: Lewin-VHI Inc; 1993;.
Miller RH, Luft HS. Assessing the Assumptions Behind Health Reform Projections: Cost Savings Due to HMOs . San Francisco: Institute for Health Policy Studies, University of California, San Francisco; 1994;. Report to the Office of Technology Assessment.
Congressional Budget Office. An Analysis of the Managed Competition Act . Washington, DC: Congressional Budget Office; 1994;.
Paringer L. Assessing the Definitions and Projections of National Health Expenditures . Washington, DC: Office of Technology Assessment; 1994;.
Congressional Budget Office. Projections of National Health Expenditures, October 1992 . Washington, DC: Congressional Budget Office; 1992;.
Congressional Budget Office. Managed Competition and Its Potential to Reduce Health Spending . Washington, DC: Congressional Budget Office; 1993;.
Congressional Budget Office. The Potential Impact of Certain Forms of Managed Care on Health Care Expenditures . Washington, DC: Congressional Budget Office; 1992;.
Edlin M.  Purchasing coalitions get a head start on reform. Managed Healthcare News . (July) 1993;; 3(7):45-46.
Pine D.  The state of health care in America: employers. Business Health . 1994;;12(suppl A to No. (3) ):58-62.
Starr B.  Employers give managed competition a new spin. Business Health . 1993;;11( (11) ):42-48.
Tweed V.  Making HMOs compete. Business Health . 1994;;12( (10) ):27-38.
Palsbo SE, Miller VP, Pan L, Bergsten C, Hodges DN. HMO Industry Profile . 1993 ed. Washington, DC: Group Health Association of America; 1993;.
Starr P. The Social Transformation of American Medicine . New York, NY: Basic Books Inc Publishers; 1982;.
Kraus N, Porter M, Ball P. Managed Care: A Decade in Review . Minneapolis, Minn: Interstudy; 1991;. The Interstudy Competitive Edge Special Edition.
 Interstudy. The Interstudy Competitive Edge . Minneapolis, Minn: Interstudy; 1994;.
Shortell SM, Gillies RR, Anderson DA, Mitchell JB, Morgan KL.  Creating organized delivery systems: the barriers and facilitators. Hosp Health Serv Admin . 1993;;38:447-466.
Grant PN.  Evolving health system models. California Hosp . (March/April) 1992;:12-15.
Davidson RJ.  Community care networks: cornerstone of health care reform. J Am Health Policy . 1992;;2( (3) ):12-15.
Grant PN.  Medical practices changing course. California Physician . (September) 1991;:32-38.
Anderson HJ.  Hospitals seek new ways to integrate health care. Hospitals . (April 5) , 1992;;66(7): 26-36.
Ackerman FK.  The movement toward vertically integrated regional health systems. Health Care Manage Rev . 1992;;17:81-88.
Findlay S.  How new alliances are changing health care. Business Health . 1993;;11( (12) ):28-34.
Meyer H.  Fee for service dying as big doctor groups take over L.A. Am Med News . (April 12) , 1993;:1, 6, 8.
Cerne F.  Trading up: the right vehicle for the new integrated terrain. Hosp Health Netw . 1994;; 68( (9) ):32-34.
Findlay S.  Networks of care may serve as a model for health reform. Business Health . 1993;;11 ( (2) ):27-31.
Gillies RR, Shortell SM, Anderson DA, Mitchell JB, Morgan KL.  Conceptualizing and measuring integration: findings from the Health Systems Integration Study. Hosp Health Serv Admin . 1993;; 38:467-489.
Petersen C.  Constructing a health care fortress. Managed Healthcare . 1993;;3( (12) ):1, 32.
Madison DL, Konrad TR.  Large medical group-practice organizations and employed physicians: a relationship in transition. Milbank Q . 1988;;66:240-282.
Fiscus JW.  Primary care docs opt for paycheck, security. Managed Health Care News . 1993;;2( (11) ):1, 34.
Packer-Tursman J.  Why doctors join managed health care. HMO Magazine . (November/December) 1992;:39-45.
Newhouse JP.  An iconoclastic view of health cost containment. Health Aff (Millwood) . 1993;;12 ( (suppl) ):152-171.
Schwartz WB.  The inevitable failure of current cost-containment strategies: why they can provide only temporary relief. JAMA . 1987;;257:220-224.
Ginzberg E.  High-tech medicine and rising health care costs. JAMA . 1990;;263:1820-1822.
Weisbrod BA.  The health care quadrilemma: an essay on technological change, quality of care and cost containment. J Econ Lit . 1991;;24:523-552.
Grumbach K, Lee PR.  How many physicians can we afford? JAMA . 1991;;265:2369-2372.
Ginzberg E.  Physician supply policies and health reform. N Engl J Med . 1992;;268:3115-3118.
Welch WP, Miller ME, Welch HG, Fisher ES, Wennberg JE.  Geographic variation in expenditures for physicians' services in the United States. N Engl J Med . 1993;;328:621-627.
Barer ML, Evans RG, Labelle RJ.  Fee controls as cost control: tales from the frozen north. Milbank Q . 1988;;66:1-64.
Office of Technology Assessment. Pharmaceutical R&D: Risks and Rewards . Washington, DC: US Government Printing Office; 1993;. OTA-H-522.
Enthoven AC.  Why managed care has failed to contain costs. Health Aff (Millwood) . 1993;;12( (3) ): 27-43.
Weiner JP.  Forecasting the effects of health reform on US physician workforce requirement: evidence from HMO staffing patterns. JAMA . 1994;; 272:222-230.
Kronick R, Goodman DC, Wennberg J, Wagner E.  The marketplace in health care reform: the demographic limitations of managed competition. N Engl J Med . 1993;;328:148-152.
Mallory JS.  Strategies for the 1990s. Bests Rev . (April) 1990;:36, 38, 40, 42, 111-112.
Goldsmith J.  Hospital/physician relations: a constraint to health reform. Health Aff (Millwood) . 1993;;12( (3) ):160-169.
Congressional Budget Office. HR1200, American Health Security Act of 1993 . Washington, DC: Congressional Budget Office; 1993;.
Congressional Budget Office. An Analysis of the Administration's Health Proposal . Washington, DC: Congressional Budget Office; 1994;.
Enthoven AC, Singer SJ.  A single-payer system in Jackson Hole clothing. Health Aff (Millwood) . 1994;;13( (1) ):81-94.
Evans RG, Lomas J, Barer ML, et al.  Controlling health expenditures: the Canadian reality. N Engl J Med . 1989;;320:571-577.
US General Accounting Office. Managed Health Care: Effect on Employers' Costs Difficult to Measure . Washington, DC: US General Accounting Office; 1993;.
Schwartz WB, Mendelson DN.  Eliminating waste and inefficiency can do little to contain costs. Health Aff (Millwood) . 1994;;13( (1) ):224-235.
Evans RG.  Tension, compression, and shear: directions, stresses, and outcomes of health care cost control. J Health Polit Policy Law . 1990;;15: 101-128.
Rice T, Brown ER, Wyn R.  Holes in the Jackson Hole approach to health care reform. JAMA . 1993;;270:1357-1362.
Miller RH, Luft HS. Research on the Cost-effectiveness of Managed Care Health Plans: A Literature Analysis . San Francisco: University of California, San Francisco; 1994;. Report to the Office of the Assistant Secretary of Health, US Dept of Health and Human Services.
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