We are grateful to participants in the University of Connecticut Applied Microeconomics Workshop and Industrial organization Workshop for their helpful Com-ments. We also acknowledge the comments of an anony-mous reviewer.
DO HMOS ENCOURAGE PREVENTION? AN ANALYSIS OF ALTERNATIVE HEALTH CARE PLANS
Article first published online: 18 JUL 2008
Contemporary Economic Policy
Volume 20, Issue 4, pages 429–439, October 2002
How to Cite
Miceli, T. J. and Heffley, D. (2002), DO HMOS ENCOURAGE PREVENTION? AN ANALYSIS OF ALTERNATIVE HEALTH CARE PLANS. Contemporary Economic Policy, 20: 429–439. doi: 10.1093/cep/20.4.429
- Issue published online: 18 JUL 2008
- Article first published online: 18 JUL 2008
We examine consumers' choice of preventive care and providers' choice of capacity (which affects the transaction costs of consuming health care) under alternative health care financing plans. We show that consumers choose Pareto-optimal prevention and providers choose optimal capacity under a pure feE-for-service (FFS) plan and under a mixed plan that includes an up-front fee and a fee for service. Under a pure prepaid plan, however, consumers may over- or underconsume prevention. In the former case, capacity restrictions under such a plan (e.g., long office waits, limited options) may be interpreted as a second-best response to overconsumption. We also find that the dollar costs of health care are higher under the prepaid plan. These conclusions cast doubt on some of the presumed advantages of HMOs.