TAILIEUCHUNG - Competition among Health Maintenance Organizations

As . Surgeon General and Chair of the National Prevention, Health Promotion, and Public Health Council (National Prevention Council), I am honored to present the nation’s first ever National Prevention and Health Promotion Strategy (National Prevention Strategy). This strategy is a critical component of the Affordable Care Act, and it provides an opportunity for us to become a more healthy and fit nation. The National Prevention Council comprises 17 heads of departments, agencies, and offices across the Federal government who are committed to promoting prevention and wellness. The Council provides the leadership necessary to engage not only the federal government but. | Competition among Health Maintenance Organizations William E. Encinosa III University of Michigan Ann Arbor MI 48109 David E. M. Sappington University of Florida Gainesville FL 32611 We develop a model of competition among health maintenance organizations HMOs to analyze the effects of market power scale economies and asymmetric knowledge of health risk on market outcomes. We find that competition among HMOs may but need not ensure socially preferred outcomes. Market power or scale economies can sometimes admit socially preferred outcomes when they would otherwise not arise. Asymmetric knowledge of health risk may or may not be constraining. When it is constraining a variety of patterns of incomplete health insurance can arise along with excessive or insufficient treatment and preventive care for either high-risk or low-risk individuals. 1. Introduction Health maintenance organizations HMOs are now firmly established as major providers of both health insurance and health care Therefore the nature and consequences of market competition among HMos warrant careful investigation. We analyze a simple model of HMo competition in this paper. our model admits a preliminary assessment of how market power may influence outcomes in health-care markets. Such an assessment We are grateful for the helpful comments and suggestions provided by Jim Burgess Jacques Cremer Jon Hamilton Richard Hirth Albert Ma Daniel Spulber Ted Stefos an anonymous coeditor and two anonymous referees and participants of the Second BiAnnual Conference on the Industrial Organization of Health Care held in Boston in September 1995. We also thank Rajiv Sharma for valuable research assistance. Support from the . Department of Veterans Affairs and the Robert Wood Johnson Foundation is gratefully acknowledged. 1. Winslow and Anders 1993 report that more than 41 000 000 Americans were enrolled in HMOs as of 1993. 1997 Massachusetts Institute of Technology. Journal of Economics Management .

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