ABSTRACT
This chapter describes managed care with particular attention to the distinctive combination of insurance; also its cost-cutting potential and care exemplified by health maintenance organizations (HMOs) and similar organizations. HMOs appear to overcome the information problems inherent in fee-for-service (FFS) health care markets that ordinary insurance coverage may exacerbate. The chapter explores the market effects of managed care on providers, insurers, and the adoption of new health care technology. The chapter addresses the indirect effects of managed care through the market mechanism in comparative effects. The chapter also discusses the impact of HMOs/ preferred provider organizations (PPOs) on hospital markets which include the provider and health insurance markets. The passage of PPACA in 2010 is also creating uncertainties in both private and public health insurance markets. The enormous task facing health economists, policy analysts, and plan managers is to innovate and evaluate delivery models that promote a better balance between costs and quality.
