Trends In Managed Care And Managed Competition, 1993–1997

PROLOGUE: John Maynard Keynes once quipped that “[p]ractical men, who believe themselves to be quite exempt from any intellectual influences, are usually the slaves of some defunct economist.” And so it goes with Adam Smith, whose ideas on economic competition and free markets have become so thoroughly entrenched in the fabric of American life that policymakers are loath to abandon them, even when they exact a high sacrifice from society's neediest citizens. In American health care, policymakers must struggle with precisely this kind of conflict: the moral imperative to allow all citizens equal access to health-preserving resources versus the political and historical imperative to maintain fidelity to abstract notions that are powerfully linked to the American heritage. This struggle has given birth to managed care and managed competition, both designed in part to ensure wider distribution of health care resources, while at the same time preserving a measure of autonomy for the private-sector actors who have made health care their livelihood. In this paper Susan Marquis and Stephen Long examine recent trends in employers' embrace of managed care and managed competition. The 1997 data in this paper come from the 1997 Robert Wood Johnson Foundation (RWJF) Employer Health Insurance Survey, part of the RWJF's Community Tracking Study and its State Initiatives in Health Care Reform Project. Both authors have had highly distinguished careers and are expert in employment-based health insurance; they are also widely respected for the large body of health policy research that they have produced over the past two decades. Both are senior economists at RAND in Washington, D.C. ABSTRACT: According to the recent literature, we are experiencing a managed care “revolution,” and managed competition is increasingly being embraced by private- and public-sector policymakers. Using two large employer health insurance surveys, this paper presents new estimates that both confirm and add to our understanding of changes taking place in employment-based health plans. The dramatic shifts in enrollment from indemnity to managed care largely reflect employers' choices about the types of plans to offer. Employees are limited in the number and types of plans from which they can choose. When choice is available, it is generally not governed by managed competition principles.