Health Maintenance Organizations and the Rationing of Medical Care

vH . ,EALTH MAINTENANCE ORGANIZATIONS (HMOS), with their capitation payments and contractual obligations to provide services, present a set of economic incentives that depart significantly from those of the conventional fee-for-service medical care system. It might be expected that these incentive differences will result in different approaches to the allocation of medical resources. Furthermore, these allocation or rationing mechanisms might have ethical implications because of the differential impact on various socioeconomic groups. This paper will address a series of questions arising from the differences between prepaid and fee-for-service systems. The first section will examine the incentives under each system. In doing so, it will focus on incentives to the enrollee or patient, to the organization, and to providers within the system. This discussion will highlight the conflicting incentives inherent in various arrangements. The second section will examine how these incentives and conflicts may be dealt with in terms of the rationing or allocation of resources. The third section will expand the analysis to consider the probable effects of different systems with respect to various socioeconomic groups. This discussion will focus on both the microquestion of the impact of