The University of North Carolina at Pembroke
MPM 574--Health Economics
Practice Questions--Chapter 9  Answers

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 1.  What barriers did traditional fee-for-service medicine create to restrain the growth of HMOs prior to 1973?
denying hospital privileges to HMO physicians. p. 208
excluding HMO physicians from medical societies.
pushing for state legislation that forced HMOs to accept any physician (any willing provider), requiring HMOs to be nonprofit, or prohibiting HMOs from advertising (which favors the established providers at the expense of the new provider).
discriminatory use of Certificates of Need against HMO hospitals

 2.  What legislative, economic, and judicial developments occurred from 1975 to 1985 that encouraged the growth of HMOs and competition in the health care markets?  When did HMOs experience their greatest growth spurt?
Growth of HMOs: mainly due to the HMO Act of 1973.  Also, revision of Public Law  93-641 in 1979, which reduced state legislatures' abilities to restrict HMOs. p. 210
Recession of 1981 forced employers to be more cost conscious.  Reduced marginal tax rates reduced the attractiveness of fringe benefits vs. take-home pay.
Supreme Court's 1982 decision that medicine could be subject to anti-trust laws p. 214

 3.  How are HMOs similar to PPOs?  How do they differ?
Similarities: restricted panel of providers, incentive for patient to use less treatment.
Differences: HMPs are capitated, PPOs are fee-for-service.  Traditional HMOs have a closed panel of providers, PPOs try to get as many providers as possible to sign up with them.  p. 218

 4.  Regarding the quality of care provided by HMOs and fee-for-service systems, how did John Ware's 1996 study force people to reinterpret Miller and Luft's 1994 study?
Miller and Luft's meta-analysis said that the average person in an HMO does as well or better than the average person in fee-for-service.  Ware found that the benefits are not uniform across all patients.  Specifically, Ware found that the poor and the elderly did better under fee-for-service.

 5.  "HMOs are losing their competitive edge.  Fee-for-service costs are almost the same as HMOs' costs."  Would Wickizer and Feldstein agree that HMOs are losing their impact?  How would they interpret this finding?
No, they would not agree.  They would say that HMOs have a major effect on the markets, but we do not see a major price difference between HMOs and fee-for-service because the market has become very competitive.  There is a "spill-over" effect of lower HMO prices on fee-for-service prices.  They noticed that when HMOs are present in a market, prices are lower.
(Don't ignore the 1984 RAND study.)

last updated April 2, 2002, by Jim Frederick
copyright 2002 Jim Frederick