Private Payers Serving Individuals with Disabilities and Chronic Conditions. G. Summary and Conclusions


Four major conclusions can be drawn from this chapter. First, it appears that individuals with potentially disabling chronic conditions are not homogeneous with respect to the type of insurance they choose. We found that enrollment into different insurance types was systematically related to patient characteristics. Being male and younger increased the likelihood of choosing managed care as opposed to indemnity coverage in both firms. Early retirees and persons having both mental and physical disabling conditions, rather than just a physical condition, were less likely to choose managed care. Living in a MSA increased the probability of enrollment in the POS option in Employer A, while using more outpatient services in the past or having a child with a potentially disabling chronic condition in the family lowered the probability of HMO enrollment.

Second, differences in enrollee characteristics among plans need to be accounted for in order to identify the effect of managed care on health care utilization and expenditures. Higher utilization and expenditures in one insurance type or another may not reflect differences in the plans themselves, but rather underlying differences in enrollees. Statistical methods should be used when possible to control for two categories of confounding influences: patient characteristics available in databases of enrollees and unmeasured factors systematically related to insurance choice (e.g., causes of adverse selection). For Employer A, we found that utilization and expenditures were generally lower, on average, in the POS plan without controlling for any confounders. After adjusting for population characteristics, fewer differences emerge, and those that remain are generally smaller. For example, on average POS enrollees had 15 prescriptions filled in 1995, whereas indemnity plan enrollees filled 20. After controlling for confounders, this difference of five prescriptions was reduced to 3.6.

For Employer B we also found that simple descriptive comparisons resulted in mean utilization and expenditures in 1995 that were generally lower in the HMO plan than in the indemnity plan. In contrast to Employer A, after controlling for confounders, more differences remain (hospital admissions, outpatient visits, outpatient expenditures and total expenditures). However, as with Employer A, those that do remain are generally smaller in magnitude.

Third, managed care does not have a uniform effect. Rather, its impact varied with the type of health care services and payments being studies. Choosing managed care insurance instead of indemnity insurance did not result in different levels for some outcomes (such as inpatient payments), but did for others (outpatient visits). The effect of managed care also differed across the employers. Overall, the difference in use and expenditures between managed care and indemnity plans was greater for Employer B than for Employer A. This result is not surprising since the coverage levels and costs of the alternative options were more similar in Employer A than in Employer B.

Fourth, there is some evidence consistent with adverse selection among members of Employee A's health plans but not among those in Employer B's plans. In Employer B's plans, contrary to expectations, we found some evidence that those having higher expenditures based upon unobservable confounders were also more likely to have joined the HMO plan. This is probably due to the relatively high price of the indemnity plan. People with potentially disabling chronic conditions may have viewed the indemnity plan as too expensive compared to the HMO options.

View full report


"privpay.pdf" (pdf, 3.64Mb)

Note: Documents in PDF format require the Adobe Acrobat Reader®. If you experience problems with PDF documents, please download the latest version of the Reader®