Competitive Effects of HMOs: A Review of the Evidence

Despite the major methodological strides that have been made in the study of the competitive impact of HMOs and the considerable information gained from case studies, the formulation of substantive conclusions relating to HMO market penetration is in its infancy. In this review of recent studies of the competitive impact of HMOs, which concentrates on the econometric evidence, the authors found several anomalies concerning HMO impact in the market for hospital services, and make suggestions for methodological improvements. They introduce the notion of the role of employers in the insurance purchase decision as a key element in developing a complete model of health plan choice. They conclude with a proposal for a research agenda for studying the growing impact of HMOs on traditional health care coverage. (Summer 1985)