From a recent reseach study published by Inquiry ($$) using California data. A little wordy but worth a read:
Our findings show that manged care appears to have lost its ability to significantly reduce the rate of increase in hospital costs at least in the more competitive markets in which it was most effective at holding down costs in the early to mid-1990s. Our results from the early 1990s are consistent with both theory and prior evidence showing the combination of more competitive hospital markets and high managed care penetration resulted in price competition that effectively held down costs. Our more recent data reveal that these relationships changed in important ways since the managed care backlash. High managed care penetration no longer is associated with lower cost growth — and may even be associated with higher cost growth — in the most competitive markets, indicating that the synergistic effect between managed care penetration and hospital competition to hold down hospital cost inflation no longer exists.
We are witnessing a shifting of the battle ground over the cost of health care. Not sure whether anyone but scholars and health care wonks realize the growing impact of this change in the market’s ability to deliver effective economic checks and balances in the private health care sector.
