The Effect of a Prepaid Group Practice on Children's Medical Care Use and Health Outcomes Compared to Fee-for-Service Care

by R. Burciaga Valdez


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To evaluate differences in medical expenditures and child health outcomes in a prepaid group practice compared with the fee-for-service (FFS) system when both serve comparable populations with the same service benefits, this Note uses data from Seattle participants in the Health Insurance Experiment. No differences in imputed total expenditures were observed for children randomly assigned to a health maintenance organization (HMO) or to FFS plans. Children on cost-sharing FFS plans, however, had fewer medical contacts and received fewer preventive services than those assigned to the HMO. No significant differences in physiologic outcomes (e.g., visual acuity, hemoglobin level) were observed between FFS and HMO children. The results of the experiment neither strongly support nor indict fee-for-service or prepaid care for children.

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