Health Outcomes for Adults in Prepaid and Fee-for-Service Systems of Care

Results from the Health Insurance Experiment

by John E. Ware, Robert H. Brook, William H. Rogers, Emmett B. Keeler, Allyson Ross Davies, Cathy D. Sherbourne, George A. Goldberg, Patricia Camp, Joseph P. Newhouse


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While health maintenance organizations (HMOs) have lower medical costs than fee-for-service plans with the same benefits, it has not been clear whether the cost reductions in HMOs, achieved largely by reductions in hospital admissions, have adverse effects on health. This study addresses this important issue for nonaged adults. It describes the RAND Health Insurance Experiment, including the sample and methods of analysis. The findings indicate that the nonpoor suffer no harm to health through participation in an HMO and their enrollment should be encouraged. Low-income people who have health problems when they join an HMO appear to be worse off at the HMO compared with a fee-for-service plan.

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