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Article: Do HMOs encourage prevention? An analysis of alternative health care plans
- Article from:
- Contemporary Economic Policy
- Article date:
- October 1, 2002
- Author:
CopyrightCopyright Western Economic Association Oct 2002. Provided by ProQuest LLC. (Hide copyright information)
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We examine consumers' choice of preventive care and providers' choice of capacity (which affects the transaction costs of consuming health care) under alternative health care financing plans. We show that consumers choose Pareto-optimal prevention and providers choose optimal capacity under a pure fee-for-service (FFS) plan and under a mixed plan that includes an up-front fee and a fee for service. Under a pure prepaid plan, however, consumers may over- or underconsume prevention. In the former case, capacity restrictions under such a plan (e.g., long office waits, limited options) may be interpreted as a second-best response to overconsumption. We also find that the dollar costs of health ...