Frontiers in Health Policy Research.

The NBER's fifth annual conference on "Frontiers in Health Policy Research," organized by Alan M. Garber, took place on June 7 in Bethesda, Maryland. The program was:

Jeanette Chung, University of Chicago, and David Meltzer, NBER and University of Chicago, "Effects of Competition under Prospective Payment on Hospital Costs among High and Low Cost Admissions: Evidence from California, 1982-1993" (NBER Working Paper No. 8069)

John Cawley and Catherine McLaughlin, University of Michigan, and Michael Chernew, NBER and University of Michigan, "HMO Participation in Medicare Managed Care"

Frank R. Lichtenberg, NBER and Columbia University, "The Effect of Medicare on Health Care Utilization and Outcomes"

Mark Pauly, NBER and University of Pennsylvania, and Bradley Herring, University of Pennsylvania, "Gutting Taxes for Insuring: Options and Effects of Tax Credits for Health Insurance" and "Expanding Coverage Via Tax Credits: Trade-Offs and Outcomes"

Frank A. Sloan, NBER and Duke University, "Hospital Ownership Conversion: Defining the Appropriate Public Oversight Role"

Meltzer and Chung use data from California in 1983 and 1993 on hospital charges and cost-to-charge ratios to examine the effects of competition on costs. They consider both high and low cost admissions and their costs before and after the establishment of the Medicare Prospective Payment System (PPS). Comparing persons above and below age 65, they find that competition is associated with increased costs in both age groups before PPS, but decreased costs afterwards. This is especially true among those over age 65 with the highest costs. The authors conclude that the combination of competition and prospective payment systems may result in incentives to selectively reduce spending among the most expensive patients. This implies the need to carefully monitor outcomes for the sickest patients under prospective payment systems in competitive environments.

Many health maintenance organizations (HMOs) have exited the market for Medicare managed care; since 1998 the number of participating plans has fallen from 346 to 174. Cawley, Chernew, and McLaughlin study how the equilibrium number of HMOs participating in Medicare managed care markets varies with the Health Care Financing Administration (HCFA) capitation payment. They have data from virtually every county in the continental United States, plus the District of Columbia, from 1993-2001. The authors find that in 2001, only 12.3 percent of...