Frontiers in health policy research.

• Position: Economics of health plans, Medicare and the pharmaceutical industry

Nearly 100 representatives of foundations, government agencies, the U.S. Congress, and the corporate sector gathered in Washington on June 5 for the NBER's first annual conference on "Frontiers in Health Policy Research." Alan M. Garber, director of the NBER's Health Care program and a professor at Stanford University, chose the following NBER research studies for discussion:

David M. Cutler, NBER and Harvard University, and Louise Sheiner, Council of Economic Advisers, "Managed Care and the Growth of Medical Expenditures"

Alan M. Garber, Mark B. McClellan, and Thomas E. MaCurdy, NBER and Stanford University, "Medicare Beneficiaries with Persistently High Expenditures: Identification and Policy Implications"

David M. Cutler, and Richard J. Zeckhauser, NBER and Harvard University, "Adverse Selection in Health Insurance"

Ernst R. Berndt, NBER and MIT; Iain M. Cockburn, NBER and University of British Columbia; Douglas L. Cocks, Eli Lilly and Company; Arnold Epstein, M.D., Harvard Medical School; and Zvi Griliches, NBER and Harvard University, "Is Drug Price Inflation Different for the Elderly?"

Laurence C. Baker, NBER and Stanford University, and Sharmila Shankarkumar, "Managed Care Spillovers in Medicare, 1990-94"

Cutler and Sheiner examine the relation between HMO enrollment and medical spending. They find that managed care reduces the growth of hospital costs. While some of this effect is offset by increased spending on physicians, there is generally a significant reduction in total spending as well. Second, preliminary evidence shows that managed care has reduced the diffusion of medical technologies. States with high enrollment in managed care were technology leaders in the early 1980s; by the early 1990s, those states were only average in their acquisition of new technologies. This suggests that managed care may have a significant effect on the long-run growth of medical costs.

Garber and his coauthors present information about the distribution of Medicare expenditures among beneficiaries in specific years, along with new evidence on the extent to which Medicare payments for the care of individual beneficiaries persist over long time periods. Their analysis is based on a longitudinal population of Medicare enrollees from 1987 to 1995. They find that high-cost users accounted for a disproportionate share of the growth of Medicare Part A (hospital) payments during this period, but that changes in Medicare Part B payments were driven...