Managed Care, Medical Technology, and Health Care Cost Growth: A Review of the Evidence

The evidence suggests that managed care, as currently practiced, may reduce the rate of cost growth, however, managed care is unlikely to prevent the share of gross domestic product spent on health care from rising unless the cost-increasing nature of new technology changes.

Abstract

Although managed care plans reduce health care expenditures at any point in time, less is known about whether such plans control health care cost growth. Because use of new medical technology is an important determinant of cost growth, the impact of managed care on utilization of medical technology will largely determine whether managed care can reduce expenditure growth to sustainable levels. This article reviews the literature relating medical technology to cost growth and the literature examining the impact of managed care on either cost growth or on the diffusion of medical technology. Studies that examine plan-level data often reach different conclusions than studies that examine market-level data. The evidence suggests that managed care, as currently practiced, may reduce the rate of cost growth. However, managed care is unlikely to prevent the share of gross domestic product spent on health care from rising unless the cost-increasing nature of new technology changes.