: The use of capitation by HMOs gives providers an incentive to reduce costs, possibly by lowering the services provided, while HMO competition for enrollees gives these plans an incentive to increase the services they provide. Ideally, these countervailing incentives lead plans to make efficient choices about services and care quality. Empirical research has now clearly demonstrated the success of HMOs in reducing the cost of inpatient care, especially through lowering hospitalizations. Work by Melnick and colleagues (1992), Gaskin and Hadley (1997), Rosko (2001), and others suggests that hospital prices and average costs are lower in the presence of large managed care penetration in the market. But whether HMOs have any perceivable effects on the health status of older adults and, if so, the nature of such effects, is still largely an open question. The goal of the proposed study is to analyze the effects of enrollment in a managed care plan on the health of near-elderly adults. The candidate will work toward this goal using information gathered in the 1994, 1996, 1998, and 2000 waves of the Health and Retirement Survey (HRS). The three specific aims of the study are to: 1) Estimate health production functions for several self-reported measures of health, using well-specified models that account for the nature of an individual's health plan (i.e., whether it is an HMO, a PPO, or a FFS plan); 2) While estimating these, control for the possible endogeneity of several right-hand-side variables, particularly plan type, which occurs because many near-elders choose their insurance coverage from a menu of plans offered by either their current or former employer; and 3) Compare and contrast the effects of HMOs, PPOs, and FFS plans on the health of near-elders.
