Managed Care and the Competitive Market in Health Care

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Abstract
THE STRENGTHENING of competitive market forces in recent years deserves some of the credit for the recent marked deceleration in the annual increases in national health care expenditures. But several informed analysts believe that the medical insurance premium cycle is once again turning up, which would be a prelude to higher total expenditures.1 The recent moderation in annual cost increases reflected, in the first instance, the price-focused efforts of large corporate enterprises to moderate their health care benefit costs; the increasing surpluses in hospital beds and underemployed specialists that enabled the rapidly growing managed care companies to negotiate substantial discounts with key providers, physicians, and hospitals; the enthusiasm of the booming stock market to finance the expansion of the rapidly growing managed care sector; and the increasing preference of the sick elderly to be treated at home rather than in nursing homes, which has fueled a large expansion in

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