Rather, the study by the National Bureau of Economic Research says that HMO premiums are lower than traditional health coverage because HMOs benefit from a lower incidence of disease among generally healthier members – and pay lower prices for the same medical treatments – at least in Massachusetts.
The study found that about half of the HMO cost savings come from lower incidences and another 45% because HMOs paid lower prices for the same treatment, according to BNA.
The study, “Enrollee Mix, Treatment Intensity, and Cost in Competing Indemnity and HMO Plans”, was summarized in the November 2000 issue of The NBER Digest. The data comes from 200,000 Massachusetts state and local employees and family members covered by the Group Insurance Commission of Massachusetts.
These members had a choice between a traditional plan and an HMO, whose premiums were about 35% less than the alternative.
The researchers examined cost differences in treating eight common medical conditions: heart attacks, cancers (breast, colon, cervical, and prostate), diabetes, and live births.
The procedures selected to treat a particular condition did not vary greatly between the two programs, and explained only a small part of the cost difference. In fact, the study found the indemnity plan offered more intense treatment only for births.
The NBER research paper (Working Paper No. 7832) is available at http://www.nber.org .