This paper investigates the impact of Medicare HMO penetration on the medical care expenditures incurred by Medicare fee-for-service (FFS) enrollees. The researchers found that increasing penetration leads to reduced spending on FFS beneficiaries. In particular, their estimates suggest that the increase in HMO penetration during the study period led to approximately a 7% decline in spending per FFS beneficiary. Similar models for various measures of health care utilization find penetration-induced reductions consistent with their spending estimates. The findings suggest their estimated spending reductions are driven by beneficiaries who have at least one chronic condition.
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