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February 1991, Vol. 114,
No. 2
Thomas P. Burke and Rita S. Jain
A fter a decade of growth, nontraditional health care plans such as health maintenance organizations and preferred provider organizations have emerged as viable alternatives to long-established fee-for-service plans. Virtually nonexistent 10 years earlier, these newer arrangements covered one-fourth of all full-time participants in employer-financed health care benefit plans in medium and large private establishments in 1989.
This development is in part a response to rapid escalation in health care costs as a result of both increases in the prices of medical services and the introduction of expensive new ways of diagnosing and treating illness. From 1979 to 1989, the Consumer Price Index (CPI) for medical care products and services increased 119 percent, compared with a 64-percent rise in the CPI for all goods and services. During the same timespan, the percent of gross national product devoted to medical care rose from 8.6 percent to 11.4 percent.
The response to rising health care costs over the last decade has taken a number of forms. By introducing alternative health care plans, employers are providing employees with a choice as to the type and extent of coverage that best meets individual needs. Alternative plans emphasize preventive care and out-of-hospital services and provide incentives for receiving care at designated locations. Another form of response to rising health care costs has been the introduction of cost control features in traditional health care plans. These features are intended to limit the use of medical care facilities when such use is not considered necessary.
This excerpt is from an article published in the February 1991 issue of the Monthly Labor Review. The full text of the article is available in Adobe Acrobat's Portable Document Format (PDF). See How to view a PDF file for more information.
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