Summary

Many employers believe that, in principle, managed care plans save money, but little empirical evidence exists to support this view; most cost studies do not adequately control for key factors affecting costs, such as employees' age or health status. Consequently, the cost savings suggested by many studies may be due to the fact that managed care plans tend to attract younger and healthier employees rather than to cost containment. In addition, plan comparisons often do not account for differences in benefits provided. Little research has been done on employer cost containment among the newer HMOs using doctors in independent practice associations, preferred provider networks, or the managed care hybrids. Some managed care plans have a potential for cost savings. Cost containment efforts in managed care largely involve controls on the use of expensive medical services. Restrictions on employees' choice of doctors is viewed as the main barrier to employee acceptance of network-based managed care plans. To improve their ability to assess plans, employers are increasingly asking managed care plans for more information on costs, outcomes, use rates, and enrollee satisfaction. Nearly all HMOs' report employer requests for these data, and local employer coalitions are working to enhance the development of this information.

GAO found that: (1) the proportion of private-sector employees enrolled in managed care plans increased from 5 percent in 1980 to 55 percent in 1992; (2) managed care cost control efforts involve alternative financing methods and limitations on the use of expensive medical services; (3) employees are concerned about restrictions on the choice of health care providers; (4) enrollment trends show that many employees prefer more flexibility than is afforded by traditional health maintenance organizations (HMO) and are willing to pay additional out-of-pocket costs to receive care from the provider of their choice; (5) some evidence suggests that patients rate managed care health services lower than fee-for-service physician services; (6) employers' experiences with managed care costs vary; and (7) performance measures need to be developed that will allow employers to make informed decisions about health care plans and providers.