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Several analysts have proposed adding adjusters based on health status and prior utilization to the adjusted average per capita cost formula. The authors estimate how well such adjusters predict annual medical expenditures among non-elderly adults. Both measures substantially improve on the variables currently used. If only health measures are added, 20-30 percent of the predictable variance is explained; if only prior use is added, more than 40 percent is explained; if both are added, about 60 percent is explained. The results support including some measure of use in the formula until better health measures are developed.

Does free medical care lead to better health than insurance plans that require the patient to shoulder part of the cost? In an effort to answer this question, we studied 3958 people between the ages of 14 and 61 who were free of disability that precluded work and had been randomly assigned to a set of insurance plans for three or five years. One plan provided free care; the others required enrollees to pay a share of their medical bills. As previously reported, patients in the latter group made approximately one-third fewer visits to a physician and were hospitalized about one-third less often. For persons with poor vision and for low-income persons with high blood pressure, free care brought an improvement (vision better by 0.2 Snellen lines, diastolic blood pressure lower by 3 mm Hg); better control of blood pressure reduced the calculated risk of early death among those at high risk. For the average participant, as well as for subgroups differing in income and initial health status, no significant effects were detected on eight other measures of health status and health habits. Confidence intervals for these eight measures were sufficiently narrow to rule out all but a minimal influence, favorable or adverse, of free care for the average participant. For some measures of health in subgroups of the population, however, the broader confidence intervals make this conclusion less certain.

In a previous comparison of persons between 14 and 62 years of age randomly assigned to receive care through a fee-for-service system (n = 784) or through a health maintenance organization (HMO) (n = 738) in Seattle, Washington, persons in the HMO had much lower hospital expenditures and admissions, more bed days, a higher prevalence of serious symptoms, and less satisfaction with care. We report an examination of 20 additional health status measures. Our results are consistent with a hypothesis of no differences in health status measures between the two systems. In addition, a comparison of nine health practices between the systems also indicated no overall differences. Most physiologic measures and health practices for a typical person were not affected by care received through the fee-for-service system or the HMO. However, we are less certain of this result in specific subgroups, such as persons of lower income initially at elevated risk, because confidence intervals are necessarily wider. We conclude that the cost savings achieved by this HMO through lower hospitalization rates were not reflected in lower levels of health status.

In a randomized trial of the effects of medical insurance on spending and the health status of the nonaged, we previously reported that patients with limited cost sharing had approximately one-third less use of medical services, similar general self-assessed health, and worse blood pressure, functional far vision, and dental health than those with free care. Of the 20 additional measures of physiological health studied here on 3,565 adults, people with cost sharing scored better on 12 measures and significantly worse only for functional near vision. People with cost sharing had less worry and pain from physiological conditions on 33 of 44 comparisons. There were no significant differences between plans in nine health practices, but those with cost sharing fared worse on three types of cancer screening and better on weight, exercise, and drinking. Overall, except for patients with hypertension or vision problems, the effects of cost sharing on health were minor.

Do children whose families bear a percentage of their health care costs reduce their use of ambulatory care compared with those families who receive free care? If so, does the reduction affect their health? To answer these questions, 1,844 children aged 0 to 13 years were randomly assigned (for a period of 3 or 5 years) to one of 14 insurance plans. The plans differed in the percentage of their medical bills that families paid. One plan provided free care. The others required up to 95% coinsurance subject to a +1,000 maximum. Children whose families paid a percentage of costs reduced use by up to one third. For the typical child in the study, this reduction caused no significant difference in either parental perceptions of their child's health or in physiologic measures of health. Confidence intervals are sufficiently narrow for most measures to rule out the possibility that large true differences went undetected. Nor were statistically significant differences observed for children at risk of disease. Wider confidence intervals for these comparisons, however, mean that clinically meaningful differences, if present, could have been undetected in certain subgroups.

To determine whether health outcomes in a health maintenance organisation (HMO) differed from those in the fee-for-service (FFS) system, 1673 individuals ages 14 to 61 were randomly assigned to one HMO or to an FFS insurance plan in Seattle, Washington for 3 or 5 years. For non-poor individuals assigned to the HMO who were initially in good health there were no adverse effects. Health outcomes in the two systems of care differed for high and low income individuals who began the experiment with health problems. For the high income initially sick group, the HMO produced significant improvements in cholesterol levels and in general health ratings by comparison with free FFS care. The low income initially sick group assigned to the HMO reported significantly more bed-days per year due to poor health and more serious symptoms than those assigned free FFS care, and a greater risk of dying by comparison with pay FFS plans.