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This paper examines changes in the use of selected diagnostic technologies for Medicare patients in 1985 and 1990. The analysis compares patients across five common, medical tracer conditions: acute myocardial infarction (AMI), congestive heart failure (CHF), stroke, pneumonia, and gastrointestinal (GI) hemorrhage. The relationship of hospital characteristics to patterns of technology use was assessed by grouping hospitals by a composite measure of "costliness." The overall use of 21 diagnostic tests rose by 27% over the 5-year period. Increases were most marked among the three cardiovascular tracers and for related technologies, such as cardiac angiography and cardiac ultrasound. There was evidence that newer technologies partially replaced older diagnostic tests that were used for similar indications: rates of noninvasive cerebrovascular imaging rose while rates of cerebral angiography declined. However, for several common, long-established tests, such as electrocardiogram and chest radiograph, there were consistent increases that are unexplained. High-cost hospitals performed diagnostic tests at much higher rates than lower-cost hospitals in both 1985 and 1990, but the rate of increase in test use across the two study years was generally greater for the lower-cost hospitals.

The adjusted average per capita cost (AAPCC) payment system for Medicare risk-based plans uses a county level geographic adjustment factor to account for differences in beneficiary costs across areas. The implications of abandoning the county unit as the basis of the geographic area are examined and the merging of counties to match the geographic definition used in the prospective payment system are considered. Year-to-year variation in a county AAPCC is inversely associated with county population size and, based on year-to-year AAPCC variation, 86 percent of all counties are too small to be used for the geographic adjustment.

This article reports the results of a study that examined what happened to the utilization of Medicaid beneficiaries, eligible under Aid to Families with Dependent Children, who were mandatorily enrolled in several capitated alternatives in the Kansas City area. Their experience is contrasted with that of a comparison group selected from the St. Louis area. The types of plans analyzed include those sponsored by hospitals, neighborhood health centers, HMOs, and private physicians (IPAs). With the exception of emergency room use, all plans controlled utilization equally well. Results are explained in light of their management and policy implications.

The Tax Equity and Fiscal Responsibility Act of 1982, under rules implemented in April 1985, creates incentives for HMOs and other competitive medical plans to significantly expand their participation in Medicare on an at-risk basis. In an attempt to gauge the likely response of HMOs to the new incentives, we examined data on a census of HMOs operating in 1982 to look for differences between HMOs that entered the Medicare program at risk under the earlier National Medicare Competition demonstration and those that did not. The most consistent difference we found was that HMOs in areas with a high adjusted average per capita cost were more likely to enter the Medicare market. HMOs with prior experience serving Medicare beneficiaries were also more likely to join the demonstration, as were HMOs that were federally qualified. No other HMO characteristics appeared to significantly affect the likelihood of entry.

This article investigates the impact of unions on the wages of hospital workers. Our OLS findings agree with previous OLS studies--unions increase registered nurses' (RNs) wages by five percent and by about eight to ten percent for other hospital workers. By contrast, we find (after correcting for selectivity bias in hospital unionization status) a direct union effect of about twenty percent on RN wages and in excess of thirty percent on wages of other hospital workers. While the results based on selectivity bias adjustments make us uneasy, we do not reject them out-of-hand. We also find indirect union effects (up to five percent) by other unionized occupations within a hospital and up to ten percent by other unionized hospitals in the local labor market. Prospective reimbursement programs have a negative impact on the wages of hospital workers but are only significant for non-unionized occupations. Our three empirical tests of monopsony all reject the view that monopsony is a factor in hospital wage-setting. Even considering the large union effects (based on selectivity bias adjustment), we conclude that unions have been a minor contributor to hospital cost inflation.

This study investigates the effects of tax, regulatory, and reimbursement policies and other factors exogenous to the health insurance market on the relative price (to commercial insurers) paid by Blue Cross plans for hospital care, their administrative expense and accounting profits, premiums, and ultimately Blue Cross market share. We specify and estimate a simultaneous equation model to assess interrelationships among these variables. We conclude that premium tax advantages enjoyed by the Blues have virtually no effect on the Blues' premiums or their market shares. A Blue Cross plans' market share has a positive effect on the discount it obtains from hospitals as does coverage of Blue Shield charges by a state-mandated rate-setting plan. An upper bound on the effect on the Blue Cross market share of covering Blue Cross under rate-setting but excluding the commercials from such coverage is seven percentage points. Tests for administrative slack in the operation of Blue Cross plans yield mixed results.

The Health Care Financing Administration (HCFA) initiated the Medicare Competition Demonstration in 1982 in anticipation of congressional intent to establish a national program. Interim results on the 1984 service use and cost experience of the health maintenance organizations (HMOs) and competitive medical plans (CMPs) participating in the demonstrations indicate that Medicare enrollees in the demonstration experienced a median of 1,951 hospital days per 1,000 person years, 57 per cent of the median of 3,432 days per 1,000 in the local markets from which the plans drew enrollment. Independent practice association (IPA) HMOs experienced higher hospital use rates than staff and group model HMOs. These comparisons are not adjusted for various risk factors, the absence of which were likely to favor the demonstration plans. Plans with lower hospital service use were federally qualified and had been operating for more than five years. The median total annual revenue per enrollee across all plans was $2,312, compared to median annual expenses per enrollee of $2,250. The distribution of median annual expenses per enrollee by major category of expense was: institutional expenses ($1,038/enrollee), medical expenses ($720/enrollee), supplemental services expenses ($154/enrollee), and administrative and other expenses ($295/enrollee). Future analysis, using beneficiary-level data, will examine the impact of the demonstration and the nature and extent of evident biased selection and will compare the quality of care in the demonstrations to that in the fee-for-service sector.

The study presents an empirical analysis of the diffusion patterns of five surgical procedures. Roles of payer mix, regulatory policies, physician diffusion, competition among hospitals, and various hospital characteristics such as size and the spread of technologies are examined. The principal data base is a time series cross-section of 521 hospitals based on discharge abstracts sent to the Commission on Professional and Hospital Activities. Results on the whole are consistent with a framework used to study innovations in other contexts in which the decisions of whether to innovate and timing depend on anticipated streams of returns and cost. Innovation tends to be more likely to occur in markets in which the more generous payers predominate. But the marginal effects of payer mix are small compared to effects of location and hospital characteristics, such as size and teaching status. Hospital rate-setting sometimes retarded diffusion. Certificate of need programs did not.