Did managed care work?
The bright moment for private health care in America was the mid-1990s, when the managed care revolution tamed spending growth. Eventually, consumers got angry at HMOs and politicians browbeat them, and -- even though there was never evidence that their members had worse health outcomes -- they gave up on controlling costs and just began passing the cost increases onto employers and individuals. As Aaron Carroll shows, that story looks a lot better when you're looking at health-care spending as a percent of GDP than when you're looking at health-care spending on its own:
Managed care, in other words, is getting a lot of credit that properly belongs to the economic boom of the '90s. Health-care spending didn't stop growing faster than GDP so much as GDP began growing faster than health-care spending. When you look at health-care spending on its own, the cost control is present but much less impressive.
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