During the latter half of the 1990s, health care cost inflation

slowed after several years of rapidly rising price increases.

Many hoped that the various policies and programs

implemented by government, employers, and insurers in the

‘90s to control costs would continue to moderate these

increases for the foreseeable future. However, in the last

several years, rising health care costs have again become an

issue. In 2000, the average annual health insurance

premium in the private sector rose to $2,655 for single

coverage and $6,772 for family coverage, an increase of

33.3 percent and 36.7 percent, respectively, since 1996,

according to new data from the Medical Expenditure Panel

Survey,1 conducted by the Agency for Healthcare Research

and Quality (AHRQ). Dissatisfaction with the system is

also rising. According to a recent Harris Poll survey, 56

percent of the public, 46 percent of physicians, 48 percent

of employers, 50 percent of health plan managers, and 51

percent of hospital managers said that the health care

system requires “radical change.”2 The survey report

predicted that dissatisfaction with the health care system

would increase over the next few years as a result of

increased out-of-pocket costs, concerns about prescription

drug prices, and a possible increase in the number of

uninsured Americans. 

Today’s policymakers are searching for ways to decrease

the current levels of growth without reducing access to

needed health care services or creating undue burdens for

providers. In some instances, they are revisiting past

strategies; in others, they are exploring new approaches that

seem to hold promise. Before making decisions, today’s

policymakers could gain insights by studying the outcomes

of evidence-based research efforts. 

This synthesis is intended to provide some of those insights

by examining strategies intended to affect costs and

Reducing Costs in the Health Care System:

Learning From What Has Been Done 

Making a Difference

Employers making a fixed dollar contribution and offering

employees three or more health plans can save money on

their premiums...Page 3

Competition among HMOs in highly competitive markets

has led to lower HMO premiums...Page 3

Managed mental health/substance abuse care led to lower

costs, despite a parity mandate...Page 4

Flexible spending accounts, as currently structured, lead to

employees spending more on medical services of marginal

value and also, indirectly, to higher health insurance

premiums...Page 5

Cost sharing falls most heavily on those with the lowest

income and those with chronic health conditions...Page 6

Cost effect of hospital mergers varies by competitiveness

of market...Page 7

RESEARCH IN ACTION

Agency for Healthcare Research and Quality • www.ahrq.gov

Issue #9 September 2002

Author: Mark W. Stanton, M.A.

Managing Editor: Margaret K. Rutherford

Design and Production: Joel Boches

Suggested citation: Stanton MW, Rutherford MK. Reducing costs in the health care system: learning from what has been done. Rockville (MD): Agency for

Healthcare Research and Quality; 2002. Research in Action Issue 9. AHRQ Pub. No. 02-0046.
investigating whether or not they save money. AHRQfunded research has found that some approaches (specific

employer contribution methods, competition among health

maintenance organizations (HMOs), and behavioral

managed care) save money, and others (cost sharing,

flexible spending accounts, and hospital mergers) have

mixed results. A unique contribution of AHRQ’s research is

its focus on the dynamic or interactive effects of costcontainment strategies; i.e., estimating the likely effects of

efforts in one sector on the rest of the system. The synthesis

also reviews some of the new research efforts underway. 

Background

In 2000, health care spending rose to $1.3 trillion dollars,

or an average of $4,637 per person. As a percentage of the

Gross Domestic Product (GDP), it grew from 13.1 percent

in 1999 to 13.2 percent in 2000.3 National health

expenditures are expected to reach $2.8 trillion in 2011,

with an average annual growth rate of 7.3 percent from

2001 to 2011. By growing 2.5 percent faster than the GDP,

expenditures will consume approximately 17 percent of the

GDP in 2011.4

In 2000, spending for health services increased at virtually

identical rates in the public (6.9 percent) and private (7.0

percent) sectors. Spending on Medicare, the largest single

public health care program, rose 5.6 percent in 2000,

following much lower growth rates of 0.6 percent in 1998

and 1.5 percent in 1999.3 For the private sector, the year

2000 marked the third straight year of significantly high

growth.5 During 2000, hospital spending growth was 5.1

percent, the first time since 1993 that hospital spending

increased more than 4.0 percent.3

2 www.ahrq.gov

Summary

Strategies that reduce costs

• Employer contribution methods. Employer premium costs were lowered by an average of $480 when employers offered

employees more than two plans and made a fixed dollar contribution regardless of the plan chosen, compared to making a

fixed dollar contribution and offering only two plans. 

• HMOs and competition. HMOs reduced costs in highly competitive markets by substituting ambulatory care for hospital

visits.

• Managed care and a State mental health parity mandate. Three years after an insurer introduced a managed behavioral

health care plan, costs for mental health/substance abuse care dropped 39 percent. This step was a response to a State

mental health parity mandate that was expected to lead to higher health care costs. The study did not measure any effects

on the quality of care. 

Strategies that have mixed results

• Flexible spending accounts (FSAs). The tax exemption granted to individual users for these accounts saves money for

taxpayers and is conservatively estimated to reduce Federal revenues by at least $8 billion. FSAs currently encourage

participants to spend money at year’s end on medical services with relatively minor value in order to avoid losing the funds

at the end of the year. Allowing a limited amount of the funds remaining in the accounts at year’s end to be carried forward

into the following year might eliminate this cost inefficiency.

• Cost sharing. Higher deductibles and copayments save money for insurers and third-party payers but lead to higher out-ofpocket consumer expenses. This burden falls most heavily on people with the lowest income, those with chronic health

conditions, and those Medicare beneficiaries without employer-subsidized supplemental coverage or Medicaid.

• Hospital mergers. Savings from hospital mergers may be less than anticipated. One study found an average price reduction

of 7 percent for consumers. However, a later study showed that the savings were considerably smaller, or even nonexistent,

when the merging hospital was compared to rival hospitals competing in the same market.
Growth rates are driven by factors such as increased use of

health care, especially expensive new medical technologies,

by all age groups; general price inflation; inflation in the

prices of medical services beyond general price inflation;

and aging of the population.6 Other factors related to the

organization and delivery of care have also played a role.

For example, the recent movement from tightly managed

care to looser versions of managed care has been a

significant factor in rising costs. In an unprecedented

decline, HMO enrollment fell from 29 percent to 23

percent of privately insured employees from 2000 to 2001

while the percentage of those employees enrolled in the

looser versions of managed care rose proportionately.5

In efforts to restrain rising costs, various strategies have

been used in recent years, including the formation of

physician hospital organizations, the use of different

provider capitation schemes, and negotiated discounts for

private insurers. Recent cost-sharing strategies include

various “tiered” copayment systems for prescription drug

benefits and for hospital use. Policymakers have

encouraged enrollment in managed care plans (Medicare +

Choice), launched fraud and abuse investigations of the

Medicare program, and allowed inpatient hospital

contracting under Medicaid. Other efforts have been made

to slow the rate of Medicare cost growth by slowing the

increase in payments to health plans, hospitals, home care

providers, and nursing home providers. In the private

sector, employers have responded to rising cost pressures by

encouraging employees to enroll in managed care plans and

by restructuring their benefits packages and contribution

formulas. Hospitals, physicians, and other providers have

engaged in a variety of mergers and consolidations. And

further changes will be forthcoming in both the public and

private sectors as efforts to meet the conflicting needs to

contain costs and preserve access continue. 

Policies that made a difference in lowering

costs

Fixed dollar contributions lower employer health care

costs

Many economists and policymakers have argued that for

employers to lower their health insurance costs, they should

stimulate competition for enrollees among plans by

contributing a fixed dollar amount toward premiums and

offering employees multiple health plans. AHRQ

researchers examined the determinants of competition

among health plans in the context of a model where health

plans first compete to be selected by employers and then

compete to be chosen by employees.7 They show that

focusing competition on the price-sensitive buyer—either

the employer or the employee—leads to lower prices. While

the model suggests this can be achieved either by offering

very few plans or else by offering many plans, the

empirical evidence suggests that premiums are lower with

three or more plans and a fixed dollar contribution.

When employers made the same dollar contribution toward

all plans and offered employees more than two plans, their

premiums for single coverage were lowered by $480 and

their premiums for family coverage were lowered by $791

when compared with premiums for employers making a

fixed dollar contribution but offering only two plans.

However, increasing the number of plans led to higher

premiums if the employer paid the full premium cost.

Under the employer-pays-all scenario, single and family

premiums increased by $441 and $1,853, respectively, when

employers offered three or more plans compared with

offering two plans.7

These findings suggest that an employer’s choice of

contribution methods affects the premiums charged by

health plans. Premium differences are one of many factors

employers need to consider when deciding on the number

of plans to offer employees and how to structure employer

contributions. The data analyzed for the study come from

the 1996 Medical Expenditure Panel Survey Insurance

Component.1

Competition among HMOs lowers consumer prices

The more HMO competitors that an HMO faces in a given

market, the more likely it is to engage in price competition.

This process means lower premiums for consumers.

To find out the effects of market structure on consumer

premiums and the utilization levels of inpatient and

outpatient care, AHRQ-funded researchers compared data

on premiums, hospital use, and ambulatory visits for over

3,000 group-model and independent practice association

(IPA) model HMOs during the period 1989-95.8 A groupmodel HMO is a prepaid health care system that contracts

with one physician group to provide health services. It is a

more tightly managed form of HMO than the IPA model.

An IPA-model HMO is a prepaid health care system that

contracts with individual physicians in independent

www.ahrq.gov 3
practices and/or with associations of independent

physicians. Market structure is defined as a combination of

the penetration rate (the percentage of the population in a

given market enrolled in HMOs) and the number of HMOs

operating in that market.

AHRQ research found that market structure had the

following effects on premiums:

• Group-model HMOs in highly competitive markets (17

competitors and 45 percent HMO market penetration)

had premiums that were 11 percent lower than those in

the average HMO.

• Group-model HMOs in less competitive markets (5

competitors and 15 percent HMO market penetration)

had premiums that were 3 percent higher than average

premiums. 

• The effects of market structure on premiums for IPAmodel HMOs were similar but not as pronounced.8

Market structure also had the following effects on

utilization levels of ambulatory visits and inpatient care:

• In markets with many competitors and with high HMO

enrollment, group-model HMOs substituted ambulatory

visits for hospital visits. 

• As the number of HMO competitors increased, hospital

use declined for both IPAs and group-model HMOs.

• The average number of ambulatory visits made by

enrollees in IPA-model HMOs was not affected by

market structure.8

One implication is that although HMOs practice price

competition in high-competition markets, they seem to

engage in a more costly (to consumers) rivalry to offer

more benefits and services in low-competition markets.

The study also suggested that HMOs reduce costs by

substituting ambulatory care for hospital visits in more

competitive markets. The study did not examine the

potential effects on the quality of care.

A related AHRQ-funded study of 1,927 hospitals in 134

metropolitan areas shows that higher HMO market

penetration is associated with lower risk-adjusted mortality

rates for fee-for-service (FFS) Medicare enrollees. This

spill-over effect on the quality of care received by those

enrolled in FFS plans may be due to a positive effect of

HMOs on local practice styles or a preferential selection by

HMOs for areas with better hospital care.9

Managed care mental health carve-out with parity

mandate lowers cost

The introduction of a State mental health parity mandate

for severe mental disorders was expected to lead to

significant increases in health care costs for a large

employer group and its insurers. One insurer responded to

this concern by introducing a managed behavioral health

care carve-out. In a carve-out, an organization separate

from the principal health insurer is selected to manage

health care needs in a specific area (e.g., behavioral health)

for the employees of the group. 

To learn how the managed behavioral health care carve-out

affected use and costs of care, researchers from AHRQ and

the National Institute of Mental Health studied 75,000

enrollees over a 4-year period before and after the carve-out

went into effect.10

After the carve-out had been in effect for 3 years:

• Per-member plan costs for mental health/substance

abuse services declined by almost 40 percent.

• Per-member plan costs for children and adolescents

declined even more steeply—by 64 percent.

Almost the entire drop in mental health/substance abuse

costs was attributable to a decline in the number of

inpatient hospital days for children and adolescents. The

number of hospital admissions did not change significantly

over the 4-year study period. However, treatment

prevalence rose almost 50 percent because of the rise in the

number of persons receiving outpatient treatment. Although

more people were in treatment, the average number of

visits per patient did not decline (Table 1).

The researchers concluded that the parity mandate did not

lead to cost increases. The researchers also determined that

the impact of the parity mandate on access was ambiguous:

while treatment prevalence rose nearly 50 percent, groups

not subject to the mandate experienced similar increases. 

The study was not able to determine whether the significant

drop in inpatient use among children and adolescents was

due to the carve-out’s curbing of inappropriate use or from

restricting needed services. 

4 www.ahrq.gov
www.ahrq.gov 5

Table 1. Change in costs and use of services among insured people after enrollment in managed behavioral

health carve-out

Difference

between

Year 1 and

Item Year 1 Year 2 Year 3 Year 4 Year 4

Treatment prevalence 5.0% 5.6% 6.2% 7.3% +46%

Change in plan costs — -25% -13% -7% -39%

Admissions per 1,000 5.6 5.2 6.2 5.2 -6%

Mean length of stay in days 24.9 17.1 10.6 9.1 -66%

Any outpatient use 4.7% 5.4% 6.1% 7.0% +49%

Mean visits per user 7.4 8.0 8.0 7.6 +3%

Source: Zuvekas SH, Regier DA, Rae DS, et al. The impacts of mental health parity and managed care in one large employer group. Health Aff 2002; 21(3):148-59.

Policies that had mixed results 

Minor change to FSA exemption could improve cost

efficiency 

Flexible spending accounts (FSAs) for health care are a

way to lessen the impact of cost sharing on individuals and

families. Typically, employees with FSAs also have

employer-sponsored health insurance policies. FSAs allow

employees to pay for out-of-pocket health care expenses

with pre-tax dollars. In a health care FSA, employees agree

to payroll deductions to put pre-tax dollars into an account

and then use the funds during the year for reimbursement

of health care expenses. If the employee has not used the

money by the end of the year, it is lost (the use-it-or-lose-it

feature). FSAs allow employees to purchase qualified

benefits (defined in Section 125 of the Internal Revenue

Service Code), such as deductibles, copayments, and

medical or dental expenses, on a before-tax basis. 

The Federal and payroll tax exemptions allowable by FSAs

may well cause an annual tax loss of at least $8 billion

since the tax exemption reduces the amount of taxes that

would otherwise be collected. Health care FSAs have

received little empirical or theoretical analysis thus far. As

of 1995, 79 percent of employers offer such accounts and

the number of employees taking advantage of these

accounts was growing rapidly.11

A new AHRQ-funded study finds that the use-it-or-lose-it

feature of FSAs encourages individuals to incur medical

expenses with minimal value in order to avoid forfeiting the

funds remaining in the account at the end of the year.11

Removing this feature would eliminate a cost inefficiency

that encourages participants to spend money at year’s end

on medical services that might have little value but add to

increasing health care costs. For example, an employee

might decide to buy an extra set of eyeglasses rather than

losing funds remaining in the FSA account at year’s end.

Indeed, data from the study show that eye care expenditures

spiked upward at year’s end.

The researchers suggested that if the law allowed people to

carry forward any funds remaining in an FSA at year’s end,

insurers might respond by dropping coverage for certain

types of relatively predictable health care expenses, such as

orthodontic care and eyewear. If insurers did not cover

these items, then insurance premiums could be lower. 

AHRQ-funded researchers studied the actual use of FSAs

based on the records of a medium-sized insurer with 22,000

policyholders who were employees in 73 companies. In this

group, 2,700 policyholders, or 12 percent, used an FSA

account.11
Cost sharing hits vulnerable groups hardest

Cost sharing, having individuals pay a portion of their

health care costs out-of-pocket, may contribute to

controlling health care costs by making people more

sensitive to the price of health care. However, it may

impose disproportionate burdens on vulnerable groups

such as the poor and those with multiple chronic

conditions. 

How much the individual consumer pays for his or her

care is determined by how third-party payers (employers,

insurers, and government) divide up payments for health

care between themselves and consumers. “Cost sharing”

refers to the split between what the individual consumer

pays and what the third-party payer pays for health care. It

includes deductibles, copayments, and cash outlays that

individuals make for items not covered by health

insurance. 

A study by AHRQ-funded researchers shows the effects of

current cost-sharing patterns on the out-of-pocket health

care expenses of Medicare beneficiaries.12 Using data

drawn from the 1995 Medicare Current Beneficiary

Survey (MCBS) of 8,000 seniors, the researchers found

that out-of-pocket spending for health care averaged 19

percent of income for Medicare beneficiaries. The type of

supplemental insurance coverage held by beneficiaries had

a significant effect on the percentage of income paid out

of pocket. This percentage ranged from 8.4 percent for

those with both Medicare and Medicaid to 25.5 percent for

those with a self-purchased supplemental plan (Table 2).

More than half of out-of-pocket spending was for

prescription drugs and dental services. 

The researchers also reported that, despite Medicaid

coverage for some, the 20 percent of Medicare

beneficiaries with the lowest income spent almost a third

(31.5 percent) of their income on health care, compared

with 8.5 percent in the highest income category. Medicare

beneficiaries in another vulnerable group, those in poor

health, spent 28.5 percent of their income on health care,

compared with 14.9 percent for those in excellent healtha

(Table 3).

6 www.ahrq.gov

Table 2. Proportion of Medicare beneficiaries’

income spent on out-of-pocket health care

expenditures by insurance type

Insurance coverage Out-of-pocket costs

Medicaid 8.4%

Medicare HMO 14.8%

Private HMO 15.7%

Employer sponsored 16.1%

Medicare only 23.0%

Self-purchased 25.5%

Note: HMO—health maintenance organization.

Source: Crystal S, Johnson RW, Harman J, et al. Out-of-pocket health care costs

among older Americans. J Gerontol 2000; 55B(1):S51-62.

a

The MCBS asks respondents to assess their health status on a scale from

poor to excellent.

Facts about Flexible Spending Accounts 

• FSAs for health care provide a tax exemption by

allowing employees to avoid taxes on their out-ofpocket health care expenses. 

• The entire amount withheld for the account is

exempted from payroll, Federal, and State income

taxes. 

• Total out-of-pocket expenditures for Americans were

estimated to be $187 billion in 1999. If only 15

percent of out-of-pocket health care expenses were

paid with money deposited in FSAs (assuming the

average individual faces a 15 percent Federal tax

rate plus a 15 percent payroll levy), the Federal and

payroll tax exemptions would cause tax revenues to

drop by over $8 billion. 

Source: Cardon JH, Showalter MH. An examination of flexible spending accounts. 

J Health Econ 2001; 20:935-54.
www.ahrq.gov 7

A second study, based on data from AHRQ’s Medical

Expenditure Panel Survey, focused on out-of-pocket

spending (deductibles, copayments and cash outlays) by

people with and without chronic illnesses across the entire

population (not just Medicare enrollees).13 It found that the

burden of cost sharing falls most heavily on those with

multiple chronic health conditions and on Medicare

beneficiaries who do not have employer-subsidized

supplemental coverage or Medicaid. 

The researchers analyzed spending by both individuals and

families. They found that:

• For people age 65 and over, the highest average out-ofpocket spending category was prescription drugs ($397),

followed by dental services ($145). 

• For people under age 65, the highest average out-ofpocket spending category was for physician office visits

($104). 

• For people with three or more chronic conditions,

average out-of-pocket spending on prescription drugs

was $667. 

• Two-person families with an elderly head of household

spent an average of $812 out of pocket, compared with

$429 for their non-elderly counterparts.13

Cost effect of mergers varies by competitiveness of

market

Many hospital mergers have taken place in recent years.

One of the most frequently mentioned reasons for mergers

is eliminating the duplication of services. Mergers can lead

to lower prices and result in savings for consumers.

However, those concerned about antitrust implications

worry that mergers can decrease consumer welfare by

leading to higher prices and declining competition. Two

closely related AHRQ-funded studies have extensively

investigated the question of whether hospital mergers save

money for consumers.

The first study investigated 122 hospital mergers that took

place from 1986 to 1994.14 It examined the effects of

hospital mergers on price and costs in markets of varying

hospital concentration. While consumers realized an

average price reduction of 7 percent as a result of mergers,

the price reduction was considerably less in highly

concentrated markets. These findings suggest that a greater

emphasis should be placed on antitrust scrutiny of mergers

in areas where the market is dominated by a small number

of competing hospitals.

The second study included 204 hospitals involved in

mergers that took place from 1989 to 1997.15 It refined the

analysis of the first study by dividing nonmerger hospitals

into rival and nonrival groups. It then compared consumer

cost savings only between the merged hospitals and their

immediate rival hospitals. This study found that savings

were modest or nonexistent when merging hospitals were

compared with rival nonmerging hospitals in the same

markets.

Ongoing research

The studies cited above are only a part of a much broader

AHRQ research portfolio to inform policymakers on issues

related to cost. Two major initiatives—the Medical

Expenditure Panel Survey (MEPS) and the Healthcare Cost

and Utilization Project (HCUP)—provide essential data that

have been used across the country by researchers and

policymakers in tracking health care use and costs and

assessing trends over time.

Table 3. Proportion of Medicare beneficiaries’

income spent on out-of-pocket health care

expenditures by self-reported health status

Self-reported health status Out-of-pocket costs 

Excellent 14.9%

Very good 16.6%

Good 19.3%

Fair 23.3%

Poor 28.5%

Source: Crystal S, Johnson JW, Harman J, et al. Out-of-pocket health care costs

among older Americans. J Gerontol 2000; 55B(1):S51-62.
Medical Expenditure Panel Survey. This ongoing survey

continually provides policymakers, health care

administrators, businesses, and others with timely

comprehensive information about health care use and costs

in the United States and improves the accuracy of their

economic projections. MEPS collects data on the specific

health services that Americans use, how frequently they use

them, the cost of these services, and how they are paid for,

as well as data on the cost, scope, and breadth of private

health insurance held by and available to the U.S.

population. MEPS is unparalleled for the degree of detail in

its data, as well as its ability to link data on health services

spending and health insurance to the demographic,

employment, economic, health status, and other

characteristics of survey respondents. Moreover, MEPS is

the only national survey that provides a foundation for

estimating the impact of changes in sources of payment and

insurance coverage on different economic groups or special

populations of interest, such as the poor, elderly, families,

veterans, the uninsured, and racial and ethnic minorities.

AHRQ, which conducts MEPS in conjunction with the

National Center for Health Statistics, began fielding MEPS

in March 1996.

Healthcare Cost and Utilization Project provides

information on inpatient hospital charges at the national

and State levels, including all inpatient records with charge

data, clinical data, and demographic information from 80

percent of all hospital discharges in the United States.

HCUP is a Federal-State-industry partnership that provides

a geographically representative sample of hospital

discharges across the United States. HCUP data help

researchers, policymakers, and health care administrators

answer questions about conditions treated and procedures

performed in U.S. hospitals and ambulatory surgery centers

for the population as a whole and for population subsets,

such as children and the elderly. HCUP data provide

information on reasons for hospitalization, how long people

stay in the hospital, the procedures they undergo while

hospitalized, and how specific conditions are treated in the

hospital. 

AHRQ is also currently funding research into a number of

other areas on cost-related subjects.

The costs of medical errors and complications; internal

AHRQ study. This study will examine how much more

employers and patients pay for care when medical errors or

complications are involved. 

Impact of payment policies on the cost, content, and

quality of care; University of Minnesota, Division of

Health Services Research and Policy, Contract No. 290-00-

0017. This study combines data from health plans to

examine how economic incentives inherent in the

relationship between health plans and health care providers

(physicians and hospitals) influence the cost, quality, and

type of services received by patients. 

Examination of potential cost-savings resulting from

volume-outcome effects; internal AHRQ study. This study

will compare the costs in hospitals that perform a high

number of coronary artery bypass grafts (CABGs) each

year with the costs in hospitals that perform a low number

of CABGs. It will also examine how the costs associated

with hospital volume affect cost savings for employers and

Medicare. 

Costs of care for very low birthweight babies; RAND

Corporation, R03 HS13429-01. This research will provide

better information on the costs and cost-effectiveness of

neonatal intensive care for infants with low birthweights.

Very low birthweight infants (defined as infants with a

birthweight of 1500 grams or less) are a vulnerable patient

population. Infant mortality in the United States is

concentrated among this population, who also are subject to

high rates of disability and morbidity.

Incidence of reduced use of prescribed medications by

Medicare beneficiaries in response to out-of-pocket

costs; Center for Health Care Policy and Evaluation,

Contract No. 290-00-0012. This study, using data from

MEPS and the Medicare Current Beneficiary Survey, will

examine the impact of out-of-pocket costs on the

prescription-medication-taking behavior of Medicare +

Choice beneficiaries.

Out-of-pocket prescribed drug costs among elderly

Medicare enrollees; Rutgers University Institute for

Health, Healthcare, and Aging Research, R03 HS13005-01.

This study, using data from MEPS and the Medicare

Current Beneficiary Survey, will examine the out-of-pocket

burden of prescribed medication costs for the elderly

enrolled in the Medicare program. 

8 www.ahrq.gov
Conclusion

Many strategies to contain costs have been tried in recent

years. Some, such as competition among HMOs, managed

care as a way to handle the cost implications of parity

mandates, and certain employer contribution methods, have

been at least partly successful. Others (FSAs, cost sharing,

and hospital mergers) have had mixed results. In some

cases, shifting economic conditions may have been

responsible for the success or failure of different strategies.

As newer strategies are brought into play, research will

continue to evaluate their impact on costs, as well as

outcomes and other aspects of care. 

References

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Expenditure Panel Survey. For the 2000 Medical

Expenditure Panel Survey Insurance Component tables,

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<http://www.meps.ahrq.gov/data_pub/ic_tables.htm>. 

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*AHRQ-funded/sponsored research

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8 Prescription Drug Therapies: Reducing Costs and Improving AHRQ 02-0045

Outcomes

7 Improving Treatment Decisions for Patients with Community- AHRQ 02-0033

Acquired Pneumonia

6 Medical Informatics for Better and Safer Health Care AHRQ 02-0031

5 Expanding Patient-Centered Care to Empower Patients and AHRQ 02-0024

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4 Managing Osteoarthritis: Helping the Elderly Maintain Function AHRQ 02-0023

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3 Preventing Disability in the Elderly With Chronic Disease AHRQ 02-0018

2 Improving Care for Diabetes Patients Through Intensive AHRQ 02-0005

Therapy and a Team Approach

1 Reducing and Preventing Adverse Drug Events To Decrease AHRQ 01-0020

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