PREVENTIVE CARE AND INSURANCE COVERAGE

1. INTRODUCTION The choice to engage preventive tests and treatments depends on the many factors that influence the perceived marginal benefits and marginal costs of these services. This article examines several of the factors that affect the perceived costs and benefits of these treatments. In particular, the influence of having a choice of insurance plans, the type of insurance, and the individual's health status on the decision to access preventive services is examined. One of the arguments for managed care as a cost saving insurance model is that it uses more preventive care than indemnity insurance (Rolnick et al. 1996). Health maintenance organizations (HMOs) are likely to pursue preventive care measures in an effort to reduce future health care costs. However, this strategy may be offset by the high turnover rates in managed care. For example, estimates of the turnover rates for managed care enrollees range from 16% to 19% (Association of American Physicians and Surgeons 1995). Thus over a five-year period, a managed care company may expect to lose up to 58% of their original enrollees and all of its investments in these enrollees' health. This may reduce the HMO's incentive to provide preventive tests because these future cost savings may accrue to some other insurer. If HMOs are more likely to provide preventive care, then individuals who value this care should be more likely to enroll in an HMO, other things equal. Most studies that examine the effect of HMO enrollment in preventive care usage equations include as an independent variable a measure for enrollment or an indicator of whether tests are paid for (for a few examples see, Zapka et al. 1999; Eisen et al. 1999; Weisman and Henderson 2001). This methodology is fine if the worker does not have a choice of plans at his or her place of employment. In this case, the benefits manager chooses the type of insurance plan, and the worker either chooses to be covered by this insurance or forgoes insurance cover-age. The effect of being in an HMO on the use of preventive care, in this case, is exogenous. However, when the worker has a choice of insurance plans, the effect of HMO enrollment on the use of preventive care becomes endogenous. This study uses the Medical Expenditure Panel Survey (MEPS) to examine how the endogeneity of the choice of an HMO over a fee-for-service plan affects the use of preventive treatments when a worker has a choice of insurance plans. The results are compared to those of workers who do not have a choice of plans and to a model where HMO is assumed to be exogenous. II. LITERATURE REVIEW Research has examined the effect of insurance type on the use of preventive treatments. Phillips et al. (2000) reviewed the literature from 1990 to 1998 on whether managed care enrollees received more preventive treatment than non-managed care enrollees. About 60% of the studies found no difference, whereas 37% found that managed care enrollees were significantly more likely to receive the preventive care services. HMO enrollees are more likely to be diagnosed in the earlier stages of cancer (and Lee-Feldstein et al. 2000; Riley et al. 1994) and are more likely to receive Pap smears, mammograms, and fecal occult blood tests (Gordon et al. 1998; Weisman and Henderson 2001). Eisen et al. (1999) find a positive association with HMO enrollment and prostate cancer screening. Carrasquillo et al. (2001) find that elderly women in HMOs were more likely to have mammograms. In a recent study, Haas et al. (2002) find that Hispanics who are enrolled in managed care plans are more likely than fee-for-service Hispanics to receive mammography screenings, Pap smears, and breast exams. Likewise, whites with managed care are more likely than their fee-for-service counterparts to receive mammography and cholesterol screenings. Wang and Pauly (2003) find that managed care coverage generally supports more preventive care, but in some cases the preventive care is not cost-effective. …