title: Consumer-oriented health care reform strategies: a review of the evidence on managed competition and consumer-directed health insurance.
abstract: BACKGROUND
  For many years, leading health care reform proposals have been based on market-oriented strategies. In the 1990s, a number of reform proposals were built around the concept of "managed competition," but more recently, "consumer-directed health care" models have received attention. Although price-conscious consumer demand plays a critical role in both the managed competition and consumer-directed health care models, the two strategies are based on different visions of the health care marketplace and the best way to use market forces to achieve greater systemwide efficiencies.
  
  
  METHODS
  This article reviews the research literature that tests the main hypotheses concerning the two policy strategies.
  
  
  RESULTS
  Numerous studies provide consistent evidence that consumers' health plan choices are sensitive to out-of-pocket premiums. The elasticity of demand appears to vary with consumers' health risk, with younger, healthier individuals being more price sensitive. This heterogeneity increases the potential for adverse selection. Biased risk selection also is a concern when the menu of health plan options includes consumer-directed health plans. Several studies confirm that such plans tend to attract healthier enrollees. A smaller number of studies test the main hypothesis regarding consumer-directed health plans, which is that they result in lower medical spending than do more generous plans. These studies find little support for this claim.
  
  
  CONCLUSIONS
  The experiences of employers that have adopted key elements of managed competition are generally consistent with the key hypotheses underlying that strategy. Research in this area, however, has focused on only a narrow range of questions. Because consumer-directed health care is such a recent phenomenon, research on this strategy is even more limited. Additional studies on both topics would be valuable.
authors.affiliation: Ross School of Business, University of Michigan, Ann Arbor, MI 48109, USA. tbuch@bus.umich.edu
authors.forename: Thomas C
authors.initials: TC
authors.lastname: Buchmueller
mesh_terms: D002755:Choice Behavior; D003163:Competitive Behavior; D016536:Competitive Medical Plans / Q000191:economics*; D003258:Consumer Behavior; D055317:Evidence-Based Practice / Q000191:economics*; D018166:Health Care Reform / Q000191:economics*; D006801:Humans; D007348:Insurance, Health / Q000191:economics; D018854:Managed Competition / Q000191:economics*; D008824:Michigan; D009042:Motivation; D014481:United States