Insurance, Managed Care, and System Integration

Abstract

Approximately two-thirds of all health care expenditures are paid for by insurance. In contrast, purchases of other goods and services involve only a buyer and a seller, with no intermediate payor. As the intermediate payor, the insuring organization is the fulcrum around which the health care industry turns. In this chapter I review the reasons why insurance is so pervasive in the health care sector and why insurance for health care expenditures is usually different than insurance for other goods and services. The effects of insurance on prices and health services delivered are shown. The focus of this chapter is on the structure, behavior, and performance of insuring organizations and their effects on competition in the health insurance market. I analyze system integration and close the chapter with an examination of the status of the uninsured in the United States.