HMO coverage of cosmetic procedures: Response to market competition

Kevin Frick, Neil R. Powe

Research output: Contribution to journalArticle

Abstract

Theory suggests that insurance policies should not cover purely cosmetic procedures. This paper attempts to explain empirical variation in coverage of a purely cosmetic procedure. Health maintenance organizations (HMOs) are modeled in a Cournot competition with two decisions-the number of policies and the limits placed on medical care utilization. Comparative statics for an individual market suggest, first, that restrictiveness is positively associated with the number of HMOs. Second, restrictiveness is positively associated with the predisposition to demand managed care products. Third, each effect is strengthened by increasing the other parameter. Restriction of tattoo ablation, a purely cosmetic procedure, is examined empirically. The first and second predictions are supported at low levels of predisposition and numbers of HMOs, while the third prediction is not supported. (JEL 111).

Original languageEnglish (US)
Pages (from-to)398-410
Number of pages13
JournalInternational Advances in Economic Research
Volume4
Issue number4
StatePublished - Nov 1998

Fingerprint

Health maintenance organizations
Market competition
Prediction
Comparative statics
Cournot competition
Insurance
Medical care
Managed care

ASJC Scopus subject areas

  • Economics, Econometrics and Finance(all)
  • Economics and Econometrics

Cite this

HMO coverage of cosmetic procedures : Response to market competition. / Frick, Kevin; Powe, Neil R.

In: International Advances in Economic Research, Vol. 4, No. 4, 11.1998, p. 398-410.

Research output: Contribution to journalArticle

@article{442b32c0d3d840539d6003481e47d27d,
title = "HMO coverage of cosmetic procedures: Response to market competition",
abstract = "Theory suggests that insurance policies should not cover purely cosmetic procedures. This paper attempts to explain empirical variation in coverage of a purely cosmetic procedure. Health maintenance organizations (HMOs) are modeled in a Cournot competition with two decisions-the number of policies and the limits placed on medical care utilization. Comparative statics for an individual market suggest, first, that restrictiveness is positively associated with the number of HMOs. Second, restrictiveness is positively associated with the predisposition to demand managed care products. Third, each effect is strengthened by increasing the other parameter. Restriction of tattoo ablation, a purely cosmetic procedure, is examined empirically. The first and second predictions are supported at low levels of predisposition and numbers of HMOs, while the third prediction is not supported. (JEL 111).",
author = "Kevin Frick and Powe, {Neil R.}",
year = "1998",
month = "11",
language = "English (US)",
volume = "4",
pages = "398--410",
journal = "International Advances in Economic Research",
issn = "1083-0898",
publisher = "Springer Netherlands",
number = "4",

}

TY - JOUR

T1 - HMO coverage of cosmetic procedures

T2 - Response to market competition

AU - Frick, Kevin

AU - Powe, Neil R.

PY - 1998/11

Y1 - 1998/11

N2 - Theory suggests that insurance policies should not cover purely cosmetic procedures. This paper attempts to explain empirical variation in coverage of a purely cosmetic procedure. Health maintenance organizations (HMOs) are modeled in a Cournot competition with two decisions-the number of policies and the limits placed on medical care utilization. Comparative statics for an individual market suggest, first, that restrictiveness is positively associated with the number of HMOs. Second, restrictiveness is positively associated with the predisposition to demand managed care products. Third, each effect is strengthened by increasing the other parameter. Restriction of tattoo ablation, a purely cosmetic procedure, is examined empirically. The first and second predictions are supported at low levels of predisposition and numbers of HMOs, while the third prediction is not supported. (JEL 111).

AB - Theory suggests that insurance policies should not cover purely cosmetic procedures. This paper attempts to explain empirical variation in coverage of a purely cosmetic procedure. Health maintenance organizations (HMOs) are modeled in a Cournot competition with two decisions-the number of policies and the limits placed on medical care utilization. Comparative statics for an individual market suggest, first, that restrictiveness is positively associated with the number of HMOs. Second, restrictiveness is positively associated with the predisposition to demand managed care products. Third, each effect is strengthened by increasing the other parameter. Restriction of tattoo ablation, a purely cosmetic procedure, is examined empirically. The first and second predictions are supported at low levels of predisposition and numbers of HMOs, while the third prediction is not supported. (JEL 111).

UR - http://www.scopus.com/inward/record.url?scp=52849115385&partnerID=8YFLogxK

UR - http://www.scopus.com/inward/citedby.url?scp=52849115385&partnerID=8YFLogxK

M3 - Article

AN - SCOPUS:52849115385

VL - 4

SP - 398

EP - 410

JO - International Advances in Economic Research

JF - International Advances in Economic Research

SN - 1083-0898

IS - 4

ER -