Broadly defined, managed care plans reimburse providers a fixed (capitated) fee per patient, reducing the marginal incentive to provide services. As opposed to fee-for-service plans, in which each service is reimbursed, managed care removes incentives for overutilization.

The Big Picture Question: Does Managed Care Lower Overall Health Care Expenditures?

For this assignment, you will investigate the evidence for managed care plans reducing expenditures.

Why might a simple comparison of expenditures between fee-for-service and managed care plans be misleading? You may draw evidence from the private insurance industry of Medicare Advantage (relative to traditional Medicare) or both.