DRG dumping?

Recently proposed HMO regulations have involved mandates of two forms: (1) minimum quality standards, and (2) mandated increases in access to speciality care. I show that piecemeal regulation, which uses only one of either mandate (1) or (2), may decrease welfare for all HMO consumers. Under full regulation using both (1) and (2), if the minimum standard is set too low, say, due to political bargaining, a floor-to-ceiling effect occurs. This involves HMOs setting quality at the minimum standard, even when their quality would be above the standard in an unregulated market. Finally, I show how premiums may either increase or decrease under a mandate.

Costs and Cost Analysis↗