evolving, however, toward more organized arrangements that include some form of involvement of the providers in the risk assumed by the plan. That risk derives from the plan's agreement to deliver a defined package of services for a fixed amount per capita for an enrolled population, such as with the various forms of health maintenance organizations (HMOs). The involvement of providers in the success of the plan is intended to offer incentives for containing costs while maintaining patient satisfaction with the care received.
Bailit (1995) estimates that in 1994, of a total of 180 million insured by private plans, enrollment in managed care totaled about 115 million persons. This estimate uses a definition of managed care that includes HMOs; "point of service" plans that combine HMO enrollment with an option to use providers outside the plan for an additional cost; and PPOs (preferred provider organizations), which offer a less structured arrangement that presents the enrolled person with a financial incentive to choose providers from a preferred list. He estimates that the number of individuals enrolled in managed care in the private market increased about 10 percent from 1993 to 1994.
Enrollment in managed care in the public programs in 1994 was much lower than in private plans, at about 8 percent of Medicare beneficiaries and about 25 percent of those eligible for Medicaid. The rate of increase is greater, however, especially in the Medicaid program. Forty-two states are implementing some form of managed care in their Medicaid programs. Arizona (100 percent), Tennessee (74.9 percent), and Oregon (21.9 percent) lead the way in the percentage of Medicaid dollars spent through managed care arrangements, but many other states are moving aggressively in this direction (Lewin-VHI, 1995). Current congressional deliberations on the future course of the Medicare program may result in further encouragement of enrollment of Medicare beneficiaries in capitated managed care plans.
Of particular significance for this study is that one major objective of most managed care plans is to reduce the use of specialists and to increase the use of primary care clinicians. The path to specialized care in most plans is through the primary care physician or other primary care clinician. Managed care, therefore, enhances the power of the primary care clinician to determine the services provided and by whom. The increasing future opportunities for primary care clinicians and the contrasting decline in the need for specialists have been described by Weiner and others in projecting future physician requirements (Weiner, 1993; COGME, 1995; PPRC, 1995).
The growth of managed care, although substantial, is taking place predominantly in large and medium-sized markets. Those providing services in rural areas are anticipating the move of managed care into their communities, but managed care was not yet evident in the rural areas visited by the committee.
The development of managed care varies widely by region. The most significant market penetration has been in the West, the upper Middle West, and the Northeast. The Southeast and South Central regions have less managed care at