Structural incentives and adoption of medical technologies in HMO and fee-for-service health insurance plans.

Recent literature has argued that conventional fee-for-service (FFS) health insurance, as compared to managed care (HMO) insurance, may lead to the adoption of new technology that raises costs and reduces patient welfare. In this paper, we show that this result depends on an increasingly unrealistic key assumption-that FFS insurers cannot refuse to reimburse new technology. We also show that, when the assumption is changed, HMO insurers may adopt costly technologies that FFS insurers do not.