Prologue: Health care costs grew by 9.7 percent in 1987, topping $500 million in overall spending. Insurance premiums continue to rise (12 percent between 1987 and 1988). In an attempt to keep rising health costs under control, employers and insurance companies have instituted mechanisms such as managed care, second surgical opinions, and incentives to use generic drugs. Yet, the data show that these efforts have been anything but uniform across the country. Indeed, in many areas, benefits and costs have expanded. “For all the rhetoric we've heard, … the bulk [of employers] are sitting on their hands,” economist Michael Morrisey said. In this paper, Morrisey and fellow economist Gail Jensen examine private insurance coverage by region, trying to glean some insight into why use of health services varies drastically across the United States. Explained Morrisey, “It strikes us that … some of the variation in utilization across regions can be explained by differences in insurance coverage.” While the authors ...