State Medicaid health maintenance organization policies and special-needs children

Little research has been done to ascertain what enrollment in a health maintenance organization (HMO) may mean for the care of Medicaid recipients who regularly require specialty health services. This article presents the results of a survey of all State Medicaid agencies regarding their policies for enrolling and serving special-needs children in HMOs. The survey revealed that many States have implemented one or more strategies to protect special-needs Medicaid recipients enrolled in HMOs. The survey results suggest, however, that such strategies are too limited in scope to ensure appropriate access to specialty services for all children with special health needs.     

The determinants of HMOs' contracting with hospitals for bypass surgery

Objective. Selective contracting with health care providers is one of the mechanisms HMOs (Health Maintenance Organizations) use to lower health care costs for their enrollees. However, are HMOs compromising quality to lower costs? To address this and other questions we identify factors that influence HMOs’ selective contracting for coronary artery bypass surgery (CABG). Study Design. Using a logistic regression analysis, we estimated the effects of hospitals’ quality, costliness, and geographic convenience on HMOs’ decision to contract with a hospital for CABG services. We also estimated the impact of HMO characteristics and market characteristics on HMOs’ contracting decision. Data Sources. A 1997 survey of a nationally representative sample of 50 HMOs that could have potentially contracted with 447 hospitals. Principal Findings. About 44 percent of the HMO‐hospital pairs had a contract. We found that the probability of an HMO contracting with a hospital increased as hospital quality increased and decreased as distance increased. Hospital costliness had a negative but borderline significant (0.10<p<0.05) effect on the probability of a contract across all types of HMOs. However, this effect was much larger for IPA (Independent Practice Association)‐model HMOs than for either group/staff or network HMOs. An increase in HMO competition increased the probability of a contract while an increase in hospital competition decreased the probability of a contract. HMO penetration did not affect the probability of contracting. HMO characteristics also had significant effects on contracting decisions. Conclusions. The results suggest that HMOs value quality, geographic convenience, and costliness, and that the importance of quality and costliness vary with HMO. Greater HMO competition encourages broader hospital networks whereas greater hospital competition leads to more restrictive networks.     

Health maintenance organizations: critical issues raised by restructuring delivery for health systems reform

In sum, the potential that managed care will grow under health systems reform creates an opportunity for the HMO industry but also serves as a challenge and a threat. Faced with greater scrutiny and growing demands, HMOs increasingly are being forced to demonstrate their potential and live up to their expectation. At the same time, the changing nature of the health care system creates a challenge for HMOs. Cost pressures create needs to review the entire delivery system, including the ambulatory component, with a focus on enhancing cost-effectiveness. Greater visibility also creates demands; growing market penetration argues for the creation of a new paradigm to define an appropriate structure for public accountability and management. Finally, the transformation of an HMO industry into a managed care industry is not without its risks as HMO performance becomes evaluated not only against itself but as part of the performance of the broader managed care industry in which HMOs have become embedded.     

Health care organization and incentives under emerging models of elderly health care

Health providers are rapidly establishing integrated delivery systems to prepare for managed care and capitation. However, acute and primary services for the elderly continue to be reimbursed through DRGs or fee-for-service (FFS) payments. Different incentives and care patterns are described for providers caring for elderly populations and younger, capitated groups. Pilot programs to provide Medicare services to the elderly may become models or foundations for a future, capitated health system for the elderly. Existing models of elderly health care that receive capitated payments are described in this article, including Social HMOs, TEFRA HMOs. and PACE programs. The potential significance of these programs for the synchrony of operational incentives, comprehensiveness of health care, volume of institutional services, and primary care orientation is analyzed.     

Do HMOs Have Monopsony Power?

Objective: To determine whether health maintenance organizations (HMOs) have monopsony power in the markets for ambulatory care and inpatient hospital services. Data Sources: A pooled time-series of data on all HMOs operating in the United States from 1985 through 1997. Information reported to InterStudy on HMO market areas and enrollment is linked to financial data reported to state regulators and county characteristics from the Area Resource File (ARF). Study Design: We use a two-stage design to test for the existence of monopsony power. First, we estimate regression equations for the prices paid by HMOs for ambulatory visits and inpatient hospital days. The key independent variable is a measure of the importance of an individual HMO as a buyer of ambulatory care or hospital services. Second, we estimate regressions for the utilization of ambulatory visits and inpatient hospital days per HMO enrollee, as a function of HMO buying power and other variables. Principal Findings: Increased HMO buying power is associated with lower price and higher utilization of hospital services. Buying power is not related to ambulatory visit price or utilization per member. Conclusions: Our findings are not consistent with the monopsony hypothesis. They suggest that managed care organizations have contributed to a welfare-increasing breakup of hospital monopoly power. The role of HMOs as buyers of ambulatory services is more complex. We discuss possible reasons why buying power may not affect price or utilization of ambulatory visits.     

Managed Care and Employer Premiums

This paper used 1993–1997 data from medium and large size employers to examine the effects of market wide managed care penetration on the premiums paid for employer sponsored health insurance. Regressions were run for weighted average single coverage premiums and for premiums on conventional, HMO, and PPO coverage. Four findings emerged from the analysis. First, increased managed care penetration had no statistically significant effect on weighted average employer premiums. Second, higher HMO penetration resulted in lower HMO premiums but higher conventional and PPO premiums. Third, higher PPO penetration had no statistically meaningful effects across plan types. Finally, the results depended critically on whether firms offered self-insured plans. Higher levels of HMO penetration led to smaller increases in conventional and PPO premiums for firms with self-insured plans, but also yielded smaller premium reductions from HMOs relative to those with purchased coverage.     

Gaining strategic advantages through partnerships with public health departments

Public health officials have advocated in public health and public policy journals for collaboration with private sector health care organizations for nearly a decade. There has been little written in the management literature on this topic, however. There are several important areas in which public health departments have expertise that could be valuable to private sector health care organizations, including health maintenance organizations (HMOs). These include the delivery of services in some geographic areas and to some special populations, provision of preventive and health promotion services to HMO members, performance of epidemiology services, assistance in accreditation, and repair of the damaged image of HMOs. HMOs and local health departments in many parts of the country are already entering into contracts for these purposes. Such partnerships between HMOs and local health departments can improve the health of the members of HMO plans and contribute to improving the health of the community.     

Effect of different types of Medicaid managed care on childhood immunization rates

Medicaid managed care can improve access to prevention services, such as immunization, for low-income children. The authors studied immunization rates for 7,356 children on Medicaid in three managed care programs: primary care case management (PCCM; n = 4,605), a voluntary HMO program (n = 851), and a mandatory HMO program (n = 1,900). Immunization rates (3:3:1 series) in PCCM (78%) exceeded rates in the voluntary HMO program (71%), which in turn exceeded those in the mandatory HMO program (67%). Adjusting for race, urban residence, and gender, compared to children in PCCM, children in the voluntary HMO program were less likely to complete the 3:3:1 series (OR = 0.75, CI = 0.63, 0.90), and children in the mandatory HMO program were even less likely to complete the series (OR = 0.59, CI = 0.51, 0.68). Results differed by individual HMOs. Monitoring of outcomes for all types of managed care by Medicaid agencies is imperative to assure better disease prevention for low-income children.     

Effects of Medicaid managed care programs on health services access and use

OBJECTIVE: To estimate the effects of Medicaid managed care (MMC) programs on Medicaid enrollees' access to and use of health care services at the national level. DATA SOURCES/STUDY SETTING: 1991-1995 National Health Interview Surveys (NHIS) and a 1998 Urban Institute survey on state Medicaid managed care programs. STUDY DESIGN: Using multivariate regression models, we estimated the effect of living in a county with an MMC program on several access and use measures for nonelderly women who receive Medicaid through AFDC and child Medicaid recipients. We focus on mandatory programs and estimate separate effects for primary care case management (PCCM) programs, health maintenance organization (HMO) programs, and mixed PCCM/HMO programs, relative to fee-for-service (FFS) Medicaid. We control for individual and county characteristics, and state and year effects. DATA COLLECTION/EXTRACTION METHOD: This study uses pooled individual-level data from up to five years of the NHIS (1991-1995), linked to information on Medicaid managed care characteristics at the county level from the 1998 MMC survey. PRINCIPAL FINDINGS: We find virtually no effects of mandatory PCCM programs. For women, mandatory HMO programs reduce some types of non-emergency room (ER) use, and increase reported unmet need for medical care. The PCCM/HMO programs increase access, but had no effects on use. For children, mandatory HMO programs reduce ER visits, and increase the use of specialists. The PCCM/HMO programs reduce ER visits, while increasing other types of use and access. CONCLUSIONS: Mandatory PCCM/HMO programs improved access and utilization relative to traditional FFS Medicaid, primarily for children. Mandatory HMO programs caused some access problems for women.     

Caring for patients under Medicaid mandatory managed care: perspectives of primary care physicians

The purpose of the study was to describe the experiences of primary care physicians caring for Medicaid recipients in a demonstration mandatory health maintenance organization (HMO) managed care program. The authors collected data through semistructured individual or focus group interviews with 14 physicians and through interviews with the chief executive officers of the three HMOs participating in the demonstration program. Interview questions, developed initially from a review of the literature, addressed physicians' experiences as primary care providers for Medicaid recipients under traditional fee-for-service and under managed care arrangements through the demonstration program. Four themes emerged: providers' hassles and burdens, the complex needs of Medicaid patients, improved access to care under managed care, and individual providers' disconnect from the processes of health policy implementation and program evaluation.     

HMOs and Managed Care: Implications for Rural Physician Manpower Planning*

ABSTRACT: American health care is changing dramatically. Health maintenance organizations (HMOs) and other managed care plans are central to this change. Today, the majority of Americans living in metropolitan areas receive their care from these types of plans. The goal of this article is two-fold. First, it will discuss the potential implications of HMOs and managed care for physician needs and supply in rural regions. Second, it will derive insight into alternative approaches for meeting rural health manpower needs by analyzing HMO staffing patterns. As HMOs and other managed care plans expand, rural physicians, their practices, and their patients will almost certainly be affected. As described in this paper, most of these effects are likely to be positive. The staffing patterns used by HMOs provide an interesting point of comparison for those responsible for rural health manpower planning and resource development. HMOs appear to meet the needs of their enrollees with significantly fewer providers than are available nationally or suggested by the federal standards. Moreover, HMOs make greater use of nonphysician providers such as nurse practitioners and physician assistants.     

Medigap premiums and Medicare HMO enrollment

OBJECTIVE: Markets for Medicare HMOs (health maintenance organizations) and supplemental Medicare coverage are often treated separately in existing literature. Yet because managed care plans and Medigap plans both cover services not covered by basic Medicare, these markets are clearly interrelated. We examine the extent to which Medigap premiums affect the likelihood of the elderly joining managed care plans. DATA SOURCES: The analysis is based on a sample of Medicare beneficiaries drawn from the 1996-1997 Community Tracking Study (CTS) Household Survey by the Center for Studying Health System Change. Respondents span 56 different CTS sites from 30 different states. Measures of premiums for privately-purchased Medigap policies were collected from a survey of large insurers serving this market. Data for individual, market, and HMO characteristics were collected from the CTS, InterStudy, and HCFA (Health Care Financing Administration). STUDY DESIGN: Our analysis uses a reduced-form logit model to estimate the probability of Medicare HMO participation as a function of Medigap premiums controlling for other market- and individual-level characteristics. The logit coefficients were then used to simulate changes in Medicare participation in response to changes in Medigap premiums. PRINCIPAL FINDINGS: We found that Medigap premiums vary considerably among the geographic markets included in our sample. Measures of premiums from different insurers and for different types of Medigap policies were generally highly correlated across markets. Our models consistently indicate a strong positive relationship between Medigap premiums and HMO participation. This result is robust across several specifications. Simulations suggest that a one standard deviation increase in Medigap premiums would increase HMO participation by more than 8 percentage points. CONCLUSIONS: This research provides strong evidence that Medigap premiums have a significant effect on seniors' participation in Medicare HMOs. Policy initiatives aimed at lowering Medigap premiums will likely discourage enrollment in Medicare HMOs, holding other factors constant. Although the Medigap premiums are just one factor affecting the future penetration rate of Medicare HMOs, they are an important driver of HMO enrollment and should be considered carefully when creating policy related to seniors' supplemental coverage. Similarly, our results imply that reforms to the Medicare HMO market would influence the demand for Medigap policies.     

Service-level selection by HMOs in Medicare

In the federal Medicare program, contracting health maintenance organizations (HMOs) are paid on a capitated basis. There has long been concern that an "adverse selection" of risks remain in the traditional fee-for-service (FFS) sector, since beneficiaries with low costs may leave the FFS sector and join the HMOs. The distortion associated with this form of selection is that health plans may design their mix of health care services in order to effectuate favorable selection. This paper scrutinizes patterns of HMO membership and costs by service in the FFS sector for evidence consistent with the hypothesis that HMOs engage in service-level product distortion. We develop a multi-service model of choice between FFS and HMOs and show that if the HMO sector is underproviding (overproviding) a service relative to the FFS sector, we should observe a positive (negative) correlation between the HMO market share and average costs of those remaining in the FFS sector. We estimate the correlation between the HMO market share and the average FFS costs for different health care services using Medicare data for 1996. We find evidence indicating that there exists significant service-level selection by HMOs.     

Trends in health care financing: opportunities for family planning agencies

In response to spiraling health care costs in the US, several alternative health care delivery systems have evolved. The delivery of subsidized family planning services in particular is being affected by declining levels of government support. The most rapidly growing of alternative delivery systems is the health maintenance organization (HMO). HMOs provide a voluntarily enrolled population a guaranteed, specific range of physician and hospital services in return for a fixed periodic payment. There are 3 types of HMO: the group model, in which doctors are members of a partnership or service corporation that contracts with employers or individuals to provide medical services; the taff model, in which physicians are direct employees of the HMO; and the independent practice association (IPA) model, a physicians' group that enters into a contract with an HMO and receives reimbursement for every patient seen. In 1986, over 21 million Americans were enrolled in approximately 262 HMOs around the country. HMOs are unequaled in their success at reducing hospital utilization; they have achieved savings of hospital costs of 20-40%. Another system for delivering and financing health care is the preferred provider organization (PPO) under which patients are assigned to a designated panel of health care providers who offer services according to a discounted fee schedule. New hybrid systems that combine many of the features of both systems are emerging. Most of the newly organized health care delivery systems described focus on utilization control and keeping costs down. A common way of ensuring coordinated health care delivery is through primary care case management. To initiate or establish relationships with HMOs or other health care delivery systems, family planning agencies should consider such activities as: undertaking surveys to study the market; training new employees on developments in health care financing; and recruiting board members with HMO experience.     

HMOs and Managed Care: Implications for Rural Physician Manpower Planning*

American health care is changing dramatically. Health maintenance organizations (HMOs) and other managed care plans are central to this change. Today, the majority of Americans living in metropolitan areas receive their care from these types of plans. The goal of this article is two-fold. First, it will discuss the potential implications of HMOs and managed care for physician needs and supply in rural regions. Second, it will derive insight into alternative approaches for meeting rural health manpower needs by analyzing HMO staffing patterns. As HMOs and other managed care plans expand, rural physicians, their practices, and their patients will almost certainly be affected. As described in this paper, most of these effects are likely to be positive. The staffing patterns used by HMOs provide an interesting point of comparison for those responsible for rural health manpower planning and resource development. HMOs appear to meet the needs of their enrollees with significantly fewer providers than are available nationally or suggested by the federal standards. Moreover, HMOs make greater use of nonphysician providers such as nurse practitioners and physician assistants.     

Social Health Maintenance Organizations: assessing their initial experience.

The Social/Health Maintenance Organization (S/HMO) is a four-site national demonstration. This program combines Medicare Part A and B coverage, with various extended and chronic care benefits, into an integrated health plan. The provision of these services extends both the traditional roles of HMOs and that of long-term care community-service case management systems. During the initial 30 months of operation the four S/HMOs shared financial risk with the Health Care Financing Administration. This article reports on this developmental period. During this phase the S/HMOs had lower-than-expected enrollment levels due in part to market competition, underfunding of marketing efforts, the limited geographic area served, and an inability to differentiate the S/HMO product from that of other Medicare HMOs. The S/HMOs were allowed to conduct health screening of applicants prior to enrolling them. The number of nursing home-certifiable enrollees was controlled through this mechanism, but waiting lists were never very long. Persons joining S/HMOs and other Medicare HMOs during this period were generally aware of the alternatives available. S/HMO enrollees favored the more extensive benefits; HMO enrollees considerations of cost. The S/HMOs compare both newly formed HMOs and established HMOs. On the basis of administrator cost, it is more efficient to add chronic care benefits to an HMO than to add an HMO component to a community care provider. All plans had expenses greater than their revenues during the start-up period, but they were generally able to keep service expenditures within planned levels.     

Use of Social Services by Pregnant Medicaid Eligible Women in Baltimore

Objectives: To use linked health and social service databases to determine differences in the use of social services by pregnant women in different managed care systems. Methods: Comparison of service use by women enrolled in a fee-for-service primary care case management program (Maryland Access to Care or MAC), in a capitated health maintenance organization (HMO), or not assigned to managed care using six state databases. Participants included 5181 women receiving Medical Assistance (MA) and delivering in Baltimore City in 1993. Outcome measures were receipt of WIC, AFDC, and Food Stamps. Results: The overall proportions of women receiving WIC, AFDC, and Food Stamps at delivery were 52.7%, 89.2%, and 62.7%, respectively. Women enrolled in an HMO at delivery were less likely to be receiving WIC (adjusted odds ratios, 0.8, 95% CI, 0.69 to 0.93), AFDC (OR, 0.20; CI, 0.03 to 0.43 for women with prior children and OR 0.13; CI, 0.09 to 0.20 for women without prior children), and Food Stamps (OR 0.77; CI, 0.59 to 0.95 for women with prior children and OR, 0.49; CI, 0.35 to 0.67 for women without prior children) than their MAC counterparts. Women not assigned to managed care also generally were less likely than their MAC counterparts to receive WIC (OR 0.55; CI, 0.46, 0.66), AFDC (OR 1.07; CI 0.83,1.30 for women with prior children and OR 0.24; CI 0.18,0.34 for women without prior children), and Food Stamps (OR 0.31; CI 0.08, 0.55 for women with prior children and OR 0.31; CI 0.23, 0.41 for women without prior children). Conclusions: Although many low-income pregnant women qualify for select social services, receipt of WIC and Food Stamps was low. Increasing efforts are needed by managed care systems and public health agencies to ensure delivery of appropriate services for women.     

Structure and performance of health maintenance organizations: a review

During the past decade, the number of and enrollment in health maintenance organizations (HMOs) have grown dramatically. In 1980, 236 HMOs served 9 million members. By 1989, there were 591 HMOs with over 34 million enrollees. New HMOs are very different in organizational structure and arrangements than the HMOs that were operating in the 1970s, and the health care markets they serve also have changed substantially with the increasing supply of physicians and declining hospital admissions. Consequently, the accepted research findings on HMO performance in the 1970s may have only limited usefulness in understanding the role of HMOs and their effect on today's market for health services. This is of particular concern as the Health Care Financing Administration considers the further expansion of managed care options available to Medicare and Medicaid beneficiaries. In this article, the author reviews evidence on the relationship between HMO organizational arrangements and performance, and the trends within the HMO industry toward new organizational structures. The implications for Medicare and Medicaid risk contracting are also examined.     

The effect of market structure on HMO premiums

We examine the effects of HMO market structure on HMO premiums from 1988 to 1991. More competition, measured by the number of HMOs in the market area, reduces HMO premiums. Although this effect does not appear for IPAs before the highest level of competition is reached, it appears throughout the competitive range for Group HMOs. More market penetration, measured by the percent of the market area population enrolled in HMOs, reduces premiums for IPAs. Since the goal of managed competition is to reduce health care costs by creating competition among managed health care plans, our results offer encouragement for managed competition advocates.     

Trends in Managed Care Cost Containment: An Analysis of the Managed Care Backlash

Consumer dissatisfaction with the quality and limitations of managed health care led to rapid disenrollment from managed care plans and demands for regulation between 1998 and 2003. Managed care organizations, particularly health maintenance organizations (HMOs), now face quality and coverage mandates that restrict them from using their most aggressive strategies for managing costs. This paper examines the effect of this backlash on managed care's ability to contain costs among short‐term, non‐federal hospitals between 1998 and 2008. The results show that the impact of increased HMO penetration on inpatient costs reversed over the study period, but HMOs were still effective at containing outpatient costs. These findings have important policy implications for understanding the continuing role that HMOs should play in cost containment policy and for understanding how effective the latest wave of cost containment institutions may perform in heavily regulated markets. Copyright © 2014 John Wiley & Sons, Ltd.