A randomized trial to evaluate the effectiveness of a Medicaid HMO

The value of health-care services used by AFDC Medicaid patients receiving care in a voluntary enrollment HMO is contrasted with that of health care services used by Medicaid patients receiving fee-for-service (FFS) care. The randomized assignment of Medicaid recipients to the HMO or to FFS allows the authors to conclude that the apparent lower use of HMO enrollees results from the HMO's selection of patients with lower needs for care rather than from technical efficiency. Patients had lower use while in the HMO, but disenrollees and those who refused enrollment had significantly higher use than FFS participants. In contrast to the effect of HMOs on non-Medicaid populations, the Medicaid HMO studied provided significantly fewer outpatient services, but the same level of inpatient services as the FFS sector. Overall, voluntary enrollment of Medicaid eligibles into the HMO resulted in higher state expenditures for Medicaid because of favorable selection.     

State HMO Accreditation and External Quality Review Requirements: Implications for HMOs Serving Rural Areas

The purpose of this article is to analyze state regulations regarding health maintenance organization (HMO) accreditation and external quality review; to briefly describe states' experiences implementing these regulations; and to discuss the implications of these regulations for HMOs serving rural areas. The incorporation of HMO accreditation and external quality review requirements into state HMO licensure processes and state employee contracting raises many policy issues, including several that are especially relevant to HMOs serving rural populations. A key issue is whether the linkage of accreditation and external quality review requirements to HMO licensure will be an additional deterrent to the development of new HMOs or the expansion of existing HMOs into rural areas. Other issues relate to the costs and benefits of accreditation for HMOs serving rural populations, and the potential impact of HMO accreditation requirements on efforts to expand managed care enrollment of rural Medicaid and Medicare beneficiaries and rural state employees. Nine states were identified that have regulations requiring HMOs to seek accreditation or to undergo an external quality review as a condition of licensure. Four states were identified as implementing requirements that an HMO be accredited in order to serve state employees. Many of these requirements are still in the early stages of implementation. Several states with the requirements have significant rural populations and will provide opportunities to evaluate their impact on HMOs serving rural areas, rural providers and rural consumers.     

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.     

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.     

United Health Care of North Carolina

Physicians. While many of the rural physicians interviewed in North Carolina would prefer not to deal with HMOs at all, they are generally positive about their relationships with United Healthcare of North Carolina. These physicians chose to contract with the HMO to obtain new patients and to retain existing patients. They are satisfied that their participation has accomplished these goals. Their reimbursement arrangements are easy to understand, and most view the payment amounts as satisfactory. The physicians regard the size of the HMOs provider network and the open-access structure of the HMO as positive features that allow them to make referrals without the restrictions imposed by some other HMOs. To date, participation in United Healthcare of North Carolina has imposed few burdens on rural physicians. They are reimbursed on a fee-for-service basis, and their financial risk has been limited. They do not perceive that the HMO has had a significant impact on the way they practice medicine. This situation may change in the future if enrollees from United Healthcare of North Carolina and other HMOs constitute a greater proportion of their practices and if these HMOs move toward capitated reimbursement. The attitudes of rural physicians toward United Healthcare of North Carolina also may change if the HMO attempts to more actively manage the care provided to its enrollees. United Healthcare of North Carolina plans to eliminate physician risk sharing (in the form of withholds) and replace it with bonus payments. As one HMO executive said, the plan wants to “put incentives where they belong.” If rewarding good performance instead of punishing poor performance yields intended consequences, it may provide United Healthcare of North Carolina with a competitive advantage in rural areas. First, because such a change offers an opportunity to augment a physician's income instead of diminishing it, physicians might prefer to contract with the HMO rather than with other HMOs. Second, because bonus payments depend on performance, United Healthcare of North Carolina providers may produce outcomes that allow reductions in premium prices or expansions of benefits compared with the HMOs competitors. Hospitals. Rural hospitals cited similar motivations (attracting and retaining business) for participating in United Healthcare of North Carolina and similar levels of satisfaction with their relationships. In their experiences, the HMO has been fair in its negotiations and reimbursement. Although they contract with multiple HMOs, these rural hospitals do not perceive that HMO participation has had a significant impact on hospital operations. Because these hospitals, like many rural hospitals, rely heavily on Medicare (and, to a lesser degree, on Medicaid) as revenue sources, the future impact of managed care on their operations will depend in large part on the extent to which significant proportions of their Medicare and Medicaid patients enroll in HMOs.     

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.     

Quality oversight in medicaid primary care case management programs

As health maintenance organizations (HMOs) have curtailed participation in Medicaid, enrollment in primary care case management (PCCM) programs has grown. To examine state Medicaid agencies' monitoring of PCCM and HMO programs, we surveyed Medicaid agency directors of forty-six states and the District of Columbia. Agencies were less likely to collect performance data in PCCM programs than in HMO programs. Few PCCM programs reported performance results for the public or providers. Reporting states tended to emphasize utilization results over quality-measure results. Despite growing enrollment, PCCM programs appear less likely to use the quality-oversight strategies employed by Medicaid health plans.     

Financial performance and participation in Medicaid and Medi-Cal managed care

This article assesses the participation and the financial performance of licensed health maintenance organization (HMOs) in the Medicaid market. The study found that participation by Medicaid Dominant plans has more than doubled from 11 percent in 1992 to 23 percent in 1998 while Medicaid membership in Commercial Dominant plans declined from 71 percent in 1994 to 51 percent in 1998. Both participating and non-participating plans incurred operating losses in 1998. Medi-Cal participating plans had higher operating margins than Medicaid participating plans throughout the United States. Interviews with key informants express concern about competence in program management, rate adequacy, decline in Medicaid enrollment, and turbulence forces of managed care market on Medicaid programs.     

Medicaid managed care: the last bastion of the HMO?

States rely on health maintenance organizations (HMOs) for their Medicaid beneficiaries because they offer guaranteed access to comprehensive benefits at a predictable cost. This is true despite movement away from HMOs, or at least the more restrictive variants, in the private sector. Plans that focus on Medicaid are becoming more central to states' programs as commercial plans exit. Publicly traded, Medicaid-focused plans are also emerging. Medicaid participating plans are aggressively managing costs and care, contrasting sharply with commercial insurance where the trend is toward less intrusive managed care. In this context, state Medicaid managed care programs are facing important policy challenges related to plan participation, mainstreaming, and product design.     

North Med HMO

NorthMed HMO is viewed by its owners as an important vehicle for integrating rural providers in northern Michigan. Through the HMO, rural providers hope to be able to contract with government programs, while retaining private-sector patients through employer contracts. For most rural providers, NorthMed HMO does not yet represent a major source of revenues. However, the HMO is about to embark on an expansion that, if successful, will increase its importance to providers and its visibility within the service area. This planned expansion is likely to place severe demands on the financial and managerial resources of the organization. Physicians. NorthMed HMO offers a model of a rural-based HMO in which physicians play a dominant role. Rural physicians in northern Michigan own Northern Physician Organization, a physician organization which, in turn, is the major stockholder in NorthMed HMO. The geographic expansion of the HMO is tied, in large part, to the geographic expansion of the membership of Northern Physician Organization. NorthMed HMO enters new communities when a significant number of physicians in those communities joins Northern Physician Organization. When physicians purchase ownership shares in the physician organization, they indirectly become part owners of the HMO. Participation in NorthMed HMOs network has offered limited benefits to rural physicians at a minimal cost. By being a participating provider in NorthMed HMO, physicians can remain available to their patients who choose the HMO as a health insurance option. NorthMed HMO has not been aggressive in attempts to influence physician practices, and physicians bear no financial risk as a result of their participation. Participating physicians are paid under a fee-for-service arrangement with no risk sharing related to hospital use. Indirectly, through Northern Physician Organization's ownership role in the HMO, physicians have the potential to gain financially from NorthMed HMOs growth if the HMO were to be sold, but this diffuse incentive is unlikely to have an impact on physicians' day-to-day behavior. The relationship between NorthMed HMO and its physicians is likely to change soon. The number of HMO patients seen by physicians will increase if the HMO succeeds in securing Medicare and Medicaid contracts, and if its new point-of-service option attracts additional private-sector enrollees. NorthMed HMO plans to contract with Northern Physician Organization on a capitated basis to serve the HMOs enrollees, an arrangement that would place financial responsibility for managing care delivery more directly on participating physicians. This is likely to result in more aggressive utilization review and quality assurance measures. In effect, rural physicians will be faced with a difficult trade-off that they have, to this point, largely avoided: They will be asked to accept financial risk and oversight of their practices in return for the assurance that their HMO can successfully compete for local patients (and their insurance dollars) against health plans that are owned and managed by entities located outside of their rural area.     

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.     

A Comparison of Practice Characteristics Among Physician Assistants in HMO and Non-HMO Settings

Abstract: Health maintenance organizations (HMOs) have continued to grow in both number and enrollment. A major goal of HMOs and other managed care structures is the containment of health care costs. The utilization of physician assistants (PAS) would seem to nicely mesh with these organizations. This study examines the roles, productivity, and clinical autonomy of PAS in HMO settings. In this examination, PAS working with HMOs are compared with PAS working in non-HMO settings, both urban and rural. The results of the study document that PAS working in HMO environments primarily focus on ambulatory care, with few inpatient or administrative responsibilities. Further, PAS working in HMO settings have a highly autonomous practice with approximately 70 percent of patient visits never being discussed with a supervising physician. Lastly, the results suggest that many of the attributes of an HMO practice are found in rural practice as well. Consequently, as HMOs reach out farther into rural America, PAS in rural settings will have fewer practice modifications to make than urban PAS in their transition to practice in an HMO modality.     

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.     

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.     

Medicaid Managed Care and Health Care for Children

Objective. Many states expanded their Medicaid managed care programs during the 1990s, causing concern about impacts on health care for affected populations. We investigate the relationship between Medicaid managed care enrollment and health care for children.
Data Sources and Measures. Repeated cross-sections of Medicaid-covered children under 18 years of age from the 1996/1997 and 1998/1999 Community Tracking Study Household Surveys ( n =2,602) matched to state-year CMS Medicaid managed care enrollment data. For each individual, we constructed measures of health care utilization (provider and emergency department visits, hospitalizations, surgeries); health care access (usual source of care, unmet medical needs, put-off needed care); and satisfaction (satisfaction overall, with doctor choice, and with last visit).
Study Design. Regression analysis of the relationship between within-state changes in Medicaid managed care enrollment rates and changes in mean utilization, access, and satisfaction measures for children covered by Medicaid, controlling for a range of potentially confounding factors.
Principal Findings. Increases in Medicaid health maintenance organization (HMO) enrollment are associated with less emergency room use, more outpatient visits, fewer hospitalizations, higher rates of reporting having put off care, and lower satisfaction with the most recent visit. Medicaid primary care case management (PCCM) plans are associated with increases in outpatient visits, but also with higher rates of reporting unmet medical needs, putting off care, and having no usual source of care.
Conclusions. Both Medicaid HMO and PCCM plans can have important impacts on health care utilization, access, and satisfaction. Some impacts may be positive (e.g., less ED use and more outpatient provider use), although concern about increasing challenges in access to care and satisfaction is also warranted.     

Effects of CAHPS health plan performance information on plan choices by New Jersey Medicaid beneficiaries

OBJECTIVE: To assess the effects of CAHPS health plan performance information on plan choices and decision processes by New Jersey Medicaid beneficiaries. DATA SOURCES/STUDY SETTING: The study sample was a statewide sample of all new Medicaid cases that chose Medicaid health plans during April 1998. The study used state data on health maintenance organization (HMO) enrollments and survey data for a subset of these cases. STUDY DESIGN: An experimental design was used, with new Medicaid cases randomly assigned to experimental or control groups. The experimental group received a CAHPS report along with the standard enrollment materials, and the control group did not. DATA COLLECTION: The HMO enrollment data were obtained from the state in June 1998, and evaluation survey data were collected from July to October 1998. PRINCIPAL FINDINGS: No effects of CAHPS information on HMO choices were found for the total sample. Further examination revealed that only about half the Medicaid cases said they received and read the plan report and there was an HMO with dominant Medicaid market share but low CAHPS performance scores. The subset of cases who read the report and did not choose this dominant HMO chose HMOs with higher CAHPS scores, on average, than did those in an equivalent control group. CONCLUSIONS: Health plan performance information can influence plan choices by Medicaid beneficiaries, but will do so only if they actually read it. These findings suggest a need for enhancing dissemination of the information as well as further education to encourage informed choices.     

Happy with health care?

The American Association of Health Plans (the main HMO trade association), in making the case against patients' rights legislation, points to polling data that show Americans are basically satisfied with managed care plans. Although large majorities, including those with HMOs, do say they are "satisfied" with their health care plans, HMO members are less satisfied than members of other types of plans. And if we look beyond personal-satisfaction ratings, we find plenty of evidence for public concern about HMOs in particular and the health care system in general. Americans are supportive of HMO regulation, and despite their willingness to say they are "satisfied" with their health care plans, they harbor a lot of worries about the future--treatment that could be denied them, costs that could ruin them, and loss of coverage. The public sees the need for major change not just in HMOs but in the health care system as a whole. As HMO lobbyists scramble for new arguments against legislation, they will likely persist in misrepresenting and misusing polling data to make their case.     

Rocky Mountain HMO

Rocky Mountain HMOs two-decade history of success on the western slope of Colorado is due not only to the conscious decisions of its managers but also to the geography and demography of its primary market area. The managers of Rocky Mountain HMO sought to build a managed care plan that was physician friendly and that had a local face, explicitly recognizing that their success hinged on the ability to satisfy the needs of both providers and purchasers. Isolated by the Rocky Mountains from major population centers of the state and located beyond the pull of the Salt Lake City, Utah, market to the west, Rocky Mountain HMO had no real managed care competitors on the western slope during its formative years. This lack of competition, combined with the ability to defuse physician resistance to managed care and to provide a satisfactory array of benefits at a reasonably low price, gave Rocky Mountain HMO an impressive share of the western slope health insurance market. Rocky Mountain HMOs expansion plans, in part, are a reaction to real and anticipated increases in managed care competition along the western slope. To maintain competitive premium rates, Rocky Mountain HMO executives perceive the need to spread the fixed costs of its infrastructure by increasing enrollment. As Rocky Mountain HMO expands its market to include all areas of the state, three issues relative to rural areas emerge. First, will Rocky Mountain HMO be able to import its successful rural HMO development strategies to other rural areas of the state at the same time it attempts to develop urban markets, or will rural expansion areas be treated in the same manner as urban expansion areas? Second, what are the consequences of the HMO's change in strategic focus for Rocky Mountain HMO providers and consumers on the western slope? Third, how will increased competition on the western slope affect Rocky Mountain HMO's relationship with its providers and consumers?     

National and state trends in enrollment and spending for dual eligibles under age 65 in Medicaid managed care

BackgroundTo reduce costs and improve care, states are increasingly enrolling individuals with disabilities in Medicaid managed care. Many states allow or require adults who are dually eligible for Medicaid and Medicare to enroll in these plans.ObjectiveThis study (1) quantifies changes in enrollment by managed care arrangement for duals under age 65, between 2005 and 2008 and (2) compares enrollment and spending between dual eligibles and Medicaid-only beneficiaries.MethodsWe used Medicaid Analytic eXtract data to compare the Medicaid enrollment and spending for all-year, full-benefit dual eligibles ages 21–64 with that of Medicaid-only Supplemental Security Income (SSI) and disabled beneficiaries. The study population was classified into 9 types of managed care to quantify enrollment and calculate expenditures by year.ResultsNationwide, the proportion of adult duals in managed care increased from 2005 to 2008, with the expansion of prepaid health plans (PHPs) (31.0%–46.6%), particularly behavioral health PHPs, driving the increase. In 2008, Medicaid-only disabled adults were three times as likely as dual adults to enroll in comprehensive managed care (CMC) (35.1% versus 11.7%). Average Medicaid expenditures per enrollee differed markedly by managed care arrangement and state.ConclusionsFrom 2005 to 2008, there was little expansion of CMC among adult duals, while the use of PHPs to cover carved out services increased greatly. New federal initiatives aim to reduce barriers to enrolling duals into comprehensive, integrated managed care. With expanded enrollment, it will be important to monitor enrollment and evaluate whether integration improves care.     

The effect of HMOs on premiums in employment-based health plans.

This study documents the effect of HMOs on premiums in employment-based health plans. We analyzed a survey of Minnesota employers conducted in 1986. Among 922 usable observations, 239 firms offered HMOs in addition to fee-for-service (FFS) health plans. We estimated an equation for the probability of offering an HMO, followed by equations for HMO enrollment share, and HMO and FFS premiums. The weighted average HMO and FFS premium in firms that offer HMOs was compared to the premium of FFS-only firms. We found that offering an HMO raises the average premium for family coverage health insurance by $25.14 per month and for single coverage by $3.68 per month. This effect was smaller for firms in the Twin Cities metropolitan area. HMOs may be viewed as a progressive and innovative health care benefit, but they are likely to increase firms' health insurance premiums.