Enrollee health status under Medicare risk contracts: an analysis of mortality rates.

Previous studies comparing the health status of Medicare beneficiaries enrolled under HMO risk contracts to that of Medicare beneficiaries in fee-for-service (FFS) have generally focused on demonstration projects conducted before 1985. This study examines mortality rates in 1987 for approximately 1 million aged Medicare beneficiaries enrolled in 108 HMOs. We estimated adjusted mortality ratios (AMR) for each HMO and across all HMOs, by dividing the actual number of deaths among HMO enrollees by the "expected" number of deaths. The expected number of deaths was based on death rates among local FFS populations, adjusting for age, sex, Medicaid buy-in status, and institutional status. The AMR for all HMO enrollees pooled together was 0.80. For persons newly enrolled in 1987, the AMR was 0.69; in general, AMRs were higher for beneficiaries who had been enrolled for longer periods of time. Among individual HMOs, none exhibited an AMR substantially above 1.00. Regression analysis indicated lower AMRs for staff model HMOs than for either IPA or group models. Low mortality among Medicare HMO enrollees is consistent with favorable selection or with improvements in the health status of enrollees due to better access or quality of care in HMOs. In either case, health status differences between HMO enrollees and FFS beneficiaries have implications for the appropriateness of Medicare's Adjusted Average Per Capita Cost (AAPCC) payment formula for HMOs.     

The effect of HMOs on the inpatient utilization of medicare beneficiaries

OBJECTIVE: To determine the effect of joining HMOs (health maintenance organizations) on the inpatient utilization of Medicare beneficiaries. DATA SOURCES: We linked enrollment data on Medicare beneficiaries to patient discharge data from the California Office of Statewide Health Planning and Development (OSHPD) for 1991-1995. DESIGN AND SAMPLE: A quasi-experimental design comparing inpatient utilization before and after switching from fee-for-service (FFS) to Medicare HMOs; with comparison groups of continuous FFS and HMO beneficiaries to adjust for aging and secular trends. The sample consisted of 124,111 Medicare beneficiaries who switched from FFS to HMOs in 1992 and 1993, and random samples of 108,966 continuous FFS beneficiaries and 18,276 continuous HMO enrollees yielding 1,227,105 person-year observations over five years. MAIN OUTCOMES MEASURE: Total inpatient days per thousand per year. PRINCIPAL FINDINGS: When beneficiaries joined a group/staff HMO, their total days per year were 18 percent lower (95 percent confidence interval, 15-22 percent) than if the beneficiaries had remained in FFS. Total days per year were reduced less for beneficiaries joining an IPA (independent practice association) HMO (11 percent; 95 percent confidence interval, 4-19 percent). Medicare group/staff and IPA-model HMO enrollees had roughly 60 percent of the inpatient days per thousand beneficiaries in 1995 as did FFS beneficiaries (976 and 928 versus 1,679 days per thousand, respectively). In the group/staff model HMOs, our analysis suggests that managed care practices accounted for 214 days of this difference, and the remaining 489 days (70 percent) were due to favorable selection. In IPA HMOs, managed care practices appear to account for only 115 days, with 636 days (85 percent) due to selection. CONCLUSIONS: Through the mid-nineties, Medicare HMOs in California were able to reduce inpatient utilization beyond that attributable to the high level of favorable selection, but the reduction varied by type of HMO.     

Comparing mortality and time until death for medicare HMO and FFS beneficiaries

OBJECTIVE: To compare adjusted mortality rates of TEFRA-risk HMO enrollees and disenrollees with rates of beneficiaries enrolled in the Medicare fee-for-service sector (FFS), and to compare the time until death for decedents in these three groups. DATA SOURCE: Data are from the 124 counties with the largest TEFRA-risk HMO enrollment using 1993-1994 Medicare Denominator files for beneficiaries enrolled in the FFS and TEFRA-risk HMO sectors. STUDY DESIGN: A retrospective study that tracks the mortality rates and time until death of a random sample of 1,240,120 Medicare beneficiaries in the FFS sector and 1,526,502 enrollees in HMOs between April 1, 1993 and April 1, 1994. A total of 58,201 beneficiaries switched from an HMO to the FFS sector and were analyzed separately. PRINCIPAL FINDINGS: HMO enrollees have lower relative odds of mortality than a comparable group of FFS beneficiaries. Conversely, HMO disenrollees have higher relative odds of mortality than comparable FFS beneficiaries. Among decedents in the three groups, HMO enrollees lived longer than FFS beneficiaries, who in turn lived longer than HMO disenrollees. CONCLUSIONS: Medicare TEFRA-risk HMO enrollees appear to be, on average, healthier than beneficiaries enrolled in the FFS sector, who appear to be in turn healthier than HMO disenrollees. These health status differences persist, even after controlling for beneficiary demographics and county-level variables that might confound the relationship between mortality and the insurance sector.     

Including hospice in Medicare capitation payments: would it save money?

Hospice services received by Medicare risk-based health maintenance organization (HMO) enrollees are paid on a non-capitated basis, creating financial incentives for HMOs to encourage their terminally ill patients to elect hospice. Using Medicare administrative records for 1998, we found that hospice enrollment in the last month of life was significantly higher among HMO enrollees than among beneficiaries in fee-for-service (FFS). However, low mortality rates among HMO enrollees produced similar population-based rates of hospice use in the HMO and FFS sectors. Simulations showed that including hospice care under capitation payments in July 1998 would have produced very small savings for Medicare.     

Selection experiences in Medicare HMOs: pre-enrollment expenditures

Using 1993 and 1994 data, the authors examine whether beneficiaries who enroll in a Medicare health maintenance organization (HMO), including those enrolling for only a short period of time, have lower expenditures than continuous fee-for-service (FFS) beneficiaries the year prior to enrollment. We also test whether biased selection varies by the level of HMO market penetration and the rate of market-share growth. We find favorable selection associated with enrollment into Medicare HMOs, which declines as market share increases but does not disappear. Among short-term enrollees, we find unfavorable selection, however, selection bias was not sensitive to market characteristics.     

An Analysis of Unobserved Selection in an Inpatient Diagnostic Cost Group Model

The study assesses unobserved selection bias in an inpatient diagnostic cost group (DCG) model similar to Medicare's Principal Inpatient Diagnostic Cost Group (PIP-DCG) risk adjustment model using a unique data set that contains hospital discharge records for both FFS and HMO Medicare beneficiaries in California from 1994 to 1996. We use a simultaneous equations model that jointly estimates HMO enrollment and subsequent hospital use to test the existence of unobserved selection and estimate the true HMO effect. It is found that the inpatient DCG model does not adequately adjust for biased selection into Medicare HMOs. New HMO enrollees are healthier than FFS beneficiaries even after adjustment for the included PIP-DCG risk factors. A model developed over an FFS sample ignoring unobserved selection overestimates hospital use of new HMO enrollees by 28 percent compared to their use if they had remained in FFS. Models that better captures selection bias are needed to reduce overestimation of Medicare HMO enrollees' resource use.     

Managed care and medical expenditures of Medicare beneficiaries

This paper investigates the impact of Medicare HMO penetration on the medical care expenditures incurred by Medicare fee-for-service (FFS) enrollees. We find that increasing penetration leads to reduced spending on FFS beneficiaries. In particular, our estimates suggest that the increase in HMO penetration during our study period led to approximately a 7% decline in spending per FFS beneficiary. Similar models for various measures of health care utilization find penetration-induced reductions consistent with our spending estimates. Finally, we present evidence that suggests our estimated spending reductions are driven by beneficiaries who have at least one chronic condition.     

Use of preventive care services,beneficiary characteristics,and Medicare HMO performance

Medicare health maintenance organization (HMO) enrollees use more preventive care services than their fee-for-service (FFS) counterparts. This may be because those who enroll in HMOs have characteristics that make them more disposed to use preventive care. To investigate this possibility, we examined the use of four preventive care services by respondents to the 1996 Medicare Current Beneficiary Survey (MCBS). Unadjusted preventive care use rates for HMO enrollees were slightly higher than rates for non-HMO enrollees with private supplemental insurance. However, after adjusting for enrollee characteristics (sociodemographics, health behaviors, health status, and functioning) we found that preventive care use rates for HMO enrollees were substantially higher--consistent with HMO enrollees being less disposed to use preventive care. In comparing preventive care service rates across groups, managers and policymakers may want to consider taking into account beneficiary characteristics that are correlated with the disposition to use preventive care.     

The quality of ambulatory care in Medicare health maintenance organizations.

The quality of ambulatory care received by Medicare recipients who enrolled in health maintenance organizations (HMOs) was compared to the care received by fee-for-service (FFS) Medicare recipients, in a quasi-experimental, non-randomized design. Both samples were drawn from the four major geographic areas in the country, and included two types of HMO practices: staff/group models, and independent practice associations (IPAs). A panel of expert physicians developed criteria for evaluating ambulatory care, and medical record abstractions using these criteria were performed on 1,590 outpatient records: 777 FFS and 813 HMO (441 staff/group, 372 IPA). While individual items of medical histories and physical examinations were performed most often for staff/group HMO patients and least often in FFS patients, odds ratios (OR) for performance in staff/group HMO patients were particularly large for health maintenance items: tonometry (OR = 8.4), mammography (OR = 2.7), pelvic examination (OR = 5.3), rectal examination (OR = 2.9), fecal occult blood test (OR = 3.3). The results suggest that recommended elements of routine and preventive care are more likely to be performed for Medicare enrollees in staff/group HMOs than in FFS settings.     

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.     

Health status of Medicare enrollees in HMOs and fee-for-service in 1994

We compared the health status of 863 health maintenance organization (HMO) enrollees with that of 4,576 non-enrollees, controlling for demographics and area of residence, using 1994 data from the Medicare Current Beneficiary Survey (MCBS). HMO respondents were less likely to report fair or poor health, functional impairment, or heart disease. Average predicted costs based on various health-status measures were substantially lower for HMO respondents than for respondents in fee-for-service (FFS) arrangements. The Medicare payment formula for HMOs does not adequately adjust for the better health and consequent lower expected costs of HMO enrollees. The addition of health-status measures would improvement payment accuracy and reduce average HMO payments significantly below current levels.     

Health care use and expenditures of Medicare HMO disenrollees

We examine the impact of the first wave of Medicare health maintenance organization HMO withdrawals. With data from CMS and United Health Group, we estimate use and expenditure changes between 1998 and 1999 for HMO enrollees who were involuntarily dropped from their plan and returned to fee-for-service (FFS) Medicare using a difference-in-difference model. Compared to those who voluntarily left an HMO, involuntarily disenrolled beneficiaries had higher out-of-pocket expenditures, an 80 percent decrease in physician visits, 38 percent higher emergency room (ER) use and a higher probability of dying. The results suggest beneficiaries face significant costs and reduced health outcomes from unstable Medicare managed care markets.     

Health plan enrollment and mortality in the Medicare program

Prior studies have found that Medicare health maintenance organization (HMO) enrollees have lower mortality (over a fixed observation period) than beneficiaries in traditional fee‐for‐service (FFS) Medicare. We use Medicare Current Beneficiary Survey (MCBS) data to compare 2‐year predicted mortality for Medicare enrollees in the HMO and FFS sectors using a sample selection model to control for observed beneficiaries characteristics and unobserved confounders. The difference in raw, unadjusted mortality probabilities was 0.5% (HMO lower). Correcting for numerous observed confounders resulted in a difference of ?0.6% (HMO higher). Further adjustment for unobserved confounders resulted in an estimated difference of 3.7 and 4.2% (HMO lower), depending on the specification of geographic‐fixed effects. The latter result (4.2%) was statistically significant and consistent with prior studies that did not adjust for unobserved confounding. Our findings suggest there may be unobserved confounders associated with adverse selection in the HMO sector, which had a large effect on our mortality estimates among HMO enrollees. An important topic for further research is to identify such confounders and explore their relationship to mortality. The methods presented in this paper represent a promising approach to comparing outcomes between the HMO and FFS sectors, but further research is warranted. Copyright © 2010 John Wiley & Sons, Ltd.     

How does managed care manage the frail elderly? The case of hospital readmissions in fee-for-service versus HMO systems

OBJECTIVES: This study examined whether hospital readmissions varied among the frail elderly in managed care versus fee-for-service (FFS) systems. SETTING AND PARTICIPANTS: Random sample of 450 patients, aged 65 and over, from a large vertically integrated health care system in San Diego, California. Participants were receiving physician-authorized home health and survived and 18-month follow-up period. MAIN OUTCOME MEASURES: Multiple logistic regression analyses were used to conduct comparisons of readmissions and preventable readmissions by plan type. Two methods to identify preventable readmissions were developed, one based on a computerized algorithm of service use patterns, and another based on blind clinical review. RESULTS: The odds of having a preventable hospital readmission within 90 days of an index admission were 3.51 (P = 0.06) to 5.82 (P = 0.02) times as high for Medicare HMO enrollees compared to Medicare FFS participants, depending on the method used to assess preventability. Readmission patterns were similar for Medicare HMO enrollees and FFS study participants dually enrolled in Medicare and Medicaid. CONCLUSION: In this group of frail elderly Medicare beneficiaries, those enrolled in an HMO were more likely to have a preventable hospital readmission than those receiving care under FFS. These results suggest that policies promoting stringent approaches to utilization control (e.g., early hospital discharge, reduced levels of post-acute care, and restricted use of home health services) may be problematic for the frail elderly.     

Social/health maintenance organization and fee-for-service health outcomes over time

Evaluating the performance of long-term care (LTC) demonstrations requires longitudinal assessment of multiple outcomes where selective mortality and disenrollment, if not accounted for, can give the appearance of reduced (or enhanced) efficacy. We assessed outcomes in social/health maintenance organizations (S/HMOs) and Medicare fee-for-service (FFS) care using a multivariate model to estimate active life expectancy (ALE). S/HMO enrollees and samples of FFS clients in four sites were analyzed and outcome differences assessed for a 3-year period. Results provide insights into S/HMO performance under different conditions and, more generally, into evaluating LTC demonstrations without randomized client and control groups.     

Do Medicare HMOs still reduce health services use after controlling for selection bias?

This study models the relationship between Medicare beneficiary decisions to join Medicare HMOs and subsequent health services utilization. The relationship between health plan choice and utilization is thought to be endogenous because of favorable selection into HMOs. Previous studies found significantly lower inpatient utilization among Medicare HMO enrollees than among nonenrollees, but lacked strong controls for selection bias. Thus, a firm conclusion could not be drawn as to whether the observed differences were attributable to the HMO practice setting or to baseline differences in the illness profiles of the two groups studied. The present study uses simultaneous equations methods, including discrete factor estimation, to test the effect of Medicare HMOs on utilization when strong controls for selection bias are imposed. The model was run on a panel of 1993-1996 data from the Medicare Current Beneficiary Survey, supplemented with linked data on Medicare HMO characteristics and area supply characteristics. The study found that even when favorable selection is controlled for, Medicare HMOs significantly reduce both the probability of hospitalization and the number of inpatient days used by those who are hospitalized. Medicare HMOs do not, however, appear to reduce the use of physician services.     

Medicare beneficiaries rate their medical care: new data from the MCBS (Medicare Current Beneficiary Survey)

The Medicare Current Beneficiary Survey (MCBS) contains a wealth of information about the people whose care is financed by the program. This article examines their satisfaction with medical care received and explores the relationship of these attitudes with the characteristics of subgroups of the enrolled population. Satisfaction with medical care among Medicare beneficiaries is found to be generally high (80-90 percent). Disabled Medicare beneficiaries are less satisfied than the aged, and health maintenance organization (HMO) enrollees less satisfied than fee-for-service (FFS) patients. Others with lower-than-average satisfaction are people with poorer health status, those covered by Medicaid, and those without supplementary insurance.     

Consumer information and biased selection in the demand for coverage supplementing Medicare.

This study examines how the relationship between health insurance knowledge and the health status of health insurance consumers influences their decisions to purchase insurance coverage. Data from the federal Medicare health insurance program for the elderly in the United States are used. The basic Medicare program provides a limited amount of coverage for health care services obtained from any provider in the private fee-for-service (FFS) market. Beneficiaries of this program may choose to supplement the basic coverage which they receive by two mechanisms: either they may purchase private insurance designed to fill some of the gaps left by the federal program ('Medigap' policies), thereby remaining in the FFS market and preserving their choice of provider, or they may enroll in health maintenance organizations (HMOs), thereby leaving the FFS market and agreeing to use only those providers affiliated with the HMO, and in return receiving broader coverage at little additional out-of-pocket cost. The study was made possible by a unique data set which combines measures of beneficiary knowledge of Medicare coverage with measures of perceived health status, socio-economic characteristics, and insurance coverage choices for a sample of Medicare beneficiaries who participated in an educational workshop about their insurance coverage options. These data were used to estimate a multinomial logistic model of the determinants of insurance choices, where the options included the two listed above and a basic Medicare option. The study explicitly recognizes the interaction between insurance information and health status in health plan choice. These results show that knowledge of coverage does have a differential impact on the decision to purchase health insurance depending on health status. With a high level of knowledge, sicker beneficiaries are less likely to have basic Medicare alone, compared with HMOs or Medigap policies, while healthier beneficiaries are less likely to be enrolled in HMOs, compared with Medigap policies. This finding has important implications for the use of health status measures to adjust capitated payment formulas when knowledgable consumers have the option to enroll in HMOs or remain in the FFS environment. In the absence of health status adjusters for the HMO capitation payments, high levels of coverage knowledge may exacerbate inherent selection bias among these coverage options by healthier and sicker consumers of health insurance.     

A comparison of satisfaction levels between traditional and managed care Medicare recipients

The Spokane County health department conducted a survey of randomly selected households in the county. The survey combined several previously validated instruments. Since the purpose of this study was to compare satisfaction levels and access and communication issues of Medicare recipients in Health Maintenance Organizations (HMOs) to Medicare recipients using the traditional fee-for-service (FFS), a subpopulation was used. The results of this study did not support the findings of previous studies; HMO members were older and had no differences in health status from traditional FFS members. HMO members were more educated, had higher incomes, and were more satisfied with their care than the FFS group. The authors suggest that these differences from previous studies may be due to the fact that the majority of HMO respondents are in not-for-profit HMOs which return a fairly high proportion of the insurance premium to the patients in the form of medical care. They also suggest that not-for-profit HMOs may be different than for-profits due to the lack of pressure to return profits to the stockholders.     

PMD6 Chronic Care Costs of New Medicare HMO Enrollees: Implications for Disease Management

Cost-effective care for chronic conditions is a growing concern of health plans enrolling increasing numbers of the elderly and disabled under Medicare risk contracts. This study provides evidence of the prevalence, patterns of care, and costs of chronic illnesses among new Medicare HMO enrollees. The results provide a foundation for estimates of the cost-effectiveness of drug therapy and care management programs that serve this group.
METHODS: We used national Medicare claims data to examine chronic care services and associated costs for a sample of 19,084 beneficiaries who enrolled in an HMO in 1995. We constructed three measures of cost: the total Medicare-covered cost, the cost of medical claims with the chronic condition coded as a diagnosis, and the regression-estimated effect of the chronic condition on cost.
RESULTS: 58% of the new Medicare HMO enrollees in our sample were treated for at least one of the selected chronic conditions in the six months before enrollment. One-third of the new enrollees had multiple conditions represented by diagnoses in more than one of eighteen chronic-condition groups. Persons with chronic conditions accounted for 93% of pre-enrollment Medicare costs among new HMO enrollees. Per 1,000 enrollees, pre-enrollment Medicare costs were greatest for those with hypertensive disease, coronary heart disease, heart failure, and diabetes.
CONCLUSIONS: The concentration of utilization and costs in those with chronic conditions suggests that appropriate drug therapy and care management for those with chronic conditions should be a top priority for HMOs with Medicare risk contracts. These estimates of prevalence suggest a need for HMOs to screen new Medicare HMO enrollees for chronic conditions immediately upon enrollment to ensure continuity of care.