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.     

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.     

How the elderly fare in HMOs: outcomes from the Medicare competition demonstrations.

Because of concern about the effects of prepaid care on outcomes for elderly enrollees in health maintenance organizations (HMOs), a prospective study of access to care and functional outcomes was performed. HMOs with Medicare risk contracts in January 1985 (N = 17) were selected from ten communities and were matched for comparison with ten similar communities where no Medicare HMOs were in operation. Random samples of HMO enrollees (N = 2,098) and fee-for-service (FFS) nonenrollees (N = 1,059) were assessed at baseline and at follow-up one year later (HMO = 1,873, FFS = 916) to observe access to care and functional outcomes. At baseline, nonenrollees had more bed days and poorer functional status than HMO enrollees. While fewer HMO enrollees experienced declines in functional status between baseline and follow-up (e.g., patient's ability to function declined in one or more activities of daily living: HMOs at 5.3 percent versus FFS at 8.5 percent, p < .01), after controlling for other factors with logistic regression, enrollment status was not significantly associated with functional decline. Self-rated health, history of hospitalization, age of 80 or older and baseline functional status were predictive of decline in function. After controlling for baseline differences, HMO disenrollees also experienced similar functional declines at follow-up compared to continuously enrolled beneficiaries. These findings suggest that Medicare beneficiaries who belong to HMOs experience comparable rates of functional decline to those experienced by beneficiaries in the FFS sector with similar initial levels of function and health status. Together with results showing no significant difference in medical visits according to various symptoms, we conclude that access and quality of care delivered by HMOs is comparable to that provided in FFS settings.     

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.     

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.     

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.     

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.     

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.     

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.     

Pre-enrollment reimbursement patterns of Medicare beneficiaries enrolled in "at-risk" HMOs.

The Health Care Financing Administration (HCFA) has initiated several demonstration projects to encourage HMOs to participate in the Medicare program under a risk mechanism. These demonstrations are designed to test innovative marketing techniques, benefit packages, and reimbursement levels. HCFA's current method for prospective payments to HMOs is based on the Adjusted Average Per Capita Cost (AAPCC). An important issue in prospective reimbursement is the extent to which the AAPCC adequately reflects the risk factors which arise out of the selection process of Medicare beneficiaries into HMOs. This study examines the pre-enrollment reimbursement experience of Medicare beneficiaries who enrolled in the demonstration HMOs to determine whether or not a non-random selection process took place. The results of this study suggest that the AAPCC may not be an adequate mechanism for setting prospective reimbursement rates. The Marshfield results further suggest that the type of HMO may have an influence on the selection process among Medicare beneficiaries. If Medicare beneficiaries do not have to change providers to join an HMO, as in an IPA model or a staff model which includes most of the providers in an area, the selection process may be more likely to result in an unbiased risk group.     

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.     

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.     

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.     

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.     

Prostate cancer treatment and ten-year survival among group/staff HMO and fee-for-service Medicare patients.

OBJECTIVE: To compare treatment patterns and the ten-year survival of prostate cancer patients in two large, nonprofit, group/staff HMOs to those of patients receiving care in the fee-for-service health setting. DATA SOURCES/STUDY DESIGN: A cohort of men age 65 and over diagnosed with prostate cancer between 1985 and the end of 1992 and followed through 1994. Subjects (n = 21,741) were ascertained by two population-based tumor registries covering the greater San Francisco-Oakland and Seattle-Puget Sound areas. Linkage of registry data with Medicare claims data and with HMO inpatient utilization data allowed the determination of health plan enrollment and the measurement of comorbid conditions. Multivariate regression models were used to examine HMO versus FFS treatment and survival differences adjusting for sociodemographic and clinical characteristics. PRINCIPAL FINDINGS: Among cases with non-metastatic prostate cancer, HMO patients were more likely than FFS patients to receive aggressive therapy (either prostatectomy or radiation) in San Francisco-Oakland (odds ratio [OR] = 1.69, 95% CI = 1.46-1.96) but not in Seattle (OR = 1.15, 0.93-1.43). Among men receiving aggressive therapy, HMO cases were three to five times more likely to receive radiation therapy than prostatectomy. Overall mortality was equivalent over ten years (HMO versus FFS mortality risk ratio [RR] = 1.01, 0.94-1.08), but prostate cancer mortality was higher for HMO cases than for FFS cases (RR = 1.25, 1.13-1.39). CONCLUSION: Despite marked treatment differences for clinically localized prostate cancer, overall ten-year survival for patients enrolled in two nonprofit group/staff HMOs was equivalent to survival among patients receiving care in the FFS setting, even after adjustment for sociodemographic and clinical characteristics. Similar overall but better prostate cancer-specific survival among FFS patients is most plausibly explained by differences between the HMO and FFS patients in both tumor characteristics and unmeasured patient selection factors.     

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.     

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.     

Issues regarding health plan payments under Medicare and recommendations for reform.

The failures of the market for current Medicare health plans include poor information and price distortions and can be attributed to government policy. Reforms that could improve its structure are annual open enrollment periods, premium rebates from health management organizations (HMOs) to members, and termination of the federal government's subsidy of Medicare supplementary insurance. However, the price for a basic Medicare benefits package would still be distorted because Medicare bases its contribution on the cost of a comparable package in the fee-for-service (FFS) sector rather than on the cost of the most efficient plan available to beneficiaries in each market area. The present Medicare HMO program almost certainly increases total Medicare costs and actually discourages HMO growth by shielding beneficiaries from the true price difference between basic benefits in the HMO and FFS sectors. Lacking payment reforms, the Medicare HMO program should be terminated.     

Patient selection in the ESRD managed care demonstration

The Centers for Medicare & Medicaid Service's (CMS') end stage renal disease (ESRD) managed care demonstration offered an opportunity to assess patient selection among a chronically ill and inherently costly population. Patient selection refers to the phenomenon whereby those Medicare beneficiaries who choose to enroll or stay in health maintenance organizations (HMOs) are, on average, younger, healthier, and less costly to treat than beneficiaries who remain in the traditional Medicare fee-for-service (FFS) sector. The results presented in this article show that enrollees into the demonstration were generally younger and healthier than a representative group of comparison patients from the same geographic areas.