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.     

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.     

Stage of cancer at diagnosis for Medicare HMO and fee-for-service enrollees.

OBJECTIVES. Health maintenance organizations (HMOs) with Medicare contracts often provide cancer screening and preventive services not covered under fee-for-service. This study compared cancer patients in HMOs and fee-for-service on stage at diagnosis. METHODS. The study examined stage at diagnosis for aged Medicare enrollees in HMOs and fee-for-service, using information from the Surveillance, Epidemiology, and End Results program, linked with Medicare enrollment files. Twelve cancer sites were investigated, and demographics, area of residence, year of diagnosis (1985 to 1989), and education at the census tract level were controlled. RESULTS. HMO enrollees were diagnosed at earlier stages for cancers of the female breast, cervix, colon, and melanomas and at later stages for stomach cancer. There were no differences for cancers of the prostate, rectum, buccal cavity and pharynx, bladder, uterus, kidney, and ovary. HMO effects were strongest in areas with large, mature HMOs. CONCLUSIONS. Compared with fee-for-service enrollees, HMO enrollees were diagnosed at earlier stages for cancer sites for which effective screening services are available. The earlier detection of certain cancers among HMO enrollees may result from coverage of screening services and, perhaps, promotion by HMOs of such services.     

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.     

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.     

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 fee-for-service health care expenditures: evidence from Medicare revisited

This paper implements a new method for calculating the extent of selection in the aged Medicare HMO market. Selection is measured as the difference in average costs between new Medicare HMO enrollees and Medicare fee-for-service stayers with data from 1990 to 1994. Results suggest Medicare HMO enrollees were 1030 US dollars cheaper in their first year of enrollment. The effect is found entirely in Part A (hospital) expenditures, confirming selection is based on inpatient rather than outpatient or preventive care. These results are consistent with previous work.     

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.     

Medicare HMOs: the experience of older African Americans and whites

This exploratory study of 205 older adults with chronic illness, of whom 55 enrolled in Medicare HMOs, examined the characteristics of those who enrolled, their experiences with managed care, and the differences between African Americans and whites in these domains. HMO enrollees were more likely to report their finances as inadequate; to have a high school education or less; and to have higher levels of social support. No significant differences by race were found in enrollment or in factors related to enrollment. Enrollees joined because of low premiums, enhanced HMO benefits, and pressure from employers providing retiree health benefits. The majority of enrollees reported positive experiences, however, more whites than African Americans reported negative experiences.     

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.     

Effects of supplemental coverage on use of services by Medicare enrollees

This article estimates the extent to which private insurance supplements affect use of services by Medicare enrollees. Three types of supplements to Medicare's coverage are examined--Health Maintenance Organizations (HMOs), medigap (MGP) plans, and employment-based indemnity (EBI) plans. While each kind of supplement reduces cost sharing on Medicare-covered services, only HMOs do so without increasing enrollees' overall use of services. Use of services by HMO enrollees is about 4 percent lower than use by similar Medicare enrollees with no insurance supplement. By contrast, use of services by enrollees with MGP coverage is 28 percent higher, and use of services by enrollees with EBI plans is 17 percent higher.     

Diagnosis-based risk adjustment for Medicare capitation payments

Using 1991-92 data for a 5-percent Medicare sample, we develop, estimate, and evaluate risk-adjustment models that utilize diagnostic information from both inpatient and ambulatory claims to adjust payments for aged and disabled Medicare enrollees. Hierarchical coexisting conditions (HCC) models achieve greater explanatory power than diagnostic cost group (DCG) models by taking account of multiple coexisting medical conditions. Prospective models predict average costs of individuals with chronic conditions nearly as well as concurrent models. All models predict medical costs far more accurately than the current health maintenance organization (HMO) payment formula.     

HMO vs fee-for-service care of older persons with acute myocardial infarction.

OBJECTIVES. Health maintenance organizations (HMOs) continue to grow in number and in their enrollment of Medicare recipients. They are also increasingly viewed as organizational structures that might contribute to control of health care costs. Yet little is known about the quality of care that elderly HMO enrollees receive. METHODS. We compared patients from three HMOs to a fee-for-service (FFS) sample that was national in scope. Sickness at admission, the quality of process of care, and mortality were assessed for patients aged 65 years and older who had been hospitalized with a diagnosis of acute myocardial infarction. RESULTS. After adjustment for sickness at admission, there were no significant mortality differences between the HMO and FFS groups at either 30 (23.2% vs 23.5%) or 180 days (34.4% vs 34.5%) after admission. Compliance with process criteria was higher for the HMO group as a whole (P < .05). The HMOs had greater compliance with three of five scales measuring different aspects of care for patients with acute myocardial infarction. CONCLUSIONS. We conclude that older patients from our participating HMOs who were hospitalized for acute myocardial infarction received hospital care that was generally better in terms of process than that received by patients in a national FFS sample.     

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.     

Physicians contracting with managed care

It has been observed that enrollees in managed care systems such as HMOs and PPOs have lower expenditures and utilization rates than those in conventional insurance plans. Few studies have investigated this issue by examining providers. This paper studies whether physicians with low costs are more likely to sign contracts with HMOs and PPOs in order to help explain the observation of lower expenditures and utilization rates by HMO and PPO enrollees. A logistic regression is applied to the data from the 1984-1985 Physician Practice Costs and Income Survey. The results do not show strong evidence that a physician's likelihood of contracting with HMOs and PPOs is related to the physician's practice costs and utilization pattern. Instead, major factors that significantly affect a physician's decision of contracting with managed care systems are the physician's socio-demographics, the physician's practice region, and the market conditions.     

Biased enrollment of Medicare beneficiaries in HMO plans--implications for Medicare costs

Policymakers assumed that the enrollment of Medicare beneficiaries in health maintenance organization (HMO) plans would generate significant cost savings for Medicare. The Health Care Financing Administration (HCFA) calculates the reimbursement to HMOs per Medicare beneficiary on the basis of individual and community-specific characteristics. Estimates of the individual-specific profitability rate for enrolling an individual in a Medicare HMO risk plan suggest that the probability of enrollment in HMOs increases with a higher profitability score. The probability of not enrolling high-loss cases is found to be high, indicating that the biased selection in HMO plans actually increases the overall cost of running the Medicare program.     

Workers' compensation cost shifting: an empirical study.

It has been suggested that health maintenance organizations (HMOs) overdiagnose work-related injuries and illnesses to increase their income. This study compared the Workers' Compensation experience of 2,176 Boston postal employees enrolled in a large HMO with that of 3,473 employees enrolled in a large fee-for-service health insurance plan. It controlled for the potential confounders of age, gender, job classification, type of injury, and duration of employment. It found no difference in the incidence of injuries: 5.93% for HMO enrollees and 6.25% for fee-for-service plan enrollees. Medical costs averaged $475 for HMO enrollees and $838 for fee-for-service plan enrollees (p = 0.018). Total costs averaged (09 for HMO enrollees and $1388 for fee-for-service plan enrollees (p = 0.063). In our cohort, there was no evidence of cost shifting. It appeared that the HMO provided less expensive medical care for injured postal workers.     

Physicians Contracting with Managed Care

It has been observed that enrollees in managed care systems such as HMOs and PPOs have lower expenditures and utilization rates than those in conventional insurance plans. Few studies have investigated this issue by examining providers. This paper studies whether physicians with low costs are more likely to sign contracts with HMOs and PPOs in order to help explain the observation of lower expenditures and utilization rates by HMO and PPO enrollees. A logistic regression is applied to the data from the 198401985 Physician Practice Costs and Income Survey. The results do not show strong evidence that a physician's likelihood of contracting with HMOs and PPOs is related to the physician's practice costs and utilization decision of contracting with managed care systems are the physician's socio-demographics, the physician's practice region, and the market conditions.     

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.     

HMO selection and Medicare costs: Bayesian MCMC estimation of a robust panel data tobit model with survival.

The fraction of US Medicare recipients enrolled in health maintenance organizations (HMOs) has increased substantially over the past 10 years. However, the impact of HMOs on health care costs is still hotly debated. In particular, it is argued that HMOs achieve cost reduction through 'cream-skimming' and enrolling relatively healthy patients. This paper develops a Bayesian panel data tobit model of HMO selection and Medicare expenditures for recent US retirees that accounts for mortality over the course of the panel. The model is estimated using Markov Chain Monte Carlo (MCMC) simulation methods, and is novel in that a multivariate t-link is used in place of normality to allow for the heavy-tailed distributions often found in health care expenditure data. The findings indicate that HMOs select individuals who are less likely to have positive health care expenditures prior to enrollment. However, there is no evidence that HMOs disenrol high cost patients. The results also indicate the importance of accounting for survival over the panel, since high mortality probabilities are associated with higher health care expenditures in the last year of life.