Impact of HMO withdrawals on vulnerable Medicare beneficiaries

The Medicare+Choice (M+C) program has faced successive waves of plan withdrawals since 1999. We collected data from 1,055 beneficiaries who were involuntarily disenrolled from a health maintenance organization (HMO) that withdrew from six large markets in 1999 to investigate how they were impacted by the forced change in coverage. Administrative data from this HMO were used to oversample beneficiaries who were perceived to be vulnerable based on their poor health status in the period before the HMO withdrawal. Although most beneficiaries dealt with the withdrawals without major problems, appreciable numbers of beneficiaries did report adverse impacts. These negative impacts were more likely to occur for low-education, low-income, minority beneficiaries. We found little evidence, however, that beneficiaries who were vulnerable due to their poorer health experienced more adverse effects.     

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.     

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.     

Risk differential between Medicare beneficiaries enrolled and not enrolled in an HMO.

Medicare provides incentive reimbursements to health maintenance organizations (HMOs) which enroll Medicare beneficiaries on a risk option and provide care at a lower cost than expected. The incentive reimbursements are tied to an actuarial calculation of Medicare Adjusted Average Per Capita Cost (AAPCC). The AAPCC adjusts for a number of variables which affect Medicare reimbursements and for which data are available: place of residence, age, sex, welfare status, and institutional status of beneficiaries. These factors account for much of the expected difference in health care reimbursements. They do not, however, account for differences in health status. Because of this, AAPCC calculations of expected costs may be too high if a selected group of beneficiaries is healthier than average, or too low if the selected group has a poorer health status than average. This case study examines the utilization behavior and reimbursement experience of a group of Medicare beneficiaries prior to their joining an HMO (during an open enrollment period) under a risk-sharing option. Their use was compared with a comparable Medicare population (the comparison group) to determine if their usage rates were greater, equal, or less than average. Results show that beneficiaries who joined during open enrollment had a rate of hospital inpatient use over 50 percent below the comparison group and a reimbursement rate for inpatient services 47 percent below the comparison group. These beneficiaries' use of Part B services also appears to be lower than the comparison group. These results must be interpreted with care. The information came from a single case study. Specific aspects of the open enrollment process, described in the paper, further limit the general liability of the findings. Also, while some studies of the same subject support the results, many others do not.     

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.     

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.     

Trends in Medicare health maintenance organization enrollment: 1986-93

This study examines Medicare health maintenance organization (HMO) enrollment under the Tax Equity and Fiscal Responsibility Act (TEFRA) of 1982 (Public Law 97-248) from 1986 to 1993. It shows that there was moderate growth in the number of Medicare beneficiaries participating in the TEFRA risk program, reaching 1 in 20 beneficiaries in 1993. Medicare HMO enrollment is heavily concentrated in a few large plans, resulting in heavy concentrations geographically. California and Florida accounted for over one-third of Medicare HMO enrollees. One-half of the States have no Medicare HMO enrollment and one-fifth of the States have fewer than 15,000 Medicare HMO enrollees.     

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.     

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.     

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.     

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.     

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.     

Designing health insurance information for the Medicare beneficiary: a policy synthesis.

Can Medicare beneficiaries make rational and informed decisions about their coverage under the Medicare program? Recent policy developments in the Medicare program have been based on the theory of competition in medical care. One of the key assumptions of the competitive model is the free flow of adequate information, enabling the consumer to make an informed choice from among the various sellers of a particular product. Options for Medicare beneficiaries in supplementing their basic Medicare coverage include the purchase of private supplementary insurance policies or enrollment in a Medicare HMO. These consumers, in a complex health insurance market, have only limited information available to them because many health plans do not make adequate comparable product information available. Moreover, since the introduction of the Medicare HMO option, the long-range plan for management of the Medicare budget has become based on the large-scale voluntary enrollment of beneficiaries into capitated health plans. The policy instrument that has been used to improve beneficiary decisions on how to supplement Medicare coverage is the informational or educational program. This synthesis presents findings regarding the relative effectiveness of different types of health insurance information programs for the Medicare beneficiary in an effort to promote practical use of the most effective types of information.     

The impact of payor/provider type on health care use and expenditures among the frail elderly.

OBJECTIVES: This study examined whether health care expenditures and usage by the frail elderly differ under three payor/provider types: Medicare fee for service, Medicare health maintenance organization (HMO), and dual Medicare-Medicaid enrollment. METHODS: In-home interviews were conducted among 450 frail elderly patients of a San Diego, Calif, health care system. Cost and use data were collected from providers. RESULTS: Analyses revealed no difference in total expenditures between fee-for-service and HMO enrollees, but Medicare-Medicaid beneficiaries' expenditures were 46.8% higher than those for HMO enrollees and 52.2% higher than those for the fee-for-service group. Fee-for-service participants were less than half as likely as HMO enrollees to have two or more hospital admissions, but hospital usage rates between those two payor/provider groups did not differ. Not were there payor/provider differences in access to home health care, but HMO home health care users received significantly fewer services than the others. CONCLUSIONS: The care provided to these HMO beneficiaries resulted in a combination of restricted home health use and higher multiple hospitalizations. This raises compelling questions for future research. For the dually enrolled, stronger cost containment may be required.     

Longitudinal analysis of patient satisfaction among Medicare beneficiaries in different models of health maintenance organizations and fee-for-service care.

Based on a randomly selected nationwide sample of Medicare beneficiaries, this study analyzes changes in patient satisfaction over a one year period for beneficiaries receiving care in a variety of delivery settings: fee for service, group model HMO, staff model HMO, and Independent Practice Association model HMO. The findings reveal the patient satisfaction changes significantly over a one year period, from lower levels of satisfaction to higher levels of satisfaction. The primary explanation for this change in satisfaction is a decline in health status over the same one year period. Additional differences in satisfaction with care were observed for Medicare beneficiaries served by different types of delivery settings with varying degrees of utilization controls.     

Understanding biased selection in Medicare HMOs

OBJECTIVE: To investigate the extent of favorable health maintenance organization (HMO) selection for a longitudinal cohort of Medicare beneficiaries, examine whether the extent of favorable selection varies with the degree of Medicare HMO market penetration in a county, and explain conflicting findings in the literature on favorable HMO selection. DATA SOURCES: A panel of 1992-1996 data from the Medicare Current Beneficiary Survey (MCBS), supplemented with linked data from the Area Resource File and Medicare administrative datasets. STUDY DESIGN: Using random effects probit estimation, we model a beneficiary's HMO enrollment status as a function of self-reported health status and Medicare HMO market penetration. DATA EXTRACTION METHODS: The MCBS data for beneficiaries residing in states served by Medicare HMOs in 1992-1996 were linked by county to the supplementary datasets. PRINCIPAL FINDINGS: We find that favorable selection persists in the cohort over time on some, but not all, measures. We find no substantial association between favorable HMO selection and HMO market penetration. We find that conflicting findings in the literature on favorable HMO selection may be explained by several methodological choices, including the choice of health status measure and the structure of the sample. CONCLUSIONS: Our results support further risk adjustment of the adjusted average per capita cost (AAPCC) payment formula.