Using HMOs To Serve The Medicaid
Population: What Are The
Effects On Healthcare Utilization And
Does The Type Of HMO Matter?
Bradley Herring and E. Kathleen Adams
Emory University
Primary Research Questions
• What are the effects of using HMOs for the
Medicaid population?
– Does enrollee access to care change?
– Do utilization patterns change?
– Do overall healthcare expenses change?
• Are there different effects for commercial HMOs
versus Medicaid-dominant HMOs?
June 25, 2006 AcademyHealth ARM in Seattle
Funded by an RWJF HCFO Grant
State Motivation for
Using Managed Care
Background
• Enrollees in some form of Medicaid managed care
increased from 32.1% in 1995 to 60.7% in 2004
– Primary care case management
– At risk health plans: “carve out” plans and HMOs
• Enrollees in Medicaid HMOs increased from 14.1%
in 1995 to 39.5% in 2004
• Little consistent or generalizable empirical evidence
for access to care, utilization, or total expenses
Might the Type of HMO Matter?
• Commercial HMOs enrolling both Medicaid and
privately insured populations:
– Reduce “stigma” by integrating populations?
– More likely to include “mainstream” providers?
– Economies of scale?
• Medicaid-dominant HMOs – more than 75% of
enrollees in Medicaid:
– Serve unique needs (economies of scope)?
– More likely to include traditional “safety net” providers?
– Inefficient due to “learning by doing”?
• Improve access to care, at current expense:
– Improve access to “mainstream” office-based providers?
– Improve quality?
• Reduce expense, while maintaining access:
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–
–
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Improve use of cost-effective preventive services?
Decrease unnecessary use of the ER?
Better manage chronic conditions?
Use bargaining power to achieve provider discounts?
• Or perhaps yield predictable budgets?
Prior Research
• Early research summarized in Hurley et al. (1993)
and Rowland et al. (1995)
• More recent research:
– State-specific analysis: CA, FL, OH, MN, TN, WI
– Nationally-representative survey data:
• State-level penetration or presence of MMC in a county
– We compliment Duggan’s (2004) work on total state
expenditures (i.e., capitation rates) by focusing on
underlying utilization-based expenses
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Our Empirical Approach
• Community Tracking Study in 60 U.S. markets
– Household Survey for ‘96-‘97, ‘98-‘99, ‘00-‘01, and ‘03
– We limit to the 51 urban MSAs
• MSA measures of Medicaid HMO penetration using
CMS and InterStudy data for ‘96, ‘98, ‘00, and ‘02
– CMS lists all Medicaid HMOs and the counties served
– We link to InterStudy data to determine whether each
HMO is commercial or Medicaid-dominant
– Penetration rate: the percentage of all Medicaid enrollees
in that HMO type
Our Empirical Approach (cont.)
OUTCOMEit = f (ßHMO XHMO,it + ßI XI,it + ßAREA XAREA,it
+ γMSA MSAi + γYEAR YEARt, ε)
where
OUTCOMEit = a specific outcome measure for
Medicaid enrollee i during time t
= measures of commercial and
XHMO,it
Medicaid-dominant HMO penetration
= a set of individual characteristics
XI,it
XAREA,it
= a set of local area characteristics
= a set of MSA indicator variables
MSAi
YEARt
= a set of year indicator variables
ε
= an error term
Medicaid Enrollees in the CTSCTS-HS:
Three Sets of Dependent Variables (cont.)
Office-based physician visits
Any mental health services
Inpatient stays
Inpatient surgeries
Variables:
HMO (both types)
penetration rate
Commercial HMO
penetration rate
Medicaid-dominant HMO
penetration rate
1996
1998
2000
2002
24.7% 35.9% 32.4% 42.1%
8.5% 14.3% 12.4% 12.1%
16.2% 21.6% 20.0% 30.0%
Source: Complied CMS and InterStudy data
Medicaid Enrollees in the CTSCTS-HS:
Three Sets of Dependent Variables
• Sample: 9134 non-elderly with Medicaid in the CTS-HS
– Includes children in SCHIP
– Adults and children both together and separate
• 1st set: Access measures:
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–
–
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Usual source of care other than the ER
Usual source of care is the ER
Having a difficulty in obtaining care
Being satisfied with one’s primary care doctor
Medicaid Enrollees:
Independent Variables
• Variables of interest:
• 2nd set: utilization measures:
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–
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Medicaid HMO Penetration Rates
of Urban CTS Markets by Period
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–
–
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Medical practitioner visits
ER visits
Inpatient nights
Outpatient surgeries
• 3rd set: “synthetic” estimate of total healthcare
expenses using CTS-HS utilization & the MEPS:
– 1996-2003 MEPS to regress actual expense on utilization
– The MEPS coefficients are essentially “unit prices”
– Commercial HMO penetration rate
– Medicaid-dominant HMO penetration rate
• Individual controls:
– Age and gender, family type (e.g., single with kids), family
income, race/ethnicity, education, self-reported health status
• Local-area controls:
– PCCM, type of SCHIP expansion, Medicaid fee index,
MDs/capita seeing Medicaid, hospital beds/capita, FQHC,
private HMO penetration, median income, race/ethnicity
• MSA fixed effects and time trend
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Results for Commercial HMOs
• Child enrollees:
– No effect on access
– No effect on utilization
– No effect on expenses
• Adult enrollees:
– No effect on access
– Increase only for mental health visits (p<0.05)
– Decrease in expenses (p<0.10)
Results for MedicaidMedicaid-Dominant HMOs
• Child enrollees:
– Decrease in usual source of care other than ER (p<0.10)
– Increase in medical practitioner visits (p<0.10)
Increase in ER visits (p<0.05)
– Increase in healthcare expenses (p<0.05)
• Adult enrollees:
– Increase in using the ER as a usual source of care (p<0.10)
– Increase in medical practitioner visits (p<0.05)
Decrease in inpatient surgeries (p<0.001)
Decrease in outpatient surgeries (p<0.05)
– No effect on healthcare expenses
Magnitude of the Effect of
MedicaidMedicaid-Dominant HMOs
• We simulate the independent effect of the increase
in the Medicaid-dominant penetration rate of
16.2% in 1996-1997 to 30.0% in 2002-2003:
– Proportion reporting a (non-ER) usual source of care:
Reduced from 86.2% to 84.8%
– Number of visits to the ER:
Increased from 0.654 per year to 0.732 per year
– Total healthcare expenses (in 2003$):
Increased from $3004 to $3163 (a 5.3% real increase)
Conclusions
• Increase in penetration by commercial HMOs:
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No change in access to care
Little change in utilization patterns
No increase in expenses (perhaps a decrease for adults)
(Our other work: increase in physician participation)
• Increase in penetration by Medicaid-dominant HMOs:
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Worse access to care
Many changes in utilization
Increase in expenses for children; No change for adults
(Our other work: no change in physician participation)
Policy Implications
• What’s the real motivation for contracting with HMOs?
– Welfare improvements from either improved access and
maintained expense -or- lower expense and maintained access
• Our results suggest that
– States may have seen small welfare improvements by
contracting with commercial HMOs before their exit
– States have seen (and will see) decreases in welfare by
contracting with Medicaid-dominant HMOs
• Attention needed in setting capitation rates and fees
– Exits by commercials & pressure from Medicaid-dominants
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