Growth in HMO Share of the Medicare Market, 1989-1994

Health Affairs

Volumn 15, Issue 3, 1996, Pages 201-214

  Welch, W Pete ^a,b  

^a Macroeconomic Analysis Division   (United States)

^b URBAN INSTITUTE   (United States)

Author keywords

[No Author keywords available]

Indexed keywords

AGED; ARTICLE; DEMOGRAPHY; ECONOMICS; FEMALE; FINANCIAL MANAGEMENT; HEALTH MAINTENANCE ORGANIZATION; HUMAN; MALE; MEDICARE; MIDDLE AGED; POLICY; REIMBURSEMENT; UNITED STATES; UTILIZATION REVIEW;

AGED; AGED, 80 AND OVER; DEMOGRAPHY; FEMALE; HEALTH MAINTENANCE ORGANIZATIONS; HUMANS; INSURANCE, HEALTH, REIMBURSEMENT; MALE; MARKETING OF HEALTH SERVICES; MEDICARE; MIDDLE AGED; PUBLIC POLICY; UNITED STATES;

EID: 1542744518     PISSN: 02782715     EISSN: None     Source Type: Journal    
DOI: 10.1377/hlthaff.15.3.201     Document Type: Article

References (26)

1. Congressional Budget Office, CBO March 1996 Baseline: Medicare (Washington: CBO, March 1996).
2. The congressional Medicare reform plan also would specify the increase in the payment rates yearly through 2002. This is projected to lower payment rates.
3. The most common form of cost contract is health care prepaid plans.
4. Reported in Group Health Association of America, 1995 National Directory of HMOs (Washington: GHAA, June 1995). Most published data on HMO share of the general health care market are derived from HMOs' reporting of their own enrollment. However, because HMOs are more likely to have enrollment in several MSAs than in several states, figures on general market share are more usable at the state level than at the MSA level.
5. W. P. Welch, "Geographic Adjustments in Medicare Payment to HMOs: Alternatives to Local Fee-for-Service Expenditures," Health Care Financing Review (Spring 1992): 97-110.
6. National means for general market share and AAPCC were calculated by weighting by number of Medicare beneficiaries in an MSA.
7. When an HMO has a multi-MSA service area, Medicare enrollment data by HMO are not available from the Denominator File for weighting purposes. Hence, whenever several MSAs were in the service areas of several HMOs, those MSAs were combined. In particular, southern California was defined to include the MSAs of Los Angeles, Orange County, Riverside/San Bernardino, Ventura, and San Diego; and northern California was defined to include the MSAs in the San Francisco and Sacramento areas. Included are market areas with especially high AAPCC or high Medicare market share in 1994.
8. 89 + B V, where the left side is now the growth rate (in percentage points). The first equation predicts the level of market share; the second, growth in market share.
9. The dependent variable was zero for only 7 percent of the eighty-six MSAs in the regression, so Tobit analysis is not necessary.
10. Whereas HMO share of the Medicare market was 2.1 percent for dual eligibles as a group, it was 2.6 percent for elderly dual eligibles and 1.0 percent for disabled dual eligibles.
11. C. Wisner, R. Feldman, and B. Dowd, "The Twin Cities Medicare Health Plans Markets: Choice, Cost, and Health Status," in HMOs and the Elderly, ed. H.S. Luft (Ann Arbor, Mich.: Health Administration Press, 1994), 59.
12. This second average is obtained by first calculating each MSAs HMO share. Then the national average is calculated by weighting each MSA's HMO share by its number of Medicare HMO enrollees. Thus, Portland receives a much greater weight than New Orleans, even though the two MSAs have roughly the same number of beneficiaries.
13. F.W Porell and S.S. Wallack, "Medicare Risk Contracting: Determinants of Market Entry," Health Care Financing Review (Winter 1992): 75-86; and C.R. Serrato, S. Brown, and J. Bergeron, "Why Do So Few HMOs Offer Medicare Risk Plans in Rural Areas?" Health Care Financing Review (Fall 1995): 85-97.
14. F.W Porell and S.S. Wallack, "Medicare Risk Contracting: Determinants of Market Entry," Health Care Financing Review (Winter 1992): 75-86; and C.R. Serrato, S. Brown, and J. Bergeron, "Why Do So Few HMOs Offer Medicare Risk Plans in Rural Areas?" Health Care Financing Review (Fall 1995): 85-97.
15. D. Wholey, R. Feldman, and J.B. Christianson, "The Effect of Market Structure on HMO Premiums," Journal of Health Economics (May 1995): 81-105.
16. Frederick/Schneiders, Analysis of Focus Groups concerning Managed Care and Medicare (Washington: The Henry J. Kaiser Family Foundation, March 1995).
17. If price-adjusted AAPCC is replaced by its components, unadjusted AAPCC has approximately the same coefficient and t-value as price-adjusted AAPCC. The price index is insignificantly positive.
18. In partial adjustment regression models, this coefficient is assumed to be between zero and 1.0, because the model assumes that the dependent variable (for example, market share) is moving toward its equilibrium. Consistent with this assumption, this coefficient is .68 when a logistic functional form is incorporated into my partial adjustment model.
19. Why this coefficient is negative is unclear. When this variable is dropped, the payment rate variable becomes insignificantly positive, while the general market share variable remains significantly positive.
20. The standardized coefficient is the product of the coefficient and its standard deviation, divided by the standard deviation of the dependent variable. A standardized coefficient of, say, .3 indicates that a change of one standard deviation in the independent variable results in a change of .3 standard deviation in the dependent variable. Note also that the standardized coefficient for 1989 market share is calculated using the second equation in Note 8 above.
21. One might hypothesize that both the price-adjusted AAPCC and general HMO market share represent high fee-for-service costs. In fact, these two variables are negatively correlated, albeit insignificantly so.
22. Basing the HMO payment rate on fee-for-service cost has some intuitive appeal as long as fee-for-service is clearly the dominant sector. However, as the HMO sector grows, fee-for-service-based payment for HMOs loses its appeal, and equity for beneficiaries becomes a concern.
23. Some of the elderly now in risk-based HMOs may have started in cost-contract HMOs that were later converted. Even when the two HMO types are combined, the HMO share has still increased greatly among beneficiaries older than age seventy-four.
24. Lewin-VHI, States as Payers: Managed Care for Medicaid Populations (Washington: National Institute for Health Care Management, February 1995).
25. P. Saucier, Federal Barriers to Managed Care for Dually Eligible Persons (Portland, Me.: National Academy for State Health Policy, August 1995).
26. Low-income Medicare beneficiaries who are not eligible for Medicaid have a strong incentive to enroll in HMOs. Unless they have retiree health insurance, they must make out-of-pocket copayments, purchase supplemental insurance, or enroll in HMOs. HMOs tend to be the least costly of these options.