Background: Since the program's inception, there has been great interest in
determining whether beneficiaries who enter and subsequently leave Medicar
e health maintenance organizations (HMOs) are more or less costly than thos
e remaining in fee-for-service (FFS) Medicare.
Objectives: To examine whether relatively high-cost beneficiaries disenroll
from Medicare HMOs (disenrollment bias) and whether disenrollment bias var
ies by Medicare HMO market characteristics, In addition, we compare rates o
f surgical procedures and hospitalizations for ambulatory care-sensitive co
nditions for disenrollees and continuing FFS beneficiaries.
Design: Cross-sectional analysis of 1994 Medicare data.
Participants and Methods: Medicare beneficiaries were first sampled from th
e 124 counties with at least 1000 Medicare HMO enrollees. From this pool, H
MO disenrollees and a sample of continuing FFS beneficiaries were drawn. Th
e FFS beneficiaries were assigned dates of "pseudodisenrollment." Expenditu
res and inpatient service use were compared for 6 months after disenrollmen
t or pseudodisenrollment.
Results: The HMO disenrollees were no more likely than the continuing FFS b
eneficiaries to have positive total expenditures (Part A plus Part B) or Pa
rt B expenditures in the first 6 months after disenrollment. However, disen
rollees were more likely to have Part A expenditures. Among beneficiaries w
ith spending, disenrollees had higher total and Part B expenditures than co
ntinuing FFS beneficiaries. Moreover, the disparity in total and Part B spe
nding between disenrollees and continuing FFS beneficiaries increased with
HMO market penetration. Although Part A spending was higher for disenrollee
s with spending, it was not sensitive to changes in market share. The HMO d
isenrollees received more surgical procedures and were hospitalized for mor
e of the ambulatory care-sensitive conditions than the FFS beneficiaries.
Conclusions: On several measures, Medicare HMOs experienced favorable disen
rollment relative to continuing FFS beneficiaries as recently as 1994, whic
h increased as HMO market share increased.