HMOs in California Decrease Use of Inpatient Care by Medicare Enrollees

Study of the effect of risk-contracting on access and quality of care for Medicare beneficiaries

The number of Medicare beneficiaries enrolling in managed care has increased since the passage of the Medicare Modernization Act (MMA) and the establishment of Medicare Advantage Plans (primarily HMO plans that provide hospital and medical insurance and prescription drug benefits) in 2003.

In this 2001 to 2005 project, Glenn A. Melnick, PhD, and other researchers from the University of Southern California examined the impact of Medicare managed care on access to and quality of care. The main part of the study focused on the impact of Medicare HMOs on use of inpatient hospital services from 1991 to 1995 in California—before the passage of MMA.

The project was part of the Robert Wood Johnson Foundation (RWJF) Changes in Health Care Financing and Organization (HCFO) national program. HCFO supports policy analysis, research, evaluation and demonstration projects that provide public and private decision leaders with usable and timely information on health care policy and financing issues.

Key Findings

  • The researchers reported the following:

    • HMOs decrease inpatient utilization for Medicare enrollees. Medicare beneficiaries enrolled in HMOs spent fewer days in the hospital than did fee-for-service beneficiaries.
    • Among Medicare HMO enrollees, those in group and staff HMOs (in which the doctors exclusively see patients from one HMO) had fewer inpatient hospital days than did those in independent practice association HMOs (in which a primary care physician acts as a gatekeeper to medical care).

      Medicare beneficiaries in group and staff HMOs in California had 18 percent fewer inpatient hospital days per year than if they had continued in fee-for-service plans. Those in independent practice association HMOs had 11 percent fewer inpatient hospital days per year.