Using HMOs to Serve the Medicaid Population

What are the Effects on Utilization and Does the Type of HMO Matter?

This article examines the penetration and impact of Medicaid HMOs in markets across the United States. The percentage of Medicaid patients enrolled in an HMO has increased from 14 percent in 1995 to 39 percent in 2004. Medicaid HMOs have been thought to have potential to lower costs and improve quality of care, but little is known about whether enrollment in a Medicaid HMO results in either of these changes.

This analysis uses the Community Tracking Study’s Health Care Survey data on utilization and access to care between 1996 and 2003. The sample was representative of urban markets, where Medicaid HMOs are most common. The authors examine two types of HMOs: Medicaid-dominant HMOs, where more than 75 percent of enrollees are on Medicaid, and commercial HMOs, where less than 75 percent of enrollees are on Medicaid.

Key Findings:

  • Overall enrollment in HMOs increased from 24 percent of the Medicaid population in 1996 to 40 percent in 2002. However, enrollment in commercial HMOs peaked at 14 percent of the Medicaid population in 1998 and has declined moderately since then as commercial HMOs have dropped out of Medicaid programs.
  • The increase in use of commercial and Medicaid HMOs did not correspond to either a decrease in medical costs or an increase in access to care.
  • Enrollment in commercial HMOs increased the likelihood that physicians accepted new Medicaid patients, but this increase did not translate into an improvement in access to care.

This research suggests that while enrollment in Medicaid HMOs has increased dramatically over the past two decades, the shift has not resulted in significant changes to either the cost or the accessibility of medical care for Medicaid enrollees.