Study Finds Patients Whose Medicare HMOs Close Face Higher Insurance Costs

From 1999 to 2003, researchers from the Project HOPE Center for Health Affairs, a nonprofit health policy research organization based in Millwood, Va., examined how Medicare beneficiaries fared after their health maintenance organizations (HMOs) closed, forcing them to seek new insurance coverage.

The study focused on beneficiaries who were especially vulnerable to the loss of HMO coverage because of chronic illness and/or high prescription drug expenditures.

Key Findings

  • Most beneficiaries dealt with the HMO withdrawals without major problems, but vulnerable groups tended to be less knowledgeable about their options.

  • Beneficiaries whose HMO closed were more likely to change their usual provider than others, but there was no evidence that they suffered more adverse health outcomes.

  • Former HMO members who returned to fee-for-service Medicare faced higher costs, had fewer physician visits but more emergency room visits and more inpatient stays, compared to those whose HMO did not close.