A new study contradicting previous research shows costs to Medicare would go up if HMO beneficiaries switched to traditional fee-for-service care.
The new Price Waterhouse study, commissioned by the American Association of Health Plans-an HMO trade group-shows that on average, beneficiaries in HMOs are not healthier than those who choose to remain in traditional Medicare. So the cost of caring for HMO enrollees who switched to traditional Medicare would be similar to that of fee-for-service beneficiaries.
That would wind up costing Medicare more because HMOs currently receive 95% of the estimated cost of caring for beneficiaries under fee-for-service.
Opponents of this formula argue that HMOs are being overcompensated because a 1993 Mathematica Policy Research study concluded the cost of caring for HMO enrollees is 11.3% lower than for the fee-for-service population.
The Mathematica findings and other studies showed beneficiaries who joined HMOs had lower utilization costs before they joined than those who remained in traditional Medicare.
That led many in the industry to conclude that HMOs enrolled a higher share of healthier beneficiaries than fee-for-service plans. Instead, the new study compares matched samples of enrollees in HMOs and fee-for-service plans in terms of health costs, chronic conditions, limitations on their daily activities, income and health status.
The study shows the health status of the two groups is not significantly different. While more fee-for-service patients had chronic heart conditions (27% vs. 18%), more HMO-enrolled patients had more expensive chronic conditions. Those include diabetes (16% vs. 12%), asthma (14% vs. 13%) and stroke (4% vs. 3%).