Do Medicare HMOs still reduce health services use after controlling for selection bias?

This study models the relationship between Medicare beneficiary decisions to join Medicare HMOs and subsequent health services utilization. The relationship between health plan choice and utilization is thought to be endogenous because of favorable selection into HMOs. Previous studies found significantly lower inpatient utilization among Medicare HMO enrollees than among nonenrollees, but lacked strong controls for selection bias. Thus, a firm conclusion could not be drawn as to whether the observed differences were attributable to the HMO practice setting or to baseline differences in the illness profiles of the two groups studied. The present study uses simultaneous equations methods, including discrete factor estimation, to test the effect of Medicare HMOs on utilization when strong controls for selection bias are imposed. The model was run on a panel of 1993-1996 data from the Medicare Current Beneficiary Survey, supplemented with linked data on Medicare HMO characteristics and area supply characteristics. The study found that even when favorable selection is controlled for, Medicare HMOs significantly reduce both the probability of hospitalization and the number of inpatient days used by those who are hospitalized. Medicare HMOs do not, however, appear to reduce the use of physician services.

One hundred and eighteen years of the German health insurance system: are there any lessons for middle- and low-income countries?

A number of low and middle income countries (LMICs) are considering social health insurance (SHI) for adoption into their social and economic environment or striving to sustain and improve already existing SHI schemes. SHI was first introduced in Germany in 1883. An analysis of the German system from its inception up to today may yield lessons relevant to other countries. Such an analysis, however, is largely lacking, especially with regard to LMICs. This paper attempts to fill this gap. For each of the following lessons, it considers if and under which conditions they may be of relevance to LMICs. First, small, informal, voluntary health insurance schemes may serve as learning models for fund administration and solidarity, but in order to achieve universal coverage government action is needed to formalise these schemes and to introduce a principle of compulsion. Once compulsory health insurance exists for some people, incremental expansion of coverage to other regions and social groups may be feasible to achieve universality. Second, in order to ensure sustainability of SHI, the mandated benefit package should be adapted incrementally in accordance with changing needs, values and economic circumstances. Third. in a pluralistic SHI system equity, as well as risk pooling and spreading, can be enhanced if funds merge. The optimal number of funds, however, will depend on the stage of development of the SHI system as well as on other objectives of the system, including choice and competition. A risk equalisation scheme may prevent the adverse effects of risk selection, if competition between insurance funds is introduced into the system. Fourth, as an alternative to both state and market regulation, self-governance may serve as a source of stability and sustainability as well as a means of decentralising and democratising a health care system. Finally, costs can be successfully contained in a fee-for-service system, if cost-escalating provider behaviour is constrained by either political pressure or technical means.

Establishing a contract for a PACS managed service

This review considers the process of contracting for a picture archiving and communication system (PACS) using the private finance initiative (PFI) managed service route. The PFI process is reviewed and the advantages and disadvantages of a managed service detailed. During contract negotiations several areas of conflict were encountered. These are discussed with an outline of how they were resolved.

CONCLUSION

A contract for a PACS has been achieved by a large acute hospital Trust using a managed service provision through PFI. In detailing the specific problems encountered in the course of negotiations, it is intended that other Trusts entering on this course will be equipped and strengthened in the finalizing of satisfactory and robust contracts.

Service use and health status of persons with severe mental illness in full-risk and no-risk medicaid programs

OBJECTIVE

The service use patterns and health status outcomes of Medicaid recipients with severe mental illness in a system that assigned full financial risk to managed care organizations through capitation and a system that paid for mental health care on a no-risk fee-for-service basis were compared.

METHODS

With use of a quasi-experimental design, initial interviews (time 1) and follow-up interviews six months later (time 2) were conducted among 92 clients in the full-risk group and 112 clients in the no-risk group. Regression models were used to compare self-reported service use and health status between the two groups.

RESULTS

Service use patterns differed between the two groups. When symptom severity at time 1 was controlled for, clients in the full-risk group were more likely to have received case management but less likely to report contact with a psychiatrist or to have received counseling than clients in the no-risk group. When health status at time 1 was controlled for, clients in the full-risk group reported poorer mental health at time 2 than clients in the no-risk group. When physical health status at time 1 was controlled for, clients in the full-risk group reported poorer physical health at time 2 than clients in the no-risk group.

CONCLUSIONS

Capitation was associated with lower use of costly services. Clients with serious mental illness in the full-risk managed care system had poorer mental and physical health outcomes than those in the no-risk system.

The effect of financial risk arrangements on service access and satisfaction among medicaid beneficiaries

OBJECTIVE

The relationship between financial risk arrangements, access to services, and consumer satisfaction with services was assessed in a sample of Medicaid beneficiaries who were enrolled under three different financial risk arrangements for health care and mental health care.

METHODS

A survey was mailed to a stratified random sample of 9,449 recipients of Supplemental Security Income. Respondents reported their health and mental health service needs, service use, and satisfaction with services. Access was measured in terms of service needs that were met.

RESULTS

Access to services was related to the type of risk arrangement. Respondents who were enrolled in plans that assumed the risk for the cost of services had poorer access to services than respondents who were enrolled in plans that did not assume the risk for the cost of these services. Satisfaction with medical services was negatively related to the plan's assuming the risk for medical expenditures.

CONCLUSIONS

Financial risk arrangements may have important implications for service use patterns among persons who have disabilities. Health and mental health policy makers should carefully consider risk arrangements when designing health plans for vulnerable populations.

Medicare+Choice: what lies ahead?

Health plans have continued to exit the Medicare+Choice program in recent years, despite efforts of Congress and the Centers for Medicare and Medicaid Services (CMS) to reform the program. Congress and CMS therefore stand poised to make additional, substantial reforms to the program. CMS has proposed to consolidate its oversight of the program, extend the due date for Medicare+Choice plans to file their adjusted community rate proposals, revise risk-adjustment processes, streamline the marketing review process, enhance quality-improvement requirements, institute results based performance assessment audits, coordinate policy changes to coincide with contracting cycles, expand its fall advertising campaign for the program, provide better employer-based Medicare options for beneficiaries, and take steps to minimize beneficiary costs. Congressional leaders have proposed various legislative remedies to improve the program, including creation of an entirely new pricing structure for the program based on a competitive bidding process.

HMO provider networks in Medicare+Choice: comparing Medicare and commercial lines of business

The Medicare+Choice (M+C) program was intended to expand choice of managed care plans for Medicare beneficiaries. In the past few years, the opposite has occurred as many participating HMOs reduced Medicare service areas or withdrew from the program. This paper presents findings from a study of the provider networks of 85 HMOs that were participating in M+C in 1999. The study shows that provider networks serving Medicare enrollees are usually similar to those developed for HMOs' commercial line of business, but when they are different, Medicare provider networks are smaller. Most HMOs also had at least some problems maintaining their Medicare provider networks. These findings have implications for the future of the Medicare+Choice program and Medicare enrollees' access to health care.

Variation in patient-reported quality among health care organizations

Health care quality measurement initiatives often use health plans as the unit of analysis, but plans often contract with provider organizations that are managed independently. There is interest in understanding whether there is substantial variability in quality among such units. We evaluated the extent to which scores on the Consumer Assessment of Health Plans Study (CAHPS) survey vary across: health plans, regional service organizations (RSOs) (similar to independent practice associations [IPAs] and physician/hospital organizations [PHOs]), medical groups, and practice sites. There was significant variation among RSOs, groups and sites, with practice sites explaining the greatest share of variation for most measures.

Financial risk, plan types, and authorizations for managed alcohol treatment services

OBJECTIVE

To estimate the effects of a managed behavioral healthcare organization's (MBHO's) products/plans and financial risk on levels and amount of care authorized for patients with alcohol-related problems.

STUDY DESIGN

Secondary analysis of 1995-1998 MBHO authorization files.

PATIENTS

Individuals diagnosed as having an alcohol-related problem without comorbidities.

METHODS

Episodes (n = 10,872) were constructed with 60-day clear zones. Multinomial regression equations were used to analyze the proportional distribution of care authorized within episodes at 5 levels: inpatient, residential, partial hospitalization, intensive outpatient, and traditional outpatient. Care equivalency hours were calculated to combine data across outpatient sessions and inpatient days. A linear regression equation analyzed quantity of care within episodes. Product/plan types, financial risk, state of residence, and participation in the MBHO's network were explanatory variables. Age, sex, diagnosis, and episode number were control variables.

RESULTS

Most utilization management care hours authorized are inpatient and residential. Relative to other products/plans for managing care, utilization management leads to 50% more authorized hours. More financial risk does not predict fewer care units authorized but shifts hospitalizations toward residential treatment. Increasing age and higher-severity diagnoses predict more overnight care authorizations. Pennsylvania, which mandates minimum levels of care and follows American Society of Addiction Medicine criteria, has significantly more care authorized compared with 8 other states with data.

CONCLUSIONS

Other than in utilization management, MBHO financial risk does not predict less care authorization. The MBHO authorizes higher-level care for older adults, for those with more severe diagnoses, and for those with episodes of care beyond the second. Authorization data do not necessarily reflect utilization but can provide a useful, partial view of management strategies.

Risk transfer and accountability in managed care organizations' carve-out contracts

OBJECTIVE

This study examined characteristics of contracts between managed care organizations (MCOs) and managed behavioral health organizations (MBHOs) in terms of delegation of functions, financial arrangements between the MCO and the MBHO, and the use of performance standards.

METHODS

Nationally representative administrative and clinical information about the three largest types of commercial products offered by 434 MCOs in 60 market areas was gathered by telephone survey. These products comprised services provided by health maintenance organizations, preferred provider organizations, and point-of-service plans. Chi square tests were performed between pairings of all three types of products to ascertain differences in the degree to which claims processing, maintenance of provider networks, utilization management, case management, and quality improvement were delegated to MBHOs through specialty contracts among the various types of products. Contractual specifications about capitation arrangements, risk sharing, the use of performance standards, and final utilization review decisions were also compared.

RESULTS

For all types of products, almost all the major functions were contracted by the MCO to the MBHO. Although most contracts assigned some risk for the costs of services to the MBHO, the degree of this risk varied by product type. Except in the case of preferred-provider organizations, a large number of performance standards were identified in MCOs' contracts with MBHOs, although financial incentives were rarely tied to such standards.

CONCLUSIONS

MCOs that contract with MBHOs place major responsibility, both financial and administrative, on the vendors.

Managed care in the doctor's office: has the revolution stalled?

OBJECTIVE

To assess trends in the involvement of US physicians with managed care.

STUDY DESIGN

Comparison of data from 2 consecutive rounds of a national survey.

METHODS

Longitudinal data were obtained from the 1996/1997 (n = 12,528) and the 1998/1999 (n = 12,304) rounds of the Community Tracking Study (CTS) Physician Survey, a large, ongoing nationally representative survey of US physicians involved in patient care. Indicators used to assess involvement with managed care included global measures of managed care participation, risk contracting, exposure to financial incentives, and impact of care management tools. Changes in these measures over the 2 study periods are reported. Analyses were conducted for all physicians, as well as for primary care physicians (PCPs) and specialists separately.

RESULTS

The percentage of practice revenue derived from managed care increased only modestly over the study period (from 42% to 45%). Mean numbers of managed care contracts per physician increased minimally (from 12 to 13). Trends in acceptance of capitation and exposure to financial incentives remained stable over the study period. Among PCPs, employment in staff/group health maintenance organizations declined slightly, whereas gatekeeping function increased modestly. Among care management tools, only treatment guidelines had a significantly increased impact on medical practice, primarily among PCPs (from 46% to 52%; P < .001).

CONCLUSIONS

Many aspects of managed care leveled off between 1996 and 1999 in ways not accurately reflected by plan enrollment patterns. This "flattening of the curve" trend appears to hold generally across multiple measures. A stalling of the managed care "revolution," if it is sustained, may portend future escalation in healthcare costs.

An examination of flexible spending accounts

This paper develops a framework for analyzing flexible spending account (FSA) participation and usage. We explore patterns of FSA usage using data from a benefits firm for 1996 including an examination of types of FSA expenditures and their timing. We estimate some simple econometric models of the participation decision and also the decision of how much to put into an FSA. Several pieces of evidence suggest that much of an FSA election amount is based on foreknowledge of expenditures. We also find that participants tend to spend their election amount early, thus obtaining an interest-free loan.

Correlates of family burden under medicaid managed mental health care

This study examined predictors of family burden (assistance in daily living, supervision, and subjective concern) for family members of Medicaid recipients with severe mental illness in two regions of Virginia. In the Richmond area, mental health services were provided on a no-risk fee-for-service basis, while in Tidewater these services were provided through a risk-based capitated contract with a managed care organization. No differences in family burden were attributable to the risk-based payment system. Predictors of increased family burden were (a) more reported client symptoms and disruptive behaviors, (b) status as a parent, and (c) living with the client.

The emergence of the microstatistical paradigm in managed care

Although commentators have argued that managed care constitutes a paradigm shift in the American health care system, it is argued that the guiding organizational assumptions driving orthodox managed care arrangements (i.e., HMOs and capitation) have been drawn from a paradigm that is 300 years old: the business of insurance. As such, traditional managed care directives have taken a macrostatistical organizational viewpoint. However well a macrostatistical paradigmatic view serves certain constructs such as the business of insurance, it is far too coarse a method for organizing and reforming the badly fragmented production processes of health care. As a corrective complement, a new microstatistical paradigmatic view is coming of age whose methodological directives are based in the episode of care, and which will ultimately allow for a more highly refined pricing and care process system to emerge.

Calculating five types of typical underpayments

Underpayments to providers under their payer agreements are a cause of many thousands of dollars in lost revenue. Providers should devise a plan to make certain that payments made to them are accurate, on time, and adhere to other contractual obligations. The importance of developing and implementing such a plan is substantiated by the fact that nearly 100 percent of a provider's commercial business is under contract. As a starting point, providers may wish to focus on five common types of underpayments: underfunding due to late payments; fee-schedule changes that are contractually disallowed; miscalculation of performance-based bonuses and errors in risk-payment reconciliations; inappropriate denials or inappropriate downcoding of claims; and non-payments. The successful execution of a plan to identify and resolve problems and recover payments owed relies on the provider's ability to document and prove that payment is due.

Definity Health shifts risk all the way to the patient; employers attracted to 'new consumerism'

What happens when a company offers its workers a defined contribution health plan for the first time? In this case, at least, they flock to it.

Successful physician groups are 'sleeping with the enemy'

Successful physician groups are "sleeping with the enemy." Groups that consider health plans as their partners rather than their opponents have a much better chance of success in the risk contracting game.

Hawaii insurer turns to risk sharing disease management initiative to slash utilization for chronic illness

Find out why this disease management program has had such good success managing total health care for enrolled patients and is expanding into cardiac care, asthma, and COPD--while putting plenty of dollars to the bottom line.

Do you really know how risk works these days?

There's a new player in the risk contracting arena--provider-owned intermediaries that come between health plans and physicians. Get the details from the first-ever study of these new entities, and their implications for at-risk providers.

Capitation: a strategy that could have a future

Capitation can be successful if hospitals, physicians, and payers share risk to align financial incentives to control costs. Payers need to help hospitals that accept risk to achieve success under managed care agreements. Many failures in hospital capitation might be preventable if hospitals improve internal operations and commit themselves to making the changes necessary for successful risk-based payment.

Social Security reform: implications for women

Despite recent economic gains for women, a substantial gender gap in financial security during old age remains, making women more dependent than men upon Social Security. Social Security plays an important role in providing for women's economic security. The implications for women of several proposed changes in Social Security policy, including the call for the partial privatization of Social Security via the introduction of individual accounts, are analyzed. Many of the proposals would have the effect of asking women, particularly low-income women, to shoulder a disproportionate share of the risks and burdens associated with the changes.

Classifying health networks and systems: managerial and policy implications

This article illustrates how a new approach to classifying health networks and systems can be used to evaluate the readiness of health care organizations to accept risk. Examples are provided from the Harris-Methodist, Henry Ford, and SSM Health Care Systems. The classification system can also be used to assist executives and physician leaders in making decisions involving the centralization of services, the number of different services to offer, and decisions to enter into various strategic alliances. The classification system can be updated to help track the evolution of the U.S. health care system over time.

Why provider-sponsored health plans don't work

Integrated delivery systems (IDSs) that assume risk directly by starting their own health plans need to ensure that they have set realistic goals. Many provider-health plan integrations fail because either the conditions under which they are started are not optimal or the integration is faulty. Successful provider-plan integrations generally have developed in rural areas where they faced limited competition, had higher utilization rates, and enjoyed greater profit margins because of lower price competition and employers' acceptance of premium rates. These factors are uncommon today. IDDSs sponsoring health plans can face problems in partnering with physicians, who may not demonstrate concern for the success of the healthcare system as a whole. For these and other reasons, IDDSs should consider partnering with existing health plans rather than starting their own plans.