Using HMOs To Serve The Using HMOs To Serve The Medicaid Population: What Medicaid Population: What

Are The Are The Effects On Healthcare Effects On Healthcare

Utilization And Does The Type Utilization And Does The Type Of HMO Matter?Of HMO Matter?

Bradley Herring and E. Kathleen AdamsBradley Herring and E. Kathleen AdamsEmory UniversityEmory University

June 25, 2006 AcademyHealth ARM in SeattleJune 25, 2006 AcademyHealth ARM in SeattleFunded by an RWJF HCFO GrantFunded by an RWJF HCFO Grant

Primary Research QuestionsPrimary Research Questions

• What are the effects of using HMOs for the Medicaid population?– Does enrollee access to care change?– Do utilization patterns change?– Do overall healthcare expenses change?

• Are there different effects for commercial HMOs versus Medicaid-dominant HMOs?

BackgroundBackground

• Enrollees in some form of Medicaid managed care increased from 32.1% in 1995 to 60.7% in 2004– Primary care case management– At risk health plans: “carve out” plans and HMOs

• Enrollees in Medicaid HMOs increased from 14.1% in 1995 to 39.5% in 2004

• Little consistent or generalizable empirical evidence for access to care, utilization, or total expenses

State Motivation for State Motivation for Using Managed CareUsing Managed Care

• Improve access to care, at current expense:– Improve access to “mainstream” office-based

providers?– Improve quality?

• Reduce expense, while maintaining access:– Improve use of cost-effective preventive services?– Decrease unnecessary use of the ER?– Better manage chronic conditions?– Use bargaining power to achieve provider

discounts?

• Or perhaps yield predictable budgets?

Might the Type of HMO Might the Type of HMO Matter?Matter?

• Commercial HMOs enrolling both Medicaid and privately insured populations:– Reduce “stigma” by integrating populations?– More likely to include “mainstream” providers?– Economies of scale?

• Medicaid-dominant HMOs – more than 75% of enrollees in Medicaid:– Serve unique needs (economies of scope)?– More likely to include traditional “safety net”

providers?– Inefficient due to “learning by doing”?

Prior ResearchPrior Research

• Early research summarized in Hurley et al. (1993) and Rowland et al. (1995)

• More recent research:– State-specific analysis: CA, FL, OH, MN, TN, WI– Nationally-representative survey data:

• State-level penetration or presence of MMC in a county

– We compliment Duggan’s (2004) work on total state expenditures (i.e., capitation rates) by focusing on underlying utilization-based expenses

Our Empirical ApproachOur Empirical Approach

• Community Tracking Study in 60 U.S. markets – Household Survey for ‘96-‘97, ‘98-‘99, ‘00-‘01, and

‘03– We limit to the 51 urban MSAs

• MSA measures of Medicaid HMO penetration using CMS and InterStudy data for ‘96, ‘98, ‘00, and ‘02– CMS lists all Medicaid HMOs and the counties

served– We link to InterStudy data to determine whether

each HMO is commercial or Medicaid-dominant – Penetration rate: the percentage of all Medicaid

enrollees in that HMO type

Medicaid HMO Penetration Medicaid HMO Penetration Rates Rates

of Urban CTS Markets by of Urban CTS Markets by PeriodPeriod

Variables: 1996 1998 2000 2002

HMO (both types) penetration rate

24.7%

35.9%

32.4%

42.1%

Commercial HMO penetration rate 8.5%

14.3%

12.4%

12.1%

Medicaid-dominant HMO penetration rate

16.2%

21.6%

20.0%

30.0%

Source: Complied CMS and InterStudy data

Our Empirical Approach Our Empirical Approach (cont.)(cont.)

OUTCOMEit = f (ßHMO XHMO,it + ßI XI,it + ßAREA XAREA,it

+ γMSA MSAi + γYEAR YEARt, ε)where OUTCOMEit = a specific outcome measure for

Medicaid enrollee i during time t XHMO,it = measures of commercial and

Medicaid-dominant HMO penetration XI,it = a set of individual characteristics XAREA,it = a set of local area characteristics MSAi = a set of MSA indicator variables YEARt = a set of year indicator variables ε = an error term

Medicaid Enrollees in the Medicaid Enrollees in the CTS-HS:CTS-HS:

Three Sets of Dependent Three Sets of Dependent VariablesVariables• Sample: 9134 non-elderly with Medicaid in

the CTS-HS– Includes children in SCHIP– Adults and children both together and separate

• 1st set: Access measures:– Usual source of care other than the ER– Usual source of care is the ER– Having a difficulty in obtaining care– Being satisfied with one’s primary care doctor

Medicaid Enrollees in the CTS-Medicaid Enrollees in the CTS-HS:HS:

Three Sets of Dependent Three Sets of Dependent Variables (cont.)Variables (cont.)• 2nd set: utilization measures:

– Office-based physician visits – Medical practitioner visits

– Any mental health services – ER visits– Inpatient stays – Inpatient nights– Inpatient surgeries – Outpatient surgeries

• 3rd set: “synthetic” estimate of total healthcare expenses using CTS-HS utilization & the MEPS:– 1996-2003 MEPS to regress actual expense on

utilization – The MEPS coefficients are essentially “unit prices”

Medicaid Enrollees: Medicaid Enrollees: Independent VariablesIndependent Variables

• Variables of interest: – Commercial HMO penetration rate– Medicaid-dominant HMO penetration rate

• Individual controls: – Age and gender, family type (e.g., single with kids),

family income, race/ethnicity, education, self-reported health status

• Local-area controls:– PCCM, type of SCHIP expansion, Medicaid fee

index, MDs/capita seeing Medicaid, hospital beds/capita, FQHC, private HMO penetration, median income, race/ethnicity

• MSA fixed effects and time trend

Results for Commercial HMOsResults for Commercial HMOs

• Child enrollees: – No effect on access – No effect on utilization – No effect on expenses

• Adult enrollees: – No effect on access– Increase only for mental health visits (p<0.05)

– Decrease in expenses (p<0.10)

Results for Medicaid-Dominant Results for Medicaid-Dominant HMOsHMOs

• Child enrollees: – Decrease in usual source of care other than ER

(p<0.10)

– Increase in medical practitioner visits (p<0.10) Increase in ER visits (p<0.05)

– Increase in healthcare expenses (p<0.05)

• Adult enrollees: – Increase in using the ER as a usual source of care

(p<0.10)– Increase in medical practitioner visits (p<0.05)

Decrease in inpatient surgeries (p<0.001)

Decrease in outpatient surgeries (p<0.05)

– No effect on healthcare expenses

Magnitude of the Effect of Magnitude of the Effect of Medicaid-Dominant HMOsMedicaid-Dominant HMOs

• We simulate the independent effect of the increase in the Medicaid-dominant penetration rate of 16.2% in 1996-1997 to 30.0% in 2002-2003:– Proportion reporting a (non-ER) usual source of care:

Reduced from 86.2% to 84.8%– Number of visits to the ER:

Increased from 0.654 per year to 0.732 per year– Total healthcare expenses (in 2003$):

Increased from $3004 to $3163 (a 5.3% real increase)

ConclusionsConclusions

• Increase in penetration by commercial HMOs: – No change in access to care– Little change in utilization patterns– No increase in expenses (perhaps a decrease for adults)– (Our other work: increase in physician participation)

• Increase in penetration by Medicaid-dominant HMOs:– Worse access to care– Many changes in utilization– Increase in expenses for children; No change for adults– (Our other work: no change in physician participation)

Policy ImplicationsPolicy Implications

• What’s the real motivation for contracting with HMOs?– Welfare improvements from either improved access and

maintained expense -or- lower expense and maintained access

• Our results suggest that– States may have seen small welfare improvements by

contracting with commercial HMOs before their exit– States have seen (and will see) decreases in welfare by

contracting with Medicaid-dominant HMOs• Attention needed in setting capitation rates and fees

– Exits by commercials & pressure from Medicaid-dominants