Biased enrollment of Medicare beneficiaries in HMO plans--implications for Medicare costs

J Health Care Finance. Summer 2002;28(4):43-57.


Policymakers assumed that the enrollment of Medicare beneficiaries in health maintenance organization (HMO) plans would generate significant cost savings for Medicare. The Health Care Financing Administration (HCFA) calculates the reimbursement to HMOs per Medicare beneficiary on the basis of individual and community-specific characteristics. Estimates of the individual-specific profitability rate for enrolling an individual in a Medicare HMO risk plan suggest that the probability of enrollment in HMOs increases with a higher profitability score. The probability of not enrolling high-loss cases is found to be high, indicating that the biased selection in HMO plans actually increases the overall cost of running the Medicare program.

MeSH terms

  • Adult
  • Aged
  • Aged, 80 and over
  • Capitation Fee
  • Cost Savings
  • Demography
  • Fee-for-Service Plans / economics
  • Health Maintenance Organizations / economics*
  • Health Maintenance Organizations / statistics & numerical data*
  • Health Status*
  • Humans
  • Income / statistics & numerical data*
  • Insurance Selection Bias*
  • Medicare / economics*
  • Middle Aged
  • Models, Econometric
  • Probability
  • Rate Setting and Review
  • Risk Sharing, Financial / economics*
  • United States