Health Care Use and Expenditures of Medicare HMO Disenrollees

Parente, Stephen T., Evans, William N., Schoenman, Julie A., Finch, Michael D., Health Care Financing Review

INTRODUCTION

On January 1, 1999, approximately 407,000 Medicare beneficiaries (nearly 7 percent of all Medicare HMO enrollees) were forced to leave their current Medicare risk-plan HMO because their health insurers chose not to enter into a new Medicare+Choice contract; or decided to reduce their current service area (Gold et al., 1999; U.S. Department of Health and Human Services, 2000; Gold and Justh, 2000; U.S. General Accounting Office, 1999). Plans have cited the payment and regulatory changes legislated by the Balanced Budget Act of 1997, combined with often intense market competition, as the reason for their withdrawal from the Medicare market (Harrison, 2002). Since 1999, Medicare managed care plan withdrawals continue to have significant consequences to Medicare beneficiaries (Booske, Lynch, and Riley, 2002). With the passage of the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA), which provides new incentives to private health insurers to reenter the market by 2006, and offer extended health care and prescription drug coverage to beneficiaries, understanding the impact of Medicare HMO withdrawals at the beneficiary level remains relevant.

Prior studies completed at the beneficiary level used survey data to gauge the impact of Medicare HMO withdrawals on cost and utilization (Booske, Lynch, and Riley, 2002; Laschober et al., 2000). While these studies have identified significant deleterious effects for beneficiaries associated with involuntary disenrollment from a Medicare HMO, such as increased out-of-pocket expenditures for prescription drugs, higher premium prices for supplemental coverage, and disruptions in their usual source of care, they have not provided an account of the utilization and expenditure impact. Also, none of these studies used a comparison group to determine whether the effects reported by disenrollees differed from underlying trends in the Medicare market.

Using 1998 and 1999 claims and enrollment data from Medicare and United Health Group (UnitedHealth), we examine the utilization and cost impact of plan changes at the beneficiary level. We report the results of an analysis comparing the utilization, out-of-pocket cost sharing, and reimbursement differences among three groups of enrollees: (1) beneficiaries involuntarily dropped from their plan and returned to FFS Medicare, (2) beneficiaries who remained enrolled in the same HMO throughout the period, and (3) beneficiaries in an UnitedHealth HMO in 1998 who voluntarily left the plan to return to FFS in 1999.

The focus of our analysis is the beneficiary level consequences of an involuntary disenrollment from a Medicare HMO from 1998 to 1999, the first period of widespread closures. This period represents a time when alternative Medicare managed care plan choices were still abundant to the beneficiary facing an HMO market withdrawal. For example, a survey of UnitedHealth Medicare seniors found that over 82 percent of those forced to leave their UnitedHealth plan in 1998 found a new managed care plan by January 1, 1999 (Schoenman et al., 2005). The implications of this research could help identify the impact of 2003 MMA failing to provide a long-term stable market-based Medicare HMO set of plan choices in 2006.

METHODS

Study Setting

This study focuses on the utilization consequences of the first large-scale wave of withdrawals of HMOs from the Medicare market, which went into effect in January 1999. A unique feature of our research is the use of claims data made available by UnitedHealth as a collaborative research partner. Effective January 1999, United-Health ended HMO coverage for 59,017 Medicare beneficiaries in 15 markets nationwide. Of these markets, United-Health had claims and enrollment data for 9 markets comprised of 31,189 beneficiaries. Table 1 lists UnitedHealth's 1998 operational markets corresponding to 92 counties for which we have enrollment. (1) In the table, the 49 counties correspond to the markets dropped by UnitedHealth are identified. All beneficiaries enrolled in these plans were forced to make a decision to choose another HMO offered in their county of residence or return to the Medicare FFS. What makes this an interesting experiment is that we are able to observe the utilization and expenditures of the dropped population if they returned to FFS. However, there is one cohort of significance with missing data--the dropped population that chose another HMO in 1999. For these beneficiaries, we used two other survey instruments to record their general experiences. We present these findings in a separate analysis (Schoenman et al., 2005).

Data

Enrollment and claims data used in this analysis were from 1998 and 1999. This pre/post-closure analysis was completed with the use of de-identified claims and enrollment data from CMS and UnitedHealth. CMS provided demographic, eligibility, and enrollment data for beneficiaries in our study group. All dropped HMO beneficiaries residing in markets UnitedHealth chose to exit in 1999 had the option of enrolling in another HMO, the majority (82 percent) did (Schoenman et al., 2005). UnitedHealth did not make the decision of which markets to withdraw from at random. Although, many of the markets designated for exit by United-Health were less than 3-5 years old; the usual startup period were managed care organizations, and the providers build sufficient claims experience to develop predictable expenditure patterns. While UnitedHealths' choice to exit certain markets was made with some lead time, the beneficiary was unaware of UnitedHealth strategic decisionmaking and experienced an exogenous shock to either return to FFS or find another Medicare HMO in their county.

Combining the Medicare data with claims and administrative files from UnitedHealth was challenging due to structural differences in the two sources of data and timing of the data requests to complete the study. Figure 1 describes the selection of the study comparison population. The following are the four population development steps.

In step one, UnitedHealth identified all Medicare HMO enrollees with any participation in a UnitedHealth HMO in 1997-1999 and created a finder file for CMS. This step yielded a starting population of 349,841 enrollees.

In step two, they sent a finder file with the enrollees to obtain CMS denominator file information, managed care enrollment data, and claims data for the beneficiary for the period 1997-1999. The resulting denominator file from CMS could only match 283,159 beneficiaries, a loss of 19 percent of the potential sample population. This loss was due to an inconsistency between the older way UnitedHealth was recording Beneficiary Identification Codes (BICs) and CMS's recently changed approach. A closer examination revealed the systematic under matching of female spouses and widowers on the data. …

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Publication information: Article title: Health Care Use and Expenditures of Medicare HMO Disenrollees. Contributors: Parente, Stephen T. - Author, Evans, William N. - Author, Schoenman, Julie A. - Author, Finch, Michael D. - Author. Journal title: Health Care Financing Review. Volume: 26. Issue: 3 Publication date: Spring 2005. Page number: 31+. © 1998 U.S. Department of Health and Human Services. COPYRIGHT 2005 Gale Group.

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