Another Leftwing Critique of Managed Competition
In an important paper in the New England Journal of Medicine in 1997, researchers looked at how people moved in and out of Medicare HMO plans and traditional Medicare….
So here’s what they found: people who wound up joining the (private) HMOs used 66% less care before joining than those who stayed in the FFS Medicare group. Somehow, the private HMOs figured out a way to get the healthy people to jump ship out of FFS Medicare into theirs!
Not only that, but people who left the (private) HMOs and went back to FFS Medicare used 180% more care after leaving than the people who stayed. Somehow the private insurance HMOs figured out a way to convince the sicker people to jump ship back to FFS Medicare.
This is what private companies competing with FFS Medicare looks like. Regulations prevent cherry-picking, and yet, the insurance companies figure out a way to preferentially cover healthy people.
Amazing. Now we need to convince the right.
At the time, enrollees could switch back and forth between FFS and the HMOs so it was they who were “gaming the system.”
Academic research suggests that people with certain chronic illnesses leave Medicaid Advantage plans in order to get the care that they need.
So you don’t need to affirmatively attract the healthy so much as encourage the sick to disenroll, something that is fairly straightforward.
OK, but why are we so sure that the insurers gamed it, rather than the patients? I’ve always thought there was multicollinearity in that study, i.e that the same thing which made the patients who dropped out more sick was also what made them drop out. I’m not sure what to call it: “lack of motivateion” or “unwilling to comply with medical advice”, perhaps.
But I do agree that it just has to be true that the plans know how to ship the more expensive patients back to the taxpayer (i.e. traditional FFS Medicare). That’s why the Ryan plan must not be malformed by allowing traditional Medicare to continue to exist. All the insurers must make the risk-adjustement payments according to a method agreed by themselves in a closed system. Thus, the selection bias should net out to zero(ish).
A whole lot of people are unwilling to “comply with medical advice” when that advice simply boils down to denying care.
From the abstract of Morgan et al. (2000):
Recent Medicare health maintenance organization (HMO) disenrollees use a high level of medical services. This study examined admissions for total hip arthroplasty (THA) and osteoarthritis-related knee replacements (OKR) among Medicare HMO disenrollees and continuously enrolled fee-for-service (FFS) beneficiaries to determine whether Medicare beneficiaries are returning to the FFS system to receive quality-of-life enhancing elective care…
The annualized adjusted rates of both THA and OKR were 3.5 to 4 times higher among Medicare HMO disenrollees than among FFS beneficiaries (P < or = .0001 for both procedures); substantially smaller differences were noted for HRF (P < or = .05), and no difference was present for AMI. HMO disenrollees and FFS enrollees did not differ in their levels of comorbidity at the time of admission.
CONCLUSIONS: These data provide indirect evidence that Medicare HMOs in South Florida are rationing THA and OKR and that beneficiaries respond by returning to the FFS system to seek care. This apparent rationing has important implications regarding for the management of serious, but nonemergent, medical conditions within the evolving Medicare system.