The Medicare-HMO Revolving Door — The Healthy Go in and the Sick Go Out

Authors:
  • BVBeth A. Virnig
    Beth A. Virnig
  • CDCarolee A. DeVito
    Carolee A. DeVito
  • NPNancy A. Persily
    Nancy A. Persily
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Abstract
Enrollment in Medicare health maintenance organizations (HMOs) is encouraged because of the expectation that HMOs can help slow the growth of Medicare costs. However, Medicare HMOs, which are paid 95 percent of average yearly fee-for-service Medicare expenditures, are increasingly believed to benefit from the selective enrollment of healthier Medicare recipients. Furthermore, whether sicker patients are more likely to disenroll from Medicare HMOs, thus raising average fee-for-service costs, is not clear.

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