HEALTH PLAN CHOICE IN THE TWIN-CITIES MEDICARE MARKET

This paper examines the relationship between characteristics of Medica re beneficiaries and their choice of health plan in the Twin Cities du ring 1988. This analysis provides the first comparison of beneficiarie s in the basic fee-for-service (FFS) Medicare sector (without a supple mentary policy) to beneficiaries in the FFS sector with a supplementar y policy, enrolles in independent practice associations (IPAs), and ne twork health maintenance organizations (HMOs). The site and time perio d are important because there were five large, mature HMOs with TEFRA- risk contracts operating at that time, enrolling 50% of Medicare benef iciaries in the market area. We find that the oldest, poorest and, to a lesser extent, the sickest Medicare beneficiaries were most likely t o have basic FFS Medicare coverage without supplementary insurance. Th e youngest enrollees are found in network HMOs. The availability of gr oup coverage and premium subsidies are positively associated with choi ce of FFS with a supplementary policy. Government policy concerning Me dicare HMO premiums appears to contribute to the poorest beneficiaries facing the highest out-of-pocket costs.