BIASED SELECTION AND MEDICARE HMOS - ANALYSIS OF THE 1989-1994 EXPERIENCE

This article presents the results of an analysis of the preenrollment and postdisenrollment experiences of Medicare-risk HMO enrollees. The results indicate that in the 6 months prior to their enrollment, new H MO enrollees use on average 37 percent fewer services than do benefici aries in traditional fee-for-service Medicare. Furthermore, HMO disenr ollees use 60 percent more services in the six months after disenrollm ent than do fee-for-service beneficiaries. Finally, new enrollees had relatively lower chronic-condition expenditures and mortality rates, w hereas disenrollees had higher values for both. These findings suggest that the overall results, in part, reflect permanent differences betw een the HMO and fee-for-service Medicare populations. Moving to an ann ual enrollment with a 90-day cooling-off period appears to be a reason able approach to addressing these differences in enrollees.