Health Maintenance Organizations as Medicaid Providers

Abstract

Evolution of a one-door, one-class system of medicine for all Americans was the professed goal of the social legislation of the 1960s. The development of health maintenance organizations (HMOs) was seen to be a major mechanism for assuring access to care and at the same time reducing the costs of social health programs. This has currently been reinforced by procompetitive proposals, which predict great efficiency resulting from the envisaged competition among organized systems of care. This article argues that established HMOs have no incentives to enroll Medicaid beneficiaries and that under current arrangements Medicaid beneficiaries have no incentives to enroll in HMOs. As Medicaid programs across the states are cut, resulting in fewer benefits and more restricted physician payments, beneficiaries may have greater incentives to enroll in organized systems. Private physicians may also face greater incentives to develop HMOs to serve Medicaid beneficiaries. If that happens, however, a two-class system—one for the poor and one for others—will be institutionalized; and to assure minimum standards of care for the poor, more, not less, regulation will be required.

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References

1. S. E. Berki , Hospital Economics (Lexington, MA: D. C. Heath, 1972), pp. 195-210.

2. Drew Altman , “Health Care for the Poor,” this issue of The Annals of the American Academy of Political and Social Science; for a detailed analysis, see Jack Hadley , More Medical Care, Better Health? (Washington, DC: Urban Institute, 1982).

3. Daniel R. Waldo and Robert M. Gibson , “National Health Expenditures, 1981,” Health Care Financing Review, 4(1):1-35 (Sept. 1982), Table 8.

4. Department of Health and Human Services , Health Care Financing Program Statistics: The Medicare and Medicaid Data Book 1981 (Washington, DC: DHHS, Health Care Financing Administration, Office of Research and Demonstrations, 1982), pp. 13-35; see also John Holahan , William Scanlon , and Bruce Spitz , Restructuring Federal Medicaid Controls and Incentives (Washington, DC: Urban Institute, 1977), pp. 1-22.

5. Harold S. Luft , “How Do Health Maintenance Organizations Achieve Their Savings? Rhetoric and Evidence,” New England Journal of Medicine, 298:1336-1343 (15 June 1978).

6. S. E. Berki and Marie L.F. Ashcraft , “HMO Enrollment, Who Joins What and Why: A Review of the Literature,” Milbank Memorial Fund Quarterly/Health and Society, 58(4):558-632 (Fall 1980).

7. U.S., Congress, House , Richard M. Nixon , “Health Message from the President of the United States Relative to Building a National Health Strategy,” 92nd Cong., 1st sess., 18 Feb. 1971.

8. InterStudy , National HMO Census—1981 (Excelsior, MN: InterStudy, 1981), p. 32.

9. Ibid.

10.

10. Department of Health and Human Services , “HCFA Program Statistics,” Health Care Financing Review, 3(2):100 (Dec. 1981).

11.

11. Sidney Trieger , Trudi M. Galblum , and Gerald Riley , HMOs: Issues and Alternatives for Medicare and Medicaid (Washington, DC: Department of Health and Human Services, Health Care Financing Administration, Office of Research, Demonstrations and Statistics, 1981), p. 4.

12.

12. Berki and Ashcraft , “HMO Enrollment.”

13.

13. Ibid.

14.

see also Bruce Spitz , “When a Solution is Not a Solution: Medicaid and Health Maintenance Organizations,” Journal of Health Politics, Policy and Law, 3(4):497-518 (Winter 1979).

15.

15. Trieger , Galblum , and Riley , HMOs: Issues and Alternatives, p. 2.

16.

16. John Holahan and Bruce Spitz , “Physician Reimbursement,” in Altering Medicaid Provider Reimbursement Methods, ed. John Holahan et al. (Washington, DC: Urban Institute, 1977), pp. 2-9.

17.

see also James Hester and Elliot Sussman , “Medicaid Prepayment: Concept and Implementation,” Milbank Memorial Fund Quarterly/Health and Society, 52(3):425-429 (Fall 1974).

18.

18. Harold S. Luft , Health Maintenance Organizations: Dimensions of Performance (New York: John Wiley, 1981), pp. 328-331.

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19. Trieger , Galblum , and Riley , HMOs: Issues and Alternatives, p. 11; see also Spitz , “HMO Reimbursement and Regulation,” pp. 170-171.