Who Belongs to HMOs: A Comparison of Fee-for-Service versus HMO Enrollees

Abstract

As employers have turned to managed care to curtail the rising cost of health care benefits, the number of HMO enrollees has proliferated. Between 1984 and 1994, HMO enrollment incrased from approximately 15 million to over 49 million individuals. Although research has indicated that HMOs have been effective in limiting medical costs, there is mixed evidence in the literature on how they achieve these savings. This article uses data from the 1987 National Medical Expenditure Survey to examine one hypothesis for these patterns: that HMOs enroll a healthier population than fee-for-service plans. To test this hypothesis we examine HMO andjee-for-evice enrollees with respect to sxioeconomic variables such as age, race, sex, income, education, health status, and location. Our results indicate that HMOs tend to enroll a younger but not much healthier population than traditional fee-for-service plans, suggesting that self-selection is not a major contriutor to HMO cost savings.