Medicare HMOs

Private-sector insurers cite extensive use of health maintenance organizations (HMO) and other managed care approaches as a key factor in slowing the growth of their insurance premiums. As a result, part of the current interest in controlling Medicare costs has centered on ways to increase HMO use among Medicare beneficiaries. This report provides information on trends in the number of (1) Medicare beneficiaries enrolling in HMOs and (2) HMOs enrolling beneficiaries. GAO analyzes this data for factors that might be influencing decisions by HMOs to enroll Medicare beneficiaries and decisions by beneficiaries to enroll in HMOs. GAO found that about 2.8 million Medicare beneficiaries--about seven percent of the total--were enrolled in risk-contract HMOs as of August 1995. This was double the percentage enrolled in 1987. The growth has been particularly rapid during the past four years and has centered on certain states. California and Florida, for example, have more than half of all enrollees.

GAO found that: (1) about 2.8 million Medicare beneficiaries are enrolled in risk-contract HMO and another 2 percent are enrolled in cost-reimbursement HMO; (2) the number of risk-contract HMO that offer care to Medicare beneficiaries has doubled from 93 in 1991 to 171 in August 1995; (3) many HMO sign risk contracts with Medicare in areas with well-established medical providers and high enrollee payments; and (4) Medicare beneficiaries enroll in HMO to avoid Medicare's normal deductibles and coinsurance, take advantage of HMO low monthly premiums, and continue receiving medical benefits from their former employers.