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Researchers compare expenditures for Medicare beneficiaries enrolled in two types of HMOs

In addition to the traditional Medicare inpatient and outpatient services covered by the Tax Equity and Fiscal Responsibility Act of 1982 (TEFRA) for TEFRA-risk health maintenance organizations (HMOs), social health HMOs (S/HMOs) provide long-term care (LTC) benefits and case management services for chronic illness. However, a recent study supported by the Agency for Healthcare Research and Quality (HS07171) found that S/HMO membership does not offer any overall savings, not even savings from substitution of S/HMO-specific services like home care for traditional services such as nursing home care.

Bryan Dowd, Ph.D., of the University of Minnesota, and his colleagues examined expenditures of enrollees in both plans, which were part of a Minneapolis S/HMO demonstration project. Enrollees in both plans used the same physicians and hospitals, and both plans were operated by the same parent organization. Because the S/HMO was capitated for both acute care and LTC services beyond the basic Medicare benefit, the S/HMO had an incentive to make cost-effective substitutions of one type of care for another. Covered LTC services of the S/HMO demonstration included homemaking services, personal care services, public health nursing, in-home physicals, occupational and speech therapy, adult day care, and medical transportation.

Results showed that outpatient services common to both the S/HMO and TEFRA HMO were about 16 percent higher for S/HMO enrollees, and expenditures for all services were about 20 to 22 percent higher for S/HMO enrollees. The researchers speculate that care coordinators and home care workers might have discovered health problems that otherwise would have gone undetected, recommended medical attention for chronic problems, and helped to link patients with other medical providers, resulting in higher expenditures for S/HMO enrollees. Nevertheless, the S/HMO was providing services that were highly valued by its members. A study after termination of the S/HMO in Minnesota found that former enrollees were receiving fewer home care services, their family caregivers reported increased burden and stress, and they had more out-of-pocket expenses.

See "S/HMO versus TEFRA HMO enrollees: Analysis of expenditures," by Dr. Dowd, Steve Hillson, M.D., Tom VonSternberg, M.D., and Lucy Rose Fischer, Ph.D., in the Summer 1999 Health Care Financing Review 20(4), pp. 7-23.

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