Do HMOs Reduce Preventable Hospitalizations for Medicare Beneficiaries?

This study assesses the association of HMO enrollment with preventable hospitalizations among the elderly in four states. Using 2001 hospital discharge abstracts for elderly Medicare enrollees (age 65 and above) residing in four states (New York, Pennsylvania, Florida, and California), from the Healthcare Cost and Utilization Project (HCUP-SID) database of the Agency for Healthcare Research and Quality, we use a multivariate cross-sectional design with patient-level data for each state. Holding other factors such as demographics and illness severity constant, we find that in three out of four states, Medicare HMO patients had lower odds of a preventable admission versus marker admission than Medicare fee-for-service (FFS) patients. Moreover, in the two states with longest tenure and greatest Medicare HMO penetration, California and Florida, the reduction in preventable admissions among Medicare HMO patients was mainly concentrated among more ill patients. These findings add to the evidence that managed care outperforms traditional care among the elderly, rather than simply skimming off the healthiest populations.