Conference Executive Summary


	Do HMOs Make a Difference? March 2000 Issue Brief No. 28

What�s the Difference Between HMOs and Non-HMOs?: National Survey of Consumers Finds Limited Disparities with Non-HMO Plans

Conference Executive Summary
March 16, 2000

ASHINGTON, DC - Contrary to public perception, health maintenance organizations (HMOs) provide the same levels of hospital, surgical and emergency room care as do other types of health plans, according to a large nationwide study recently released by the Center for Studying Health System Change (HSC). While the study findings allay concerns that HMOs stint on costly but necessary treatment, they also raise questions about HMOs’ ability to manage care and control costs. At the same time, the study identifies important trade-offs that consumers face when choosing between HMOs and other types of insurance, including preferred provider organizations (PPOs) and indemnity plans.

These and other research findings were released at a March 9 conference, "Do HMOs Make a Difference? Comparing Access, Service Use and Satisfaction Between Consumers in HMOs and Non-HMOs." HSC researchers provided an overview of results from HSC’s 1996-1997 Community Tracking Study Household Survey, which included interviews with nearly 36,000 people throughout the country who have private insurance. Their study, "Do HMOs Make a Difference?," appears in the Winter 1999/2000 issue of the journal Inquiry.

Following the presentation, a roundtable of health policy experts discussed the study’s implications for pending patient protection proposals, the decisions of private purchasers and the future of managed care. The discussants included Linda Bilheimer, Ph.D., senior program officer at The Robert Wood Johnson Foundation; Janet Corrigan, Ph.D., director of health care services at the Institute of Medicine; Robert Reischauer, Ph.D., president of the Urban Institute; and John Rother, director of legislation and public policy for AARP.

Comparisons Along Key Dimensions

The rapid growth of managed care enrollment during the past decade has fuelled a backlash, with consumers complaining that HMOs restrict their choice of providers and limit their access to needed services.

"Yet much of the information both policymakers and consumers receive are from anecdotes," says HSC senior researcher and study co-principal investigator James Reschovsky. "This HSC study fills an important gap because it was designed to produce objective, evidence-based information on how HMOs affect consumers’ access to care, use of health care services and satisfaction with care, as compared to other kinds of plans."

Specific study findings include:

Service Use. The study investigators found no differences in the use of hospitals, emergency rooms or surgery under HMOs versus other types of health plans. HMOs did however reduce the use of specialty services, and they increased the use of ambulatory care and preventive care.
Barriers to Care. Those enrolled in HMOs did not report significantly higher levels of unmet care or delayed care than consumers in other plans, however, the nature of the barriers to care differed. Families enrolled in HMOs had significantly lower out-of-pocket costs than those enrolled in non-HMOs. Specifically, 10 percent of families enrolled in HMOs paid more than $1,000 in out-of-pocket expenses, compared with 17 percent of families enrolled in other types of plans. Consequently, HMO enrollees were less likely to cite financial problems as a barrier to care. However, they were more likely to report administrative barriers to care.
Consumers’ Assessments of Care. Enrollee satisfaction with overall care was lower among HMOs, which also received fewer excellent ratings from enrollees regarding their visits with physicians. In addition, HMO enrollees were less confident that their physicians would refer them to needed specialty care than were consumers in non-HMO plans. All together, HMOs scored lower on eight out of nine satisfaction measures, with differences ranging from 3 to 7 percentage points.

Reality versus Perception

HSC vice president and co-principal investigator Peter Kemper offered two possible reasons for the lack of differentiation between HMOs and non-HMOs in service use and access. First, HMOs may be affecting how providers in local markets treat all of their patients, regardless of whether they are enrolled in HMOs. Second, intense competition has spurred health plans of all types to adopt cost control techniques originally developed under managed care. As a result, there are fewer differences between HMO and non-HMO products.

How, then, to explain consumers’ lower assessments of HMO care? One reason may be that enrollees’ assessments are shaped more by a generally negative impression of HMOs than by their actual experiences with HMOs. In addition, where there are differences between HMOs and non-HMOs-for example, HMOs’ more assertive use of care management tools and stricter access to specialty care-those may be the key differences that strike a negative chord with consumers.

For HMOs, that’s both good and bad news. Although the findings show that, except for specialty care, HMOs provide the same levels of care as other plans, they also indicate that HMOs continue to have problems with customer service and public perception.

"Consumers can find some comfort in these findings," said Corrigan. "But there remains a disconnect between people’s negative views about HMOs and what the data tell us about their overall experiences. Clearly, HMOs have to do a better job of focusing on service and convenience and on allaying the fears of the public." In addition, she said, a strong external appeals process is needed to serve people enrolled in all types of health plans-not just HMOs.

Defining Trade-Offs for Consumers

Taken together, the HSC findings articulate some trade-offs for consumers that stem from differences in plan design. Because of their reliance on care management techniques to control costs, HMOs generally control use of services by affecting the behavior and availability of health care providers. As a result, care is less expensive for consumers in HMOs than other types of plans, but enrollees face increased administrative barriers to care, such as having to get a referral. Non-HMOs, on the other hand, make greater use of consumer cost-sharing, through deductibles and coinsurance for instance, to control use of services, but with less specific oversight of service use. And while HMOs place more emphasis on primary and preventive services, non-HMOs provide more specialty services.

"Consumers, employers and policy makers should be aware that these trade-offs exist," said Kemper. "Different people will value these trade-offs differently. In and of themselves, these trade-offs argue for giving consumers a choice of health plans and allowing them to decide for themselves which trade-offs they prefer to make."

Choice, however, is not without its disadvantages, acknowledged Kemper, including higher administrative costs and issues that arise from favorable or adverse selection among product types.

"Choice alone is not an adequate solution for all of the problems in our health care system," agreed Rother. What’s needed, he added, is a broader policy debate that attempts to address serious problems that affect all sectors of the health insurance industry, rather than narrowly focusing on HMOs. "It may be that the policy debate, which has been fuelled by a perception that there are huge differences between HMOs and other forms of insurance, has missed the mark: there are some real opportunities to improve the quality of health care in this country, regardless of the type of insurance."

Who’s Managing Care?

The HSC study raises important questions regarding the use of care management techniques by HMOs. In theory, HMOs are supposed to control health care costs by reducing inappropriate care or shifting care to appropriate but less costly settings. But if the HSC data are any indication, that’s not happening.

"Where is the evidence of care management?" said Rother. "Where is the evidence that organized systems of care are actually helping consumers navigate a very complex health care system? It doesn’t appear to be there." Corrigan suggested that current care management methods may not be sufficiently advanced to reduce unnecessary services without creating inappropriate barriers to care. "The tools that we have right now are simply not good enough to do that effectively," she said.

In addition, consumers and providers alike are loathe to accept techniques that restrict enrollees’ choice of providers and access to specialty care. Some plans have responded by broadening their provider networks and loosening their restrictions on specialty services. While these actions may mollify consumers, they diminish plans’ ability to control costs. "The managed care debate is changing the nature of the trade-offs that consumers face," said Bilheimer. "Managed care organizations are becoming kinder and gentler, but there are costs associated with less aggressive management of care."

HSC president Paul B. Ginsburg, Ph.D., predicted that managed care plans would proceed carefully as they try to walk the line between managing costs and pleasing consumers. "Advances in care management will have to be friendly to patients and to physicians as well," he said.

Implications for Policy and Research

The HSC findings underscore the need for policy makers to do a better job of framing public debate on consumer protection, Corrigan said. "In some ways, we’ve given the American public a false sense of assurance with so-called seals of approval such as licensure and accreditation, which, though necessary and useful, fall far short of guaranteeing good care and are targeted at discrete parts of the system," she said. "People need to understand that there is a lot of variability out there in terms of quality of care, and that these differences are not isolated to specific health plans or providers. They stem from serious flaws in our overall health care system."

Rother agreed. Consumer protection, he said, should cut across all types of plans. "What I think consumers want when they enroll in a health plan is peace of mind," he said. "They want to know that they’re going to be treated fairly, regardless of what kind of plan they’re enrolled in." Bilheimer noted that many people don’t know what kind of health plan they have.

HSC researchers are continuing to explore questions raised by this study. Kemper and Reschovsky said that they plan to investigate more closely the effects of different types of plans on various vulnerable groups, such as people in bad health. They also cited a broad need for researchers to assess clinical outcomes among different types of plans and determine what plan attributes and techniques lead to better care. Answers to these and other questions will help policy makers to better understand the tradeoffs faced when managed care plans are regulated and help purchasers and consumers to make better informed decisions about the health care choices available to them.