Health Care Costs and Financing

Older people in HMOs and PPOs use more outpatient and preventive services than those in fee-for-service plans

Although the market share of managed care plans such as health maintenance organizations (HMOs) and preferred provider organizations (PPOs) continues to rise, many believe that these plans reduce costs by cutting back on the health care services they provide to patients. Yet, results from a new study of near-elderly individuals (those aged 55 to 64) should help calm concerns that managed care necessarily restricts use of health care services.

The age range 55 to 64 years is when many chronic conditions such as heart disease and diabetes begin to emerge, and it is a critical period for optimal disease management. According to the study, individuals in this age range who are in HMOs and PPOs use more outpatient and preventive services than similar adults in traditional fee-for-service (FFS) plans.

The study was conducted by Xiao Xu, Ph.D., of the University of Michigan, and Gail A. Jensen, Ph.D., of Wayne State University, and was supported by the Agency for Healthcare Research and Quality (HS13992). The investigators used data from the ongoing Health and Retirement Study, a nationally representative household survey that began in 1992 and targets individuals born between 1931 and 1941. Participants were reinterviewed about their demographics, health status, insurance, and health care use in 1994, 1996, 1998, 2000, and 2002.

Overall, 39 percent of 3,833 individuals in the sample (average age 58.5) had FFS coverage, 28 percent had PPO coverage, and 33 percent were covered by HMOs. Compared with FFS enrollees, HMO enrollees were 1.47 times and PPO enrollees were 1.57 times as likely to visit a doctor. The likelihood of having a blood test for cholesterol was 26 percent and 44 percent higher for HMO and PPO enrollees, respectively, than for FFS enrollees and 32 percent higher for a Pap smear to screen for cervical cancer. The effects of managed care on the use of mammography to screen for breast cancer and prostate cancer screening were also positive but not statistically significant. Enrollment in a managed care plan had no effect on the probability of hospitalization or on length of hospital stay.

See "Utilization of health care services among the near-elderly: A comparison of managed care and fee-for-service enrollees," by Drs. Xu and Jensen, in the March 2005 Managed Care Interface, pp. 60-70.

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