The Medicare-HMO Revolving Door — The Healthy Go in and the Sick Go Out

Health maintenance organizations (HMOs) serving Medicare beneficiaries have been credited with reducing the length of stay and the number of bed-days associated with the traditional fee-for-service system, 1 and the assumption has been that HMOs could help slow the growth in the costs of health care for the elderly. Over the past few years, this assumption has been questioned. A number of studies suggest that there is a bias in the enrollment of Medicare beneficiaries in HMOs, potentially offsetting any savings derived from the fact that HMOs are paid only 95 percent of average yearly fee-for-service Medicare expenditures. However, the focus . . .