Case Mix Controlled Service Use and Expenditures in the Social/Healt Maintenance Organization Demonstration

Abstract

The social health maintenance organization (S/HMO) demonstration was implemented, in part, to determine if the presumed integration of acute and chronic care in these plans could produce sufficient savings to allow plans to offer expanded and chronic care benefits without increased cost to the Medicare program. S/HMO members and a sample of fee-for-service (FFS) recipients were tracked over three years to assess their utilization experience. Analyses controlled for case mix, using Grade of Membership procedures. In 1987, the last year of risk sharing, S/HMOs reported higher total expenditures than FFS in each health status class. For the "healthy," differences were largest for physician care. In other classes, differences in nonskilled nursing or home care use were noted. In 1988, the first year of full risk, Seniors Plus had equivalent or lower expenditures relative to FFS for all classes. Elderplan had lower expenditures in four of six classes and provided more service to the "frail" and the "acutely ill." SHP had higher expenditures in all classes because of higher hospital and nursing home expenditures. Medicare Plus II had higher expenditures in all classes, for physician, nonskilled nursing home, and home care expenditures. Overall plan losses and higher expenditures among a number of case mix groups suggest a need for refinement of S/HMO operations--especially in case management relationships to medical care and in the selection of "high risk" cases.