Factors that contribute to Medicare HMO risk contract success

Abstract

In 1985, federal legislation was implemented that allowed HMOs to contract with the Health Care Financing Administration for Medicare enrollees on a risk basis. This change stimulated the development of risk contractors and a growth in HMO Medicare enrollees. This paper examines selected factors that contributed to large Medicare risk contract enrollment in four geographical locations: Los Angeles, Minneapolis-St. Paul, New York City, and Portland, Oregon. The primary types of factors examined were: HMO market conditions, HMO characteristics, and HMO marketing strategies and practices. The market competition varied substantially across the four areas. HMO plan age, total number of HMO enrollees, low premium, and the use of multimedia marketing strategies were positively associated with large Medicare risk contract enrollment.