Choice of payment plan in the Medicare capitation demonstration

Abstract

This article identifies factors that influence the choice between joining an HMO and remaining with the traditional fee-for-service system among aged Medicare beneficiaries in three communities. Sources of marketing information were found to be strongly and positively related to the decision to join the HMO. Among beneficiaries who had to switch providers to join, persons who had a prior usual source of care and those who were satisfied with the amount of paperwork required to use that source of care were less likely to enroll in the HMO. Persons who did not have to switch providers to join the HMO were more likely to enroll in the prepaid program if they were satisfied with the amount of paperwork involved in using the HMO prior to the demonstration. Differences among the three communities suggest that the barrier to HMO enrollment presented by having a prior source of care who is not affiliated with the HMO may attenuate as the number of competing HMOs in the community increases, making the medical care environment more competitive. In the community with the most HMOs, persons who already had supplemental insurance were less likely to enroll than those who did not. None of the six HMOs studied experienced adverse selection, based on pre-enrollment health status.