Can HMOs Improve Health Care for the Pool? CLAUDIA C. LORISH
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Routine and preventive health services are underutilized by low-income groups, who wake greater use of inpatient and emergency services than the population at large. Studies reported on in this article suggest that the lowincome population might be more efiectively served, and at less expense, by health maintenance organizations that provide service on a prepaid, capitation basis.
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HE COST OF HEALTH CARE in this country has risen dramatically during the past decade. The rapid development of medical technology, increases in workers' wages, and an escalation in the demand for services as a result of Medicare, Medicaid, and third-party reimbursement have all contributed to the rise in costs. In addition, they have promoted the overuse of hospitalization and other covered services. Examining this situation, a federal commission concluded: "Unless we improve the system through which health care is provided, care will continue to become less satisfactory, even though there are massive increases in cost and number of health perronnel." 1 Problems in the health care system have their greatest impact on the poor whose care is fragmented and insufficient. Special programs exist for certain groups—for exHEALTH AND SOCIAL WORK,
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ample, prenatal and well-baby care are provided through public health departments, and hospital outpatient departments may treat specific illnesses. However, consistent, routine, and preventive care remains largely unavailable to the poor even though some financial barriers have been removed. Stevens and Stevens, examining the Medicaid program, point out that it has failed to promote changes in the structure of health delivery and has, therefore, not only contributed to the aforementioned problems but has become an increasing financial burden to the states. 2 The concept of the Health Maintenance Organization (HMO) is being put forth increasingly as a solution to the problems of health care for the poor. 3 Persons responsible for decision-making in the social services and health fields must examine this concept critically as an alternative source of health care, particularly for low-income groups. This article will, therefore, review recent evidence concerning the potential of the HMO to deliver effective and efficient health services to low-income groups. After examining briefly the concept of the HMO, it will explore the data on health status and patterns of health care utilization among low-income groups. Finally, it will review the findings of recent studies of HMOs, especially those pertaining to low-income groups, and suggest their implications for social and health planning. BACKGROUND
A Health Maintenance Organization is basically a health care system that provides services to a voluntarily enrolled population on a prepaid, capitation basis. Thus, it is qualitatively different from the traditional system in which individual practitioners deliver health care on a fee-forservice basis. Proponents of HMOs claim that this system can deliver more comprehensive, higher quality services at a lower cost than the traditional health care system. This improved cost-benefit ratio is attributed to structural Downloaded from https://academic.oup.com/hsw/article-abstract/1/2/51/765796 by Rutgers University Libraries/Technical Services user on 12 January 2018
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characteristics including prepayment, which provides a financial incentive to prevent costly illness, and the grouppractice setting that promotes consultation and peer review. HMOs usually resemble one of three models. The first and best-known model is that of prepaid group practice and embodies the following characteristics: 1. Pre payment, which spreads the colt of health care over the covered population and provides adequate and stable revenue .. . 2. Group practice by an autonomous, full-time, medical group, paid by capitation or another budgeted method and not on a fee-for-service basis .. . 3. The practice of medicine in a medical center by a hospital based medical group . . . with integrated facilities 4. Voluntary enrollment 5. Comprehensive services ... insured, including preventive medical care... 4 -
The second model is frequently referred to as the medical care foundation model. It differs from the first model in that individual providers in solo practice are paid by the foundation on a fee-for-service basis. 5 A third model is the network model in which groups of practitioners enter into contract with a prepaid health plan. They practice in their own offices, which may or may not be hospital based, and are paid on a capitation basis. 6 For the purposes of this article, HMO will refer to organizations that approximate the prepaid group-practice model unless otherwise stated. HEALTH AND INCOME
To assess the potential usefulness of the HMO as an alternative resource for providing health care to low-income groups, it is helpful to review the relationship between health and income. Differences in the utilization of health services have been consistently associated with income.? Downloaded from https://academic.oup.com/hsw/article-abstract/1/2/51/765796 by Rutgers University Libraries/Technical Services user on 12 January 2018
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Recent reports of the Health Interview Survey again revealed markedly different patterns of health care utilization between low- (under $5,000 per year) and middle- and upper-income groups. The rates of hospital admissions and the number of visits to physicians were higher among low-income groups. 8 However, when these data were examined by age, low-income children actually visited physicians less than did middle- and upper-income children. 8 When the data were examined by type of visit, the lowincome group was far less likely to make use of general checkups, pre- and post-natal care, and immunizations but was more likely to use direct treatment, including emergency and inpatient services." Indicators of health status usually reveal a higher incidence and prevalence of disease and of mortality among low-income groups. Although the number of acute conditions reported are similar in all groups, the poor report a greater number of chronic conditions, more days of restricted activity per year, and more days of bed disability per year. 11 In general, these data on health status and the utilization of health services in the low-income population suggest that although the poor use services with greater frequency than the general population, these services are more likely to be emergency, inpatient, or treatment services as opposed to preventive services or ongoing care. The higher incidence of disease and disability among the poor may suggest that this pattem of utilization is not as effective in maintaining health as that displayed by middle- and upper-income groups. PATTERNS OF UTILIZATION
Several theories have been put forward in an effort to account, for these differences in health status and in pattems of using health services. The psychocultural approach suggests that behavior relating to health and illness is a function of such personal characteristics as motivation, Downloaded from https://academic.oup.com/hsw/article-abstract/1/2/51/765796 by Rutgers University Libraries/Technical Services user on 12 January 2018
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"The impact of neighborhood health centers shows . . . that when health services are available, low-income people use them in a pattern similar to that of the general population." beliefs about health, and medical orientation, all having their origin in the social group. Suchman, for example, interviewed over two thousand families and concluded that "ethnicity leads to socio-cultural differences which, in turn, lead to socio-medical variations." Thus, he explained the underutilization of preventive care among several lowincome groups as "simply one more expression of their general estrangement from the mainstream of middle class American society." 12 Several anthropological studies have offered similar explanations for the use of health services by low-income people. Religious beliefs, family structure, attitudes, and knowledge are all determining factors. 13 Attempts have also been made to explain these variations in health patterns by examining the economic and structural factors that are related to health care. The relationship between the nature of the system of health service delivery and its use has been explored in several studies. Findings suggest that the health care resources available to low-income persons are not the same and are frequently inferior to those available to other groups." Studies have also shown that the distance of the health facility and the availability of transportation in low-income communities have an effect on the use of health care. 15 Several studies of the impact of neighborhood health centers also provide evidence of the influence that structural and economic factors have on the use of health services. A comparison of baseline utilization data with data gathered two years after the creation of a neighborhood health center indicated that the use of preventive services had increased significantly. There was also evidence of changes Downloaded from https://academic.oup.com/hsw/article-abstract/1/2/51/765796 by Rutgers University Libraries/Technical Services user on 12 January 2018
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in health beliefs and attitudes." In addition, examination of the use of services in areas covered by neighborhood health centers showed different patterns among these residents than among low-income people interviewed in the National Health Survey. This implies that when health services are available, low-income people use them in a pattern similar to that of the general population. 17 Considering these findings, it seems that the use of health services can best be explained by taking into consideration the multitude of psychocultural, structural, and economic factors and their interaction. Studies of structural factors suggest, however, that behavior which was previously thought to be inherent in the individual and his group is strongly influenced by such environmental factors as the structure of the health service delivery system. This implies, then, that a qualitatively different structure—such as an HMO—might be expected to influence patterns of behavior in seeking health care and, perhaps, the health status of a low-income population. Although there is indirect evidence to support the hypothesis that an HMO might have a favorable influence on patterns of using health services, health care costs, and health status among the poor, it is important to examine the direct evidence available from studies of existing HMOs. One of the earliest studies compared members of a labor union enrolled in an HMO with those using a fee-forservice system. For this population, the adjusted rate of hospital admissions was 20.5 percent lower for the group enrolled in the HMO, the biggest difference being in female surgical admissions. Since the two groups were similar in preenrollment health status, the authors of the study suggested several possible explanations for these results. First, the availability of consultation and diagnostic facilities in the HMO meant that some hospital admissions could be avoided. Second, in the HMO the physician's fees were not linked to services rendered. Third, traditional insurance plans provided an incentive for hospitalization because Downloaded from https://academic.oup.com/hsw/article-abstract/1/2/51/765796 by Rutgers University Libraries/Technical Services user on 12 January 2018
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more services were covered under that circumstance. 18 Numerous other studies have also reported lower rates of hospital utilization for persons enrolled in HMOs. 1 ° COSTS
The cost efficiency of HMOs has been examined in several studies. Greenlick described the comparative costs at Kaiser, an HMO in Portland, Oregon, where the cost per patient day increased from $13.23 in 1950 to $54.80 in 1966—figures that parallel the national increase. However, the cost of hospitalization per member year only increased from $12.53 in 1950 to $27.31 in 1966. A fourfold increase in cost per patient day was thus reflected as a twofold increase in cost per member per year, because the number of hospital days per person per year decreased concurrently. According to Greenlick, it is this difference in the rate of increase in cost per day and cost per person per year that accounted for the difference in the cost of hospitalization for the Kaiser-Portland population in relation to the rest of the community. 2 ° Stevens also examined the cost efficiency of Kaiser-Portland and concluded that if the entire health care system achieved that level of efficiency, the United States would need 10 percent fewer physicians than existed at that time. 21 Neither study dealt with the effect of this cost-efficiency pattern on the quality of care. In 1965 the Office of Economic Opportunity (OEO) contracted with four HMOs to provide services to lowincome families. Several studies were based on these experiences, óne of which compared the utilization of services of the fifteen hundred OEO families in the plan with a random sample of non-OEO members. The rate and pattern of utilization by the two groups were found to be essentially similar except in the areas of pediatrics and obstetrics where the OEO group's utilization was higher. 22 The cost of providing health services was reported to be considerably Downloaded from https://academic.oup.com/hsw/article-abstract/1/2/51/765796 by Rutgers University Libraries/Technical Services user on 12 January 2018
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lower than that of similar services provided through programs constructed solely for the poor. 23 An examination of the experience of the OEO contracts with all four HMO plans revealed that the initial rate of utilization by the low-income group was higher than the rate for the general membership. However, within a year this rate decreased and stabilized at a level similar to that of the general membership. Although the rate of hospital admissions remained slightly higher for the OEO group than for the general membership, it was 50 percent lower than the national average for low-income people. 24 It should be noted, however, that intensive outreach and transportation services were provided to these OEO groups at a significant cost, and it is questionable whether these results could have been achieved without such services. A study comparing the use of health services by a Medicaid group before and after enrollment in an HMO revealed that the total number of ambulatory visits increased after enrollment. When these data were examined by age it was noted that utilization had significantly increased among children but had decreased among adults, which suggests a tendency toward the greater use of preventive services. Hospital admissions were 45 percent lower for the total group after enrollment, resulting in a major cost reduction to the Medicaid program. 25 In response to questions aimed at assessing the satisfaction of the study group, 54 percent feit that they received better care after enrollment in the HMO while 68 percent of the group perceived the HMO as more accessible than their previous source of care. 26 By 1973, 12 states had negotiated contracts with HMOs to provide services to Medicaid recipients, and preliminary reports of these experiences are just becoming available. One state reported that the use of HMOs yielded a 29.8 percent savings in cost when compared with the fee-forservice system for recipients of funds under Aid to Families with Dependent Children. 27 Another state found that Downloaded from https://academic.oup.com/hsw/article-abstract/1/2/51/765796 by Rutgers University Libraries/Technical Services user on 12 January 2018
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an HMO was able to provide health services for less cost than projected Medicaid payments over a comparable period of time. 28 The savings were due mainly to the elimination of the administrative costs of the vendor system. Although initial underutilization was a problem, this was partly corrected by intensive outreach and educational efforts. 29 The experience of the state of Hawaii in contracting with an HMO on behalf of Medicaid recipients has also been reported. Two matched sample groups were compared, one of which received services through the HMO while the other received traditional services. The comparison revealed that the HMO provided more comprehensive services at a lower cost in the rural areas and at a similar cost in the urban areas. 39 There was little difference in overall patient satisfaction between groups." SATISFACTION
Several studies, however, seem to imply that HMOs are not universally effective in serving low-income populations. A study in California compared patients' satisfaction between a Medicaid group receiving care through an HMO and one using the fee-for-service system. The preliminary data suggested that from the patients' point of view, the HMO failed to deliver high-quality, accessible care and did not result in the use of a higher degree of preventive services. 32 The examination of patterns of utilization of a Medicaid group enrolled in the Health Insurance Plan of New York revealed that this group underutilized services." It should be noted, however, that the HMOs studied here were of the medical care foundation and the network model respectively, as opposed to the group practice model examined in the previous studies. Taken as a whole, the above studies suggest that an HMO can serve low-income families along with a general population. When served in this manner by the prepaid group practice model of HMO, patterns of health service Downloaded from https://academic.oup.com/hsw/article-abstract/1/2/51/765796 by Rutgers University Libraries/Technical Services user on 12 January 2018
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utilization by the low-income group resemble those of the general membership after about nine months' enrollment. Comparative studies reveal that low-income families tend to increase their use of ambulatory and preventive services and to decrease their use of inpatient and emergency services. There is a tendency for utilization to increase among children and decrease among adults, which also implies a pattern of greater prevention. Although these results have been documented fairly consistently for HMOs of the group practice model, this has not been truc of the HMOs based on the medical care foundation and network models. There is, in fact, some tentative evidence that the last two models have not significantly influenced patterns of utilization. Evidence exists that the costs of serving a low-income population through an HMO are less than through the traditional system. This reduction in cost seems to be due to the decreased use of expensive inpatient and emergency care and, for Medicaid enrollees, to the reduction in the administrative costs of processing claims and vendor payments. The findings on patients' satisfaction with HMO services seem mixed. There is little evidence that patients are less satisfied with HMO services, but only sporadic evidence that they are more satisfied. This may be due to the fact that few comparative studies of patients' satisfaction under HMO and fee-for-service systems have been undertaken. Also, measurements of patient satisfaction have usually produced little variability among individuals, which makes it difficult to demonstrate significant differences. Information reflecting the effect of the HMO structure on accessibility and quality of care or on the health status of the enrolled population is largely unavailable. 34 In fact, at this point there is actually no strong, direct evidence that HMOs would deliver significantly higher quality care or produce better health in a low-income population than would the traditional system. Although the changed patterns of utilization—notably the increased use of amDownloaded from https://academic.oup.com/hsw/article-abstract/1/2/51/765796 by Rutgers University Libraries/Technical Services user on 12 January 2018
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"One state found that an HMO was able to provide health services for less cost than projected Medicaid payments over a comparable period of time." bulatory preventive services and the decreased use of inpatient services—are expected to result in better care and better health, these relationships have yet to be empirically demonstrated. SUMMARY AND IMPLICATIONS
Compared with the general population, low-income groups tend to overtilize emergency and inpatient services and underutilize routine ambulatory and preventive services. This pattern is associated with rising costs of health care and the greater frequency of chronic and disabling health problems in this segment of the population. One factor that seems to be related to this pattern of utilization is the structure of the system of health care delivery available to low-income groups. The HMO is a qualitatively different health care delivery system and, theoretically, one that might be expected to influence patterns of utilization and health status. Empirically, there is evidence that patients enrolled in many HMOs do change their patterns of utilization and take greater advantage of ambulatory and preventive care, and that this change has been clearly associated with reduced costs. The impact of HMOs on patient satisfaction and the health status of the enrolled population remains unclear, especially when HMOs of several different models are considered. The quality of health care delivered by HMOs has yet to be examined systematically. Several implications can be drawn for professionals Downloaded from https://academic.oup.com/hsw/article-abstract/1/2/51/765796 by Rutgers University Libraries/Technical Services user on 12 January 2018
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working in the field of health care for low-income groups. n There is growing evidence that some HMOs, particularly those resembling the prepaid group practice model, have the potential to eliminate some of the health care problems of the poor, and their development should be supported. However, there are important structural differences among HMOs that may result in different impacts on the enrolled population. Therefore, the unique organizational structure must be examined critically when a particular HMO is considered as a health care resource for low-income groups. n Low-income persons, especially Medicaid clients, may not have the freedom to voice their dissatisfaction with an HMOs services by dropping their membership. This necessitates the development of an effective procedure for monitoring the satisfaction of low-income patients enrolled in an HMO. n Because accessibility has been shown to be a particularly important factor affecting the utilization of health care among low-income persons, the proximity of the HMO to the target population and the availability of transportation must be considered. n Many HMOs that reported cost savings and changed patterns of utilization provided in addition some form of outreach service or health education. The provision of such services should therefore be included in planning for the enrollment of a low-income group in an HMO. Finally, although the advantages of HMOs in terms of cost and utilization have been documented, the relationship of these factors to the health status of the enrolled population has not been established. Evaluation studies of the experience of low-income groups enrolled in HMOs must address the question whether changes in the patterns of utilization actually result in better health for the population served. The impact of HMOs on the health status of the patients will be the ultimate, albeit elusive, evaluation of their effectiveness. Downloaded from https://academic.oup.com/hsw/article-abstract/1/2/51/765796 by Rutgers University Libraries/Technical Services user on 12 January 2018
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About the Author Claudia C. Lorish, MSW, is a doctoral student, School of Applied Social Sciences, Case Western Reserve University, Cleveland, Ohio. At the time of writing, she was Program Specialist, Division of Medical Assistance, Ohio Department of Public Welfare, Columbus.
Notes and Relerences 1. National Advisory Commission on Health Manpower, Report, Vol. 1 (Washington, D.C.: Government Printing Office, 1967), p. 2. 2. Robert Stevens and Rosemary Stevens, Welfare Medicine in America (New York: Free Press), 1974. 3. An indication of the federal government's commitment to the HMO concept can be seen in the HMO Act of 1973 and the resulting regulations in Federal Register, 39 (October 18, 1974), and in the guidelines for Medicaid contracts with HMOs in Federal Register, 39 (June 5, 1974). 4. Ernest Seward, "The Relevance of Prepaid Group Practice to the Effective Delivery of Health Service," New Physician, 18 (January 1969), pp. 39-43. 5. Milton Roemer and William Shonick, "HMO Performance: The Recent Evidence," Milbank Memorial Fund Quarterly, 51 (Summer 1973), pp. 271-317. 6. Jeffrey Prussin, "HMOs: Organizational and Financial Models," Hospital Progress, 55 (April 1974), pp. 33-35. 7. See, for example, Ronald Andersen et al., Health Services Use: National Trends and Variations (Washington, D.C.: U.S. Department of Health, Education & WelDownloaded from https://academic.oup.com/hsw/article-abstract/1/2/51/765796 by Rutgers University Libraries/Technical Services user on 12 January 2018
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fare, October 1972), and William Richardson, "Poverty, Illness and the Use of Health Services in the U.S.," Hospitals, 43 (July 1969), pp. 34-42. 8. See "Profile of American Health, 1973," Public Health Reports, 89 (November—December 1974), p. 515; National Center for Health Statistics, Physician Visits (Washington, D.C.: U. S. Department of Health, Education & Welfare, March 1975), p. 20. 9. Ibid. 10. Ibid., p. 32. 11. "Profile of American Health," 1973, pp. 509-512. 12. Edward Suchman, "Socio-Medical Variations among Ethnic Groups," American Journal of Sociology, 70 (November 1964), pp. 319-331. 13. See, for example, Lyle Saunders, Cultural Digerences in Medical Care (New York: Russell Sage Foundation, 1954). 14. See, for example, Raymond Duff and August Hollingshead, Sickness and Society (New York: Harper & Row), 1968; Sol Levine, Norman Scotch, and George Vlasak, "Unraveling Technology and Culture in Public Health," American Journal of Public Health, 59 (February 1969), pp. 237-244; and Thomas W. Bice, Robert L. Eickhorn, and Peter D. Fox, "Socio-economic Status and the Use of Physician's Services: A Reconsideration," Medical Care, 10 (May—June 1972), pp. 261-271. 15. See, for example, Louise Okada and Gerald Sparer, "Access to Usual Source of Care by Race and Income: Ten Urban Poverty Areas," and G. W. Shannon, R. L. Bashhur, and C. W. Spurlock, "Variations in Health Care Opportunities and Behavior Among Middle and Lower Socio-economic Status Blacks." Papers presented at the annual meeting of the American Public Health Association, New Orleans, Lousiana, October 1974. 16. Seymour S. Bellin and H. Jack Geiger, "The Impact of a Neighborhood Health Center on Patients' Behavior and Attitudes Relating to Health Care: A Study of a Low Income Housing Project," Medical Care, 10 (MayJune), pp. 224-239. Downloaded from https://academic.oup.com/hsw/article-abstract/1/2/51/765796 by Rutgers University Libraries/Technical Services user on 12 January 2018
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17. U. S. Office of Economie Opportunity, An Evaluation of the Neighborhood Health Centers Program: Summary of Results and Methodology (Washington, D.C.: U.S. Office of Economic Opportunity, 1972). 18. Paul Densen, Eve Balamuth, and Sam Shapiro, "Prepaid Medical Care and Hospital Utilization in a Dual Choice Situation," American Journal of Public Health, 50 (November 1960), pp. 1710-1726. 19. See, for example, Isadore Falk, and J. Sentura, Medical Care for Steelworkers and Their Families (Pittsburgh, Pa.: United Steelworkers of America, 1960); and Herbert Klarman, "The Effect of Prepaid Group Practice on Hospital Use," Public Health Reports, 17 (November 1963), pp. 955-965. 20. Merwyn Greenlick, "The Impact of Prepaid Group Practice on American Medical Care: A Critical Evaluation," Annals of the American Academy of Political and Social Science, 399 (January 1972), pp. 100-113. 21. Carl Stevens, "Physician Supply and National Health Care Goals," Industrial Relations, 110 (May 1971), pp. 119-244. 22. Merwyn Greenlick et al., "Comparing the Use of Medical Care Services by a Medically Indigent and General Membership Population in a Comprehensive, Prepaid Group Practice Program," Medical Care, 10 (May-June 1972), pp. 187-200. 23. Stephen Coburn, "Health Maintenance Organizations : Implications for Public Assistance Recipients," Public Welfare, 31 (Spring 1973), pp. 28-32. 24. Gerald Sparer and Arne Anderson, "Utilization and Cost Experience in Four Prepaid Plans," New England Journal of Medicine, 289 (July 1973), pp. 67-72. 25. Clifton Gaus, Norman Fuller, and Carol Bohannon, "HMO Evaluation: Utilization Before and After Enrollment" (Baltimore, Md., and Washington, D.C.: Department of Medical Care and Hospitals, Johns Hopkins University, and Department of Human Resources, District of Columbia Government, 1973). Downloaded from https://academic.oup.com/hsw/article-abstract/1/2/51/765796 by Rutgers University Libraries/Technical Services user on 12 January 2018
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26. U.S. Department of Health, Education & Welfare, Summary of SRS-Supported HMO Research and Development Efiorts Tended under Section 1116 of the Social Security Act as Amended (Washington, D.C.: Medical
Services Administration, 1973). 27. Washington Department of Social and Health Services, Health Maintenance Organizations: Comparison of Costs and Utilization for Group Health Medicaid Enrollees and Other Persons Certified for Medicaid in Washington State (Olympia, Wash.: Department of Social and Health
Services, 1974). 28. Robert Birnbaum, "The Harvard Community Health Plan: To Provide Broad Access to Quality Comprehensive Care," Public Welfare, 29 (January 1971), pp. 42-47. 29. U. S. Department of Health, Education & Welfare, Summary of SRS-Supported HMO Research and Development Ejjorts Tended under Section 1116 of the Social Security Act as Amended.
30. Robert Worth, "A Comparison of Fee-for-Service and Capitation Medicine in a Low Income Group in Honolulu," Hawaii Medical Journal, 33 (March 1974), pp. 9196. 31. U. S. Department of Health, Education & Welfare, Summary of SRS-Supported HMO Research and Development Efiorts Tended under Section 1116 of the Social Security Act as Amended.
32. Ibid. 33. James Hester and Elliot Sussman, "Medicaid Prepayment: Concept and Implementation," Milbank Memorial Fund Quarterly, 52 (Faal 1974), p. 427. 34. A notable exception is found in Sam Shapiro, Florence Weiner, and Paul Densen, "Comparison of Prematurity and Perinatal Mortality in a General Population and in the Population of a Prepaid Group Practice, Medical Care Plan," American Journal of Public Health, 48 (February 1958), pp. 107-112.
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Routine and preventive health services are underutilized by low-income groups, who wake greater use of inpatient and emergency services than the population at large. Studies reported on in this article suggest that the lowincome population might be more efiectively served, and at less expense, by health maintenance organizations that provide service on a prepaid, capitation basis.
T
HE COST OF HEALTH CARE in this country has risen dramatically during the past decade. The rapid development of medical technology, increases in workers' wages, and an escalation in the demand for services as a result of Medicare, Medicaid, and third-party reimbursement have all contributed to the rise in costs. In addition, they have promoted the overuse of hospitalization and other covered services. Examining this situation, a federal commission concluded: "Unless we improve the system through which health care is provided, care will continue to become less satisfactory, even though there are massive increases in cost and number of health perronnel." 1 Problems in the health care system have their greatest impact on the poor whose care is fragmented and insufficient. Special programs exist for certain groups—for exHEALTH AND SOCIAL WORK,
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ample, prenatal and well-baby care are provided through public health departments, and hospital outpatient departments may treat specific illnesses. However, consistent, routine, and preventive care remains largely unavailable to the poor even though some financial barriers have been removed. Stevens and Stevens, examining the Medicaid program, point out that it has failed to promote changes in the structure of health delivery and has, therefore, not only contributed to the aforementioned problems but has become an increasing financial burden to the states. 2 The concept of the Health Maintenance Organization (HMO) is being put forth increasingly as a solution to the problems of health care for the poor. 3 Persons responsible for decision-making in the social services and health fields must examine this concept critically as an alternative source of health care, particularly for low-income groups. This article will, therefore, review recent evidence concerning the potential of the HMO to deliver effective and efficient health services to low-income groups. After examining briefly the concept of the HMO, it will explore the data on health status and patterns of health care utilization among low-income groups. Finally, it will review the findings of recent studies of HMOs, especially those pertaining to low-income groups, and suggest their implications for social and health planning. BACKGROUND
A Health Maintenance Organization is basically a health care system that provides services to a voluntarily enrolled population on a prepaid, capitation basis. Thus, it is qualitatively different from the traditional system in which individual practitioners deliver health care on a fee-forservice basis. Proponents of HMOs claim that this system can deliver more comprehensive, higher quality services at a lower cost than the traditional health care system. This improved cost-benefit ratio is attributed to structural Downloaded from https://academic.oup.com/hsw/article-abstract/1/2/51/765796 by Rutgers University Libraries/Technical Services user on 12 January 2018
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characteristics including prepayment, which provides a financial incentive to prevent costly illness, and the grouppractice setting that promotes consultation and peer review. HMOs usually resemble one of three models. The first and best-known model is that of prepaid group practice and embodies the following characteristics: 1. Pre payment, which spreads the colt of health care over the covered population and provides adequate and stable revenue .. . 2. Group practice by an autonomous, full-time, medical group, paid by capitation or another budgeted method and not on a fee-for-service basis .. . 3. The practice of medicine in a medical center by a hospital based medical group . . . with integrated facilities 4. Voluntary enrollment 5. Comprehensive services ... insured, including preventive medical care... 4 -
The second model is frequently referred to as the medical care foundation model. It differs from the first model in that individual providers in solo practice are paid by the foundation on a fee-for-service basis. 5 A third model is the network model in which groups of practitioners enter into contract with a prepaid health plan. They practice in their own offices, which may or may not be hospital based, and are paid on a capitation basis. 6 For the purposes of this article, HMO will refer to organizations that approximate the prepaid group-practice model unless otherwise stated. HEALTH AND INCOME
To assess the potential usefulness of the HMO as an alternative resource for providing health care to low-income groups, it is helpful to review the relationship between health and income. Differences in the utilization of health services have been consistently associated with income.? Downloaded from https://academic.oup.com/hsw/article-abstract/1/2/51/765796 by Rutgers University Libraries/Technical Services user on 12 January 2018
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Recent reports of the Health Interview Survey again revealed markedly different patterns of health care utilization between low- (under $5,000 per year) and middle- and upper-income groups. The rates of hospital admissions and the number of visits to physicians were higher among low-income groups. 8 However, when these data were examined by age, low-income children actually visited physicians less than did middle- and upper-income children. 8 When the data were examined by type of visit, the lowincome group was far less likely to make use of general checkups, pre- and post-natal care, and immunizations but was more likely to use direct treatment, including emergency and inpatient services." Indicators of health status usually reveal a higher incidence and prevalence of disease and of mortality among low-income groups. Although the number of acute conditions reported are similar in all groups, the poor report a greater number of chronic conditions, more days of restricted activity per year, and more days of bed disability per year. 11 In general, these data on health status and the utilization of health services in the low-income population suggest that although the poor use services with greater frequency than the general population, these services are more likely to be emergency, inpatient, or treatment services as opposed to preventive services or ongoing care. The higher incidence of disease and disability among the poor may suggest that this pattem of utilization is not as effective in maintaining health as that displayed by middle- and upper-income groups. PATTERNS OF UTILIZATION
Several theories have been put forward in an effort to account, for these differences in health status and in pattems of using health services. The psychocultural approach suggests that behavior relating to health and illness is a function of such personal characteristics as motivation, Downloaded from https://academic.oup.com/hsw/article-abstract/1/2/51/765796 by Rutgers University Libraries/Technical Services user on 12 January 2018
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"The impact of neighborhood health centers shows . . . that when health services are available, low-income people use them in a pattern similar to that of the general population." beliefs about health, and medical orientation, all having their origin in the social group. Suchman, for example, interviewed over two thousand families and concluded that "ethnicity leads to socio-cultural differences which, in turn, lead to socio-medical variations." Thus, he explained the underutilization of preventive care among several lowincome groups as "simply one more expression of their general estrangement from the mainstream of middle class American society." 12 Several anthropological studies have offered similar explanations for the use of health services by low-income people. Religious beliefs, family structure, attitudes, and knowledge are all determining factors. 13 Attempts have also been made to explain these variations in health patterns by examining the economic and structural factors that are related to health care. The relationship between the nature of the system of health service delivery and its use has been explored in several studies. Findings suggest that the health care resources available to low-income persons are not the same and are frequently inferior to those available to other groups." Studies have also shown that the distance of the health facility and the availability of transportation in low-income communities have an effect on the use of health care. 15 Several studies of the impact of neighborhood health centers also provide evidence of the influence that structural and economic factors have on the use of health services. A comparison of baseline utilization data with data gathered two years after the creation of a neighborhood health center indicated that the use of preventive services had increased significantly. There was also evidence of changes Downloaded from https://academic.oup.com/hsw/article-abstract/1/2/51/765796 by Rutgers University Libraries/Technical Services user on 12 January 2018
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in health beliefs and attitudes." In addition, examination of the use of services in areas covered by neighborhood health centers showed different patterns among these residents than among low-income people interviewed in the National Health Survey. This implies that when health services are available, low-income people use them in a pattern similar to that of the general population. 17 Considering these findings, it seems that the use of health services can best be explained by taking into consideration the multitude of psychocultural, structural, and economic factors and their interaction. Studies of structural factors suggest, however, that behavior which was previously thought to be inherent in the individual and his group is strongly influenced by such environmental factors as the structure of the health service delivery system. This implies, then, that a qualitatively different structure—such as an HMO—might be expected to influence patterns of behavior in seeking health care and, perhaps, the health status of a low-income population. Although there is indirect evidence to support the hypothesis that an HMO might have a favorable influence on patterns of using health services, health care costs, and health status among the poor, it is important to examine the direct evidence available from studies of existing HMOs. One of the earliest studies compared members of a labor union enrolled in an HMO with those using a fee-forservice system. For this population, the adjusted rate of hospital admissions was 20.5 percent lower for the group enrolled in the HMO, the biggest difference being in female surgical admissions. Since the two groups were similar in preenrollment health status, the authors of the study suggested several possible explanations for these results. First, the availability of consultation and diagnostic facilities in the HMO meant that some hospital admissions could be avoided. Second, in the HMO the physician's fees were not linked to services rendered. Third, traditional insurance plans provided an incentive for hospitalization because Downloaded from https://academic.oup.com/hsw/article-abstract/1/2/51/765796 by Rutgers University Libraries/Technical Services user on 12 January 2018
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more services were covered under that circumstance. 18 Numerous other studies have also reported lower rates of hospital utilization for persons enrolled in HMOs. 1 ° COSTS
The cost efficiency of HMOs has been examined in several studies. Greenlick described the comparative costs at Kaiser, an HMO in Portland, Oregon, where the cost per patient day increased from $13.23 in 1950 to $54.80 in 1966—figures that parallel the national increase. However, the cost of hospitalization per member year only increased from $12.53 in 1950 to $27.31 in 1966. A fourfold increase in cost per patient day was thus reflected as a twofold increase in cost per member per year, because the number of hospital days per person per year decreased concurrently. According to Greenlick, it is this difference in the rate of increase in cost per day and cost per person per year that accounted for the difference in the cost of hospitalization for the Kaiser-Portland population in relation to the rest of the community. 2 ° Stevens also examined the cost efficiency of Kaiser-Portland and concluded that if the entire health care system achieved that level of efficiency, the United States would need 10 percent fewer physicians than existed at that time. 21 Neither study dealt with the effect of this cost-efficiency pattern on the quality of care. In 1965 the Office of Economic Opportunity (OEO) contracted with four HMOs to provide services to lowincome families. Several studies were based on these experiences, óne of which compared the utilization of services of the fifteen hundred OEO families in the plan with a random sample of non-OEO members. The rate and pattern of utilization by the two groups were found to be essentially similar except in the areas of pediatrics and obstetrics where the OEO group's utilization was higher. 22 The cost of providing health services was reported to be considerably Downloaded from https://academic.oup.com/hsw/article-abstract/1/2/51/765796 by Rutgers University Libraries/Technical Services user on 12 January 2018
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lower than that of similar services provided through programs constructed solely for the poor. 23 An examination of the experience of the OEO contracts with all four HMO plans revealed that the initial rate of utilization by the low-income group was higher than the rate for the general membership. However, within a year this rate decreased and stabilized at a level similar to that of the general membership. Although the rate of hospital admissions remained slightly higher for the OEO group than for the general membership, it was 50 percent lower than the national average for low-income people. 24 It should be noted, however, that intensive outreach and transportation services were provided to these OEO groups at a significant cost, and it is questionable whether these results could have been achieved without such services. A study comparing the use of health services by a Medicaid group before and after enrollment in an HMO revealed that the total number of ambulatory visits increased after enrollment. When these data were examined by age it was noted that utilization had significantly increased among children but had decreased among adults, which suggests a tendency toward the greater use of preventive services. Hospital admissions were 45 percent lower for the total group after enrollment, resulting in a major cost reduction to the Medicaid program. 25 In response to questions aimed at assessing the satisfaction of the study group, 54 percent feit that they received better care after enrollment in the HMO while 68 percent of the group perceived the HMO as more accessible than their previous source of care. 26 By 1973, 12 states had negotiated contracts with HMOs to provide services to Medicaid recipients, and preliminary reports of these experiences are just becoming available. One state reported that the use of HMOs yielded a 29.8 percent savings in cost when compared with the fee-forservice system for recipients of funds under Aid to Families with Dependent Children. 27 Another state found that Downloaded from https://academic.oup.com/hsw/article-abstract/1/2/51/765796 by Rutgers University Libraries/Technical Services user on 12 January 2018
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an HMO was able to provide health services for less cost than projected Medicaid payments over a comparable period of time. 28 The savings were due mainly to the elimination of the administrative costs of the vendor system. Although initial underutilization was a problem, this was partly corrected by intensive outreach and educational efforts. 29 The experience of the state of Hawaii in contracting with an HMO on behalf of Medicaid recipients has also been reported. Two matched sample groups were compared, one of which received services through the HMO while the other received traditional services. The comparison revealed that the HMO provided more comprehensive services at a lower cost in the rural areas and at a similar cost in the urban areas. 39 There was little difference in overall patient satisfaction between groups." SATISFACTION
Several studies, however, seem to imply that HMOs are not universally effective in serving low-income populations. A study in California compared patients' satisfaction between a Medicaid group receiving care through an HMO and one using the fee-for-service system. The preliminary data suggested that from the patients' point of view, the HMO failed to deliver high-quality, accessible care and did not result in the use of a higher degree of preventive services. 32 The examination of patterns of utilization of a Medicaid group enrolled in the Health Insurance Plan of New York revealed that this group underutilized services." It should be noted, however, that the HMOs studied here were of the medical care foundation and the network model respectively, as opposed to the group practice model examined in the previous studies. Taken as a whole, the above studies suggest that an HMO can serve low-income families along with a general population. When served in this manner by the prepaid group practice model of HMO, patterns of health service Downloaded from https://academic.oup.com/hsw/article-abstract/1/2/51/765796 by Rutgers University Libraries/Technical Services user on 12 January 2018
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utilization by the low-income group resemble those of the general membership after about nine months' enrollment. Comparative studies reveal that low-income families tend to increase their use of ambulatory and preventive services and to decrease their use of inpatient and emergency services. There is a tendency for utilization to increase among children and decrease among adults, which also implies a pattern of greater prevention. Although these results have been documented fairly consistently for HMOs of the group practice model, this has not been truc of the HMOs based on the medical care foundation and network models. There is, in fact, some tentative evidence that the last two models have not significantly influenced patterns of utilization. Evidence exists that the costs of serving a low-income population through an HMO are less than through the traditional system. This reduction in cost seems to be due to the decreased use of expensive inpatient and emergency care and, for Medicaid enrollees, to the reduction in the administrative costs of processing claims and vendor payments. The findings on patients' satisfaction with HMO services seem mixed. There is little evidence that patients are less satisfied with HMO services, but only sporadic evidence that they are more satisfied. This may be due to the fact that few comparative studies of patients' satisfaction under HMO and fee-for-service systems have been undertaken. Also, measurements of patient satisfaction have usually produced little variability among individuals, which makes it difficult to demonstrate significant differences. Information reflecting the effect of the HMO structure on accessibility and quality of care or on the health status of the enrolled population is largely unavailable. 34 In fact, at this point there is actually no strong, direct evidence that HMOs would deliver significantly higher quality care or produce better health in a low-income population than would the traditional system. Although the changed patterns of utilization—notably the increased use of amDownloaded from https://academic.oup.com/hsw/article-abstract/1/2/51/765796 by Rutgers University Libraries/Technical Services user on 12 January 2018
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"One state found that an HMO was able to provide health services for less cost than projected Medicaid payments over a comparable period of time." bulatory preventive services and the decreased use of inpatient services—are expected to result in better care and better health, these relationships have yet to be empirically demonstrated. SUMMARY AND IMPLICATIONS
Compared with the general population, low-income groups tend to overtilize emergency and inpatient services and underutilize routine ambulatory and preventive services. This pattern is associated with rising costs of health care and the greater frequency of chronic and disabling health problems in this segment of the population. One factor that seems to be related to this pattern of utilization is the structure of the system of health care delivery available to low-income groups. The HMO is a qualitatively different health care delivery system and, theoretically, one that might be expected to influence patterns of utilization and health status. Empirically, there is evidence that patients enrolled in many HMOs do change their patterns of utilization and take greater advantage of ambulatory and preventive care, and that this change has been clearly associated with reduced costs. The impact of HMOs on patient satisfaction and the health status of the enrolled population remains unclear, especially when HMOs of several different models are considered. The quality of health care delivered by HMOs has yet to be examined systematically. Several implications can be drawn for professionals Downloaded from https://academic.oup.com/hsw/article-abstract/1/2/51/765796 by Rutgers University Libraries/Technical Services user on 12 January 2018
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working in the field of health care for low-income groups. n There is growing evidence that some HMOs, particularly those resembling the prepaid group practice model, have the potential to eliminate some of the health care problems of the poor, and their development should be supported. However, there are important structural differences among HMOs that may result in different impacts on the enrolled population. Therefore, the unique organizational structure must be examined critically when a particular HMO is considered as a health care resource for low-income groups. n Low-income persons, especially Medicaid clients, may not have the freedom to voice their dissatisfaction with an HMOs services by dropping their membership. This necessitates the development of an effective procedure for monitoring the satisfaction of low-income patients enrolled in an HMO. n Because accessibility has been shown to be a particularly important factor affecting the utilization of health care among low-income persons, the proximity of the HMO to the target population and the availability of transportation must be considered. n Many HMOs that reported cost savings and changed patterns of utilization provided in addition some form of outreach service or health education. The provision of such services should therefore be included in planning for the enrollment of a low-income group in an HMO. Finally, although the advantages of HMOs in terms of cost and utilization have been documented, the relationship of these factors to the health status of the enrolled population has not been established. Evaluation studies of the experience of low-income groups enrolled in HMOs must address the question whether changes in the patterns of utilization actually result in better health for the population served. The impact of HMOs on the health status of the patients will be the ultimate, albeit elusive, evaluation of their effectiveness. Downloaded from https://academic.oup.com/hsw/article-abstract/1/2/51/765796 by Rutgers University Libraries/Technical Services user on 12 January 2018
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About the Author Claudia C. Lorish, MSW, is a doctoral student, School of Applied Social Sciences, Case Western Reserve University, Cleveland, Ohio. At the time of writing, she was Program Specialist, Division of Medical Assistance, Ohio Department of Public Welfare, Columbus.
Notes and Relerences 1. National Advisory Commission on Health Manpower, Report, Vol. 1 (Washington, D.C.: Government Printing Office, 1967), p. 2. 2. Robert Stevens and Rosemary Stevens, Welfare Medicine in America (New York: Free Press), 1974. 3. An indication of the federal government's commitment to the HMO concept can be seen in the HMO Act of 1973 and the resulting regulations in Federal Register, 39 (October 18, 1974), and in the guidelines for Medicaid contracts with HMOs in Federal Register, 39 (June 5, 1974). 4. Ernest Seward, "The Relevance of Prepaid Group Practice to the Effective Delivery of Health Service," New Physician, 18 (January 1969), pp. 39-43. 5. Milton Roemer and William Shonick, "HMO Performance: The Recent Evidence," Milbank Memorial Fund Quarterly, 51 (Summer 1973), pp. 271-317. 6. Jeffrey Prussin, "HMOs: Organizational and Financial Models," Hospital Progress, 55 (April 1974), pp. 33-35. 7. See, for example, Ronald Andersen et al., Health Services Use: National Trends and Variations (Washington, D.C.: U.S. Department of Health, Education & WelDownloaded from https://academic.oup.com/hsw/article-abstract/1/2/51/765796 by Rutgers University Libraries/Technical Services user on 12 January 2018
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fare, October 1972), and William Richardson, "Poverty, Illness and the Use of Health Services in the U.S.," Hospitals, 43 (July 1969), pp. 34-42. 8. See "Profile of American Health, 1973," Public Health Reports, 89 (November—December 1974), p. 515; National Center for Health Statistics, Physician Visits (Washington, D.C.: U. S. Department of Health, Education & Welfare, March 1975), p. 20. 9. Ibid. 10. Ibid., p. 32. 11. "Profile of American Health," 1973, pp. 509-512. 12. Edward Suchman, "Socio-Medical Variations among Ethnic Groups," American Journal of Sociology, 70 (November 1964), pp. 319-331. 13. See, for example, Lyle Saunders, Cultural Digerences in Medical Care (New York: Russell Sage Foundation, 1954). 14. See, for example, Raymond Duff and August Hollingshead, Sickness and Society (New York: Harper & Row), 1968; Sol Levine, Norman Scotch, and George Vlasak, "Unraveling Technology and Culture in Public Health," American Journal of Public Health, 59 (February 1969), pp. 237-244; and Thomas W. Bice, Robert L. Eickhorn, and Peter D. Fox, "Socio-economic Status and the Use of Physician's Services: A Reconsideration," Medical Care, 10 (May—June 1972), pp. 261-271. 15. See, for example, Louise Okada and Gerald Sparer, "Access to Usual Source of Care by Race and Income: Ten Urban Poverty Areas," and G. W. Shannon, R. L. Bashhur, and C. W. Spurlock, "Variations in Health Care Opportunities and Behavior Among Middle and Lower Socio-economic Status Blacks." Papers presented at the annual meeting of the American Public Health Association, New Orleans, Lousiana, October 1974. 16. Seymour S. Bellin and H. Jack Geiger, "The Impact of a Neighborhood Health Center on Patients' Behavior and Attitudes Relating to Health Care: A Study of a Low Income Housing Project," Medical Care, 10 (MayJune), pp. 224-239. Downloaded from https://academic.oup.com/hsw/article-abstract/1/2/51/765796 by Rutgers University Libraries/Technical Services user on 12 January 2018
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17. U. S. Office of Economie Opportunity, An Evaluation of the Neighborhood Health Centers Program: Summary of Results and Methodology (Washington, D.C.: U.S. Office of Economic Opportunity, 1972). 18. Paul Densen, Eve Balamuth, and Sam Shapiro, "Prepaid Medical Care and Hospital Utilization in a Dual Choice Situation," American Journal of Public Health, 50 (November 1960), pp. 1710-1726. 19. See, for example, Isadore Falk, and J. Sentura, Medical Care for Steelworkers and Their Families (Pittsburgh, Pa.: United Steelworkers of America, 1960); and Herbert Klarman, "The Effect of Prepaid Group Practice on Hospital Use," Public Health Reports, 17 (November 1963), pp. 955-965. 20. Merwyn Greenlick, "The Impact of Prepaid Group Practice on American Medical Care: A Critical Evaluation," Annals of the American Academy of Political and Social Science, 399 (January 1972), pp. 100-113. 21. Carl Stevens, "Physician Supply and National Health Care Goals," Industrial Relations, 110 (May 1971), pp. 119-244. 22. Merwyn Greenlick et al., "Comparing the Use of Medical Care Services by a Medically Indigent and General Membership Population in a Comprehensive, Prepaid Group Practice Program," Medical Care, 10 (May-June 1972), pp. 187-200. 23. Stephen Coburn, "Health Maintenance Organizations : Implications for Public Assistance Recipients," Public Welfare, 31 (Spring 1973), pp. 28-32. 24. Gerald Sparer and Arne Anderson, "Utilization and Cost Experience in Four Prepaid Plans," New England Journal of Medicine, 289 (July 1973), pp. 67-72. 25. Clifton Gaus, Norman Fuller, and Carol Bohannon, "HMO Evaluation: Utilization Before and After Enrollment" (Baltimore, Md., and Washington, D.C.: Department of Medical Care and Hospitals, Johns Hopkins University, and Department of Human Resources, District of Columbia Government, 1973). Downloaded from https://academic.oup.com/hsw/article-abstract/1/2/51/765796 by Rutgers University Libraries/Technical Services user on 12 January 2018
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26. U.S. Department of Health, Education & Welfare, Summary of SRS-Supported HMO Research and Development Efiorts Tended under Section 1116 of the Social Security Act as Amended (Washington, D.C.: Medical
Services Administration, 1973). 27. Washington Department of Social and Health Services, Health Maintenance Organizations: Comparison of Costs and Utilization for Group Health Medicaid Enrollees and Other Persons Certified for Medicaid in Washington State (Olympia, Wash.: Department of Social and Health
Services, 1974). 28. Robert Birnbaum, "The Harvard Community Health Plan: To Provide Broad Access to Quality Comprehensive Care," Public Welfare, 29 (January 1971), pp. 42-47. 29. U. S. Department of Health, Education & Welfare, Summary of SRS-Supported HMO Research and Development Ejjorts Tended under Section 1116 of the Social Security Act as Amended.
30. Robert Worth, "A Comparison of Fee-for-Service and Capitation Medicine in a Low Income Group in Honolulu," Hawaii Medical Journal, 33 (March 1974), pp. 9196. 31. U. S. Department of Health, Education & Welfare, Summary of SRS-Supported HMO Research and Development Efiorts Tended under Section 1116 of the Social Security Act as Amended.
32. Ibid. 33. James Hester and Elliot Sussman, "Medicaid Prepayment: Concept and Implementation," Milbank Memorial Fund Quarterly, 52 (Faal 1974), p. 427. 34. A notable exception is found in Sam Shapiro, Florence Weiner, and Paul Densen, "Comparison of Prematurity and Perinatal Mortality in a General Population and in the Population of a Prepaid Group Practice, Medical Care Plan," American Journal of Public Health, 48 (February 1958), pp. 107-112.
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