Health Care d Expenditures of Medicare HMO Disenrollees

We examine the impact of the first waveof Medicare health maintenance organiza-tion HMO withdrawals. With data fromCMS and United Health Group, we esti-mate use and expenditure changes between1998 and 1999 for HMO enrollees whowere involuntarily dropped from their planand returned to fee-for-service (FFS)Medicare using a difference-in-differencemodel. Compared to those who voluntarilyleft an HMO, involuntarily disenrolled ben-eficiaries had higher out-of-pocket expendi-tures, an 80 percent decrease in physicianvisits, 38 percent higher emergency room(ER) use and a higher probability of dying.The results suggest beneficiaries face signif-icant costs and reduced health outcomesfrom unstable Medicare managed caremarkets.