Explaining Research – Cherry picking?

Lots of you ask why I’m skeptical of the ability of a public option to truly effect massive change on the US health care system.  I give lots of answers, but – perhaps – many of you assume that I’m making a leap of faith instead of looking to the literature.

Not so!

One of my main concerns is that I don’t necessarily believe that when you put a public plan alongside a private plan, that you won’t wind up with unequal risk pools.  On the theoretical side, I would point to the different missions of those two types of outfits.  The public plan is focused on distributing funds for care; the for-profit plan is focused on, well, profit.  Those are not the same thing.

On the empirical side, I could point to the fact that Medicare Advantage has failed to deliver the same Medicare product for a cheaper amount (which was it’s mission), but we’ve done that before.

And there is more peer-reviewed research.

In an important paper in the New England Journal of Medicine in 1997, researchers examined how people moved in and out of Medicare HMO plans and traditional Medicare.  See, back in the 1990’s there was a swing to “managed care”.  Private HMOs began to offer their services to Medicare recipients.  If you were over 65, you could choose a Medicare HMO or regular Medicare on a month-to-month basis.  If you chose the Medicare HMO, you had to use their providers and hospitals, but otherwise it should be similar.  So, here were the rules if you were eligible for Medicare:

  • You could choose the public or private system
  • You could switch up and back
  • No one could deny you access to their plan
  • The benefits in the private plans could be more than the public, but not less

Got that?  No cherry picking allowed.  This looks very similar to how a public plan would function against private plans on the exchange.  So what happened when this was set up and let loose?  Guess:

Methods We used Medicare enrollment and inpatient billing records for southern Florida from 1990 through 1993 to examine differences in the use of inpatient medical services by 375,406 beneficiaries in the Medicare fee-for-service system, 48,380 HMO enrollees before enrollment, and 23,870 HMO enrollees after disenrollment. We also determined whether these differences were related to demographic characteristics and whether the pattern of use after disenrollment persisted over time.

What did the researchers do?  They looked at Medicare billing records for over 375,000 elderly Americans over a number of years.  This allowed them to look at how much inpatient care those people used.  They also looked specifically at how much care they used in the year before anyone went to an HMO and the three months after they left an HMO.  If there is no cherry picking, then they should find that the amount of care used should be the same in all of those groups and times.

Results The rate of use of inpatient services in the HMO-enrollment group during the year before enrollment was 66 percent of the rate in the fee-for-service group, whereas the rate in the HMO-disenrollment group after disenrollment was 180 percent of that in the fee-for-service group. Beneficiaries who disenrolled from HMOs re-enrolled at about the time that their level of use dropped to that in the fee-for-service group.

What did the researchers find?  People who wound up joining the (private) HMOs used 66% less care before joining than those who stayed in the (public) Medicare group.  Somehow the private insurance HMOs figured out a way to get the healthy people to jump ship out of the public plan into the private one!

Not only that, but people who left the (private) HMOs and went back to the (public) Medicare used 180% more care after leaving than the people who stayed.  Somehow the private insurance HMOs figured out a way to convince the sicker people to jump ship back to the public plans.

So we had a system where a private system and a public system were in an exchange like environment.  Regulations prevented cherry-picking.  And yet – somehow – the private plans figured out a way to do it.  And this was competing with a giant government program.

Can you understand my limited faith in the ability of a wimpy, tiny public plan to do any better?

The Medicare-HMO revolving door–the healthy go in and the sick go out. Morgan RO, Virnig BA, DeVito CA, Persily NA. N Engl J Med. 1997 Jul 17;337(3):169-75.

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