Selection Bias in HMOs: A Review of the Evidence

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Abstract
Early reviews found that health maintenance organizations (HMOs) attracted healthier beneficiaries in the Medicare program and healthier employees in the market for employer-based insurance. This review finds that HMOs still attract healthier Medicare beneficiaries, that HMOs no longer attract healthier employees, and that HMOs attract healthier Medicaid recipients. This review also found conflicting evidence about whether Medicare HMOs are overpaid, no evidence that HMOs are overpaid in the market for employer-based insurance, and evidence that concerns about overpaying Medicaid HMOs have diminished because many states are adopting mandatory programs.