Skip to content
My WebMD Sign In, Sign Up

Health Care Reform:

Health Insurance & Affordable Care Act

HMOs Don't Cut Back on Medicare Surgery

For-Profit HMOs Don't Control Surgery Costs, Study Suggests

WebMD Health News

Jan. 7, 2004 -- If you're on Medicare and want expensive surgery, you're as likely to get it from a for-profit HMO as a not-for-profit HMO.

That doesn't seem entirely logical. After all, for-profit HMOs have to give their investors a return on their money. But they aren't doing it by cutting back on costly surgery for Medicare beneficiaries.

In fact, Medicare patients in for-profit HMO plans are more likely to receive some kinds of expensive operations. Harvard researchers Eric C. Schneider, MD, and colleagues report the finding in the Jan. 8 issue of TheNew England Journal of Medicine.

"Our study results suggest that for-profit ownership of health plans does not seem to lead to restrictions on high-cost surgical procedures," Schneider tells WebMD. "And the flip side of this is that there is not a lot of evidence that for-profits are more effective than nonprofits at controlling health-care spending."

That's too bad. Because HMOs are the bulwark of U.S. efforts to control health-care costs. And it's not working, says Gerald Kominski, PhD, associate director of the UCLA Center for Health Policy Research.

In response to what has been described as a managed-care backlash, managed care has loosened the reins to most services, Kominski tells WebMD. "That is one reason why we are seeing health-care costs rise so rapidly."


Some 4.5 million Medicare beneficiaries are enrolled in a managed-care plan. Schneider wondered whether for-profit plans -- such as United and Aetna -- restrict patients' access to costly surgeries more than not-for-profit plans such as Kaiser and Harvard Community Health.

Schneider's team used data from patients who in 1997 enrolled in the Medicare+Choice program through their managed care plans. They looked at whether patients in for-profit plans had less access to 12 common, high-cost surgical procedures than those enrolled in not-for profit plans.

"We were struck by the finding that for-profit plans seemed to have higher rates of use of high-cost operations across the board," Schneider says.

Kominski suggests that the Schneider team's 1997 data has captured the beginning of a trend that continues today.

"HMOs right now are not squeezing patients with regard to access to expensive procedures," Kominski tells WebMD.

For patients who need these expensive operations, that's not a bad thing. These operations include heart-artery bypass grafting, hip and knee replacements, hysterectomy, and prostate surgery.

But for a nation trying to figure out how to pay for health care, it points to a problem. HMOs may not be the best way to keep health-care costs from spiraling out of control.

"Managed care, whether for-profit or not-for-profit, is not keeping health care costs under control," Kominski says. "Right now, they are protecting their market share more than they are managing costs."

Yet current Medicare reforms will put even more federal funds in the hands of HMOs.

"The changes in Medicare will pay more money to health plans to encourage more enrollment," Schneider says. "If successful, the main effect would be that health plans would be under less pressure to contain costs."

Schneider notes, however, that the current study does not show whether for-profit HMOs cut costs by negotiating lower prices for costly surgeries or by cutting back on services such as prescription-drug access or preventive care.

Your Costs

See insurance premium
costs and financial aid.

Start Here

Health Insurance

Find a plan that's right
for you.

Start Here

Your State's Insurance Marketplace

Get informed about plans, benefits and costs.

From WebMD

Latest Health Reform News

Loading …
URAC: Accredited Health Web Site HONcode Seal AdChoices