An Examination of Factors in the Withdrawal of Managed Care Plans from the Medicare+Choice Program

Abstract

Participation of health maintenance organizations (HMOs) in the Medicare +Choice program, expected to rise rapidly after passage of the Balanced Budget Act of 1997, has gone in just the opposite direction. Because plans have left in such large numbers, Congress has taken remedial measures to remove restrictions and increase payments. To date these efforts have failed. This paper uses plan organizational characteristics, market position, and financial performance to quantify the reasons why some HMOs exited at the end of 1998. The findings suggest HMO participation in Medicare +Choice will continue to fall unless major changes are made to the overall Medicare program and the method of paying HMOs.