Geographic variation in determinants of Medicare managed care enrollment

To examine the effect of adjusted average per capita cost (AAPCC) rate and volatility on Medicare risk plan enrollment at the county level.

Secondary data from the Health Care Financing Administration's office of managed care and other sources were merged to create comprehensive data on all Medicare risk plans in 3,069 of the 3,112 U. S. counties in December 1996.

A two-step least squares regression was estimated to examine the effects of AAPCC rate and volatility, commercial HMO enrollment, market factors, and characteristics of the county population on Medicare HMO enrollment. The model was also used to simulate the effects of the Balanced Budget Act of 1997. Data from the Health Care Financing Administration were merged with other sources at the county level. The Federal Information Processing Standards code and a crosswalk file matching that code with the county name linked the data across sources.

The AAPCC rate has a small positive effect on the probability of Medicare HMO availability and enrollment. However, commercial HMO enrollment has a much stronger positive effect on Medicare HMO enrollment. Volatility has a negative effect on the probability of any Medicare HMO enrollment.

The results suggest that payment changes enacted as part of the Balanced Budget Act will have a limited effect on Medicare HMO enrollment, especially in rural areas. Other policy changes are needed to stimulate Medicare HMO enrollment.