Comparative costs to the Medicare program of seven prepaid group practices and controls

This research was conducted in order to compare costs to the Medicare program for providing health care service to old people enrolled in two forms of health delivery organization: open market and prepaid group practice (pgp). Two data sources were employed: cost data provided by the Social Security Administration for seven prepaid group practices in five SMSAs and northern California and interviews conducted with administrators of the prepaid groups to determine: organizational sponsorship, incentive structure, pattern of selectivity of patients, and resource availability. Major findings are: (1) Enrollees in prepaid groups incur higher physician costs. This includes services provided by practitioners in and outside the plans. (2) Overall, prepaid groups demonstrate savings to the Medicare program in provider-initiated services- in hospital care and extended care facility services, but not in home health care. (3) Reduced spending in the hospital component does not imply reduction in the extended care facility or home service. (4) Outpatient costs in the hospital are generally higher in the open market modes, probably because this mode of care is viewed as an alternative to physician visits. (5) The greatest cost savings to the Medicare program are demonstrated by groups which are relatively small, yet hospital-based.