Managed care and the near-elderly: effects of plan enrollment on functionality

This paper examines the effects of enrollment in a health maintenance organization (HMO) or a preferred provider organization (PPO) on the functional status of near-elderly adults (aged 55-64), compared to traditional fee-for-service (FFS) plans. A sample of 1306 near-elderly adults with employer-sponsored health insurance are drawn from the 2000-2002 waves of the Health and Retirement Study, a nationally representative panel survey of community-dwelling adults. Regression models are estimated to assess the effects of different types of insurance plans on functionality, as measured by whether or not the individual has any functional limitations. The potential influence of selection bias into alternative types of plans is addressed by limiting the sample to near-elders without a choice of health plans. The effects of HMOs on functionality are shown to be comparable to those of FFS plans among the general near-elderly population. However, significant adverse effects of HMO enrollment on functional status are observed among near-elders with chronic conditions. PPO enrollees have similar functional outcome to FFS enrollees, even among those with chronic conditions. The observed differences in functional outcome across plans have important implications for the practicality of managed care plans serving older adults.