HMO Plans, Self-Selection, and Utilization of Health Care Services

Abstract

This study examines the effect of health maintenance organizations (HMOs) on the use of health care services among the privately insured non-elderly population. Using data from the 2000 Medical Expenditures Panel Survey, we find that HMO members are not particularly healthier than non-HMO members. Still, endogenous health plan choice decisions cause attenuation bias in the utilization performance of HMOs. After controlling selection bias, HMO enrollment increases the uses of office-based services and hospital outpatient services. These findings imply that though HMOs in private insurance market intend to contain utilization, they, in fact, provide consumer incentive to use more of health care services.