George Grob

Deputy Inspector General 

for Evaluation and Inspections 
Beneficiary Awareness of Medicare HMOs, OEI-04-97-00035

Robert A. Berenson 

Director, Center for Health Plans

and Providers, HCFA 
Attached is our report on factors affecting Medicare beneficiary awareness of health 
maintenance organizations (HMOs) located in their geographic area. 
The Balanced Budget Act of 1997 enhanced beneficiaries health care choices and expanded 
HCFAs responsibilities for informing beneficiaries about their choices.  Beneficiaries ability to 
make informed choices depends most fundamentally on whether or not there are managed care 
organizations in their geographic area and, if so, whether or not beneficiaries know about 
them. 
To determine the extent, accuracy, and source of beneficiary knowledge of managed care 
options, we used our 1997 national beneficiary satisfaction survey to ask beneficiaries who 
were not in HMOs about their awareness of Medicare HMOs.  We then checked the accuracy 
of beneficiary responses by determining whether or not they did indeed live in areas with 
Medicare-contracted risk HMOs.  Finally, we determined which factors influenced 
beneficiaries knowledge of whether or not Medicare HMOs were available in their geographic 
area. 
Clearly, much has changed since 1997 about the extent of HMO availability and beneficiary 
awareness of it.  However, factors affecting beneficiary awareness may still be pertinent.  With 
that in mind, we offer this analysis to HCFA for use in your ongoing efforts to increase 
awareness of managed care options.  This data may also serve as a baseline for measuring 
progress. 
We found that of the beneficiaries who had HMOs in their geographic area, about half (54 
percent) did not know about them.  Interestingly, over one-fourth (26 percent) of the 
beneficiaries who did not know about HMOs, but had HMOs available, said they would be 
interested in joining an HMO.  Page 2 - Robert A. Berenson 
Our analysis showed that beneficiaries who knew about Medicare HMOs lived in urban areas 
that had a strong health insurance market penetration.  Beneficiaries who lived in geographical 
areas with HMOs and knew about them tended to live in urban areas that had a higher 
percentage of Medicare beneficiaries using HMOs.  They also tended to have medical coverage 
in addition to Medicare.  However, beneficiaries knowledge of HMOs did not correlate with 
their age, gender, health status, or the average income in their area. 
Beneficiary knowledge of managed care organizations in 1997 depended largely on commercial 
advertisements and marketing.  If this same dynamic holds true today, HCFA efforts to expand 
beneficiary knowledge will need to be focused on areas where Medicare managed care options 
are available, but where commercial advertising has not been effective in reaching Medicare 
beneficiaries. 
We hope you find this information useful as you make plans to educate beneficiaries about 
Medicare+Choice.  We also have studies underway on HMO marketing materials, extra 
benefits, and HMO closings.  We are now in the process of discussing the results of these 
studies with your staff. 
This report is being issued directly in final since it contains no recommendations.  There is no 
need to formally comment on the report.  Nevertheless, your comments or questions are 
welcome. You can call me at (202) 619-0480 or have your staff contact Stuart Wright at 
(410) 786-3138. 
Attachment  Beneficiary Awareness 
of Medicare HMOs 
Prepared by 

U.S. Department of Heath and Human Services

Office of Inspector General

Office of Evaluation and Inspections

October 1999

OEI-04-97-00035
 TABLE  OF  CONTENTS 
INTRODUCTION  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  1

FINDINGS

About Half of Beneficiaries Unaware if HMOs in Area . . . . . . . . . . . . . . . . . . . . . . .  3

Of Beneficiaries with HMOs, About Half Unaware of Them . . . . . . . . . . . . . . . . . . .  3

Those Who Knew Lived in Areas with Strong Market Penetration . . . . . . . . . . . . . .  4

CONCLUSION  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  7

APPENDIX A: Variables Included in Logistic Regression Analysis . . . . . . . . . . . . . . . . . . .  8

APPENDIX B : Confidence Intervals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  10
 INTRODUCTION 
PURPOSE 
To determine factors affecting Medicare beneficiary awareness of health maintenance 
organizations in their geographical area. 
BACKGROUND 
Balanced Budget Act 
The Balanced Budget Act of 1997 created Medicare Plus (+) Choice which enhanced 
beneficiaries health care choices.  Medicare+Choice encompasses all the health plan 
choices a beneficiary has in the Medicare program.  It includes the original fee-for-
service program, risk health management organizations (HMOs), and new managed 
care models. 
Beneficiaries ability to make informed choices depends most fundamentally on 
whether or not there are managed care organizations in their area and, if so, whether or 
not beneficiaries know about them.  Prior to the Balanced Budget Act, beneficiary 
knowledge of managed care organizations depended largely on commercial 
advertisements and marketing.  However, the Balanced Budget Act expanded the 
Health Care Financing Administrations (HCFA) responsibilities for informing 
beneficiaries about their choices. 
Data for this inspection was collected in 1997, prior to implementation of the Balanced 
Budget Act.  Clearly much has changed about the extent of HMO availability and 
beneficiary awareness of it.  However, factors affecting beneficiary awareness may still 
be pertinent.  With that in mind, we offer this analysis to HCFA for use in ongoing 
efforts to increase awareness of managed care options.  This data may also serve as a 
baseline for measuring progress in this regard. 
METHODOLOGY 
As part of a broad 1997 national survey to determine beneficiary satisfaction with 
Medicare,1 we asked beneficiaries who were not in HMOs about their awareness of 
Medicare HMOs.  We then checked the accuracy of beneficiary responses by 
1Office of Inspector General, United States Department of Health and Human Services. Medicare 
Beneficiary Satisfaction: 1997. OEI-04-97-00030. 
1 
Beneficiary Awareness of Medicare HMOs  OEI-04-97-00035  determining whether or not they did indeed live in areas with Medicare-contracted risk 
HMOs. 
The following describes more specifically how we extracted and analyzed data for this 
inspection. 
1.	 In July 1997, we mailed a questionnaire to 1269 randomly-selected Medicare 
beneficiaries for whom Part B claims had been filed in Calendar Year 1996. 
Beneficiary participation in the survey was voluntary.  A total of 977 
beneficiaries returned completed questionnaires, for a response rate of 77 
percent.  Percentages are based on the number of beneficiaries who responded 
to the questions about HMOs. 
2.	 We matched addresses of the 977 respondents with HCFAs database showing 
which zip codes were covered by Medicare HMOs at the time of our survey. 
This resulted in a database containing 621 beneficiaries (64 percent of our 
respondents) who lived in a zip code covered by a Medicare HMO. 
3.	 We then matched the 621 beneficiaries with (1) Medicare enrollment data, 
which includes beneficiary characteristics, (2) 1990 Census data, (3) data on 
Medicare HMO market penetration, and (4) Medicare claims data. 
4.	 We used a logistic regression analysis to identify variables that would 
distinguish between (1) beneficiaries who said that Medicare-contracted HMOs 
were available in their geographical area and (2) beneficiaries who did not know 
or who said that Medicare HMOs were not available.  Appendix A lists the 
variables that we included in this analysis. 
____ ____ ____ ____ ____ 
We conducted this inspection in accordance with the Quality Standards for Inspections 
issued by the Presidents Council on Integrity and Efficiency. 
2 
Beneficiary Awareness of Medicare HMOs  OEI-04-97-00035  FINDINGS 
About half of beneficiaries did not know if a Medicare HMO 
was located in their geographical area 
We asked beneficiaries in our sample if they lived in a location where they could join an 
HMO.  The following table shows that over half said they did not know, and another 8 
percent said they did not live in an area with HMOs. 
Beneficiary Knowledge 
Of HMOs 
Category  Percent 
Beneficiaries who said they did live in an area  36 
with Medicare HMOs 
Beneficiaries who said they did not live in an  8 
area with Medicare HMOs 
Beneficiaries who said they did not know if  56 
they lived in an area with Medicare HMOs 
The majority of beneficiaries (69 percent) who said they knew about HMOs in their 
area said they learned of them through HMO advertising. 
Of beneficiaries who did have HMOs in their area, about 
half did not know about them 
When we matched the database of Medicare-contracted HMOs to the zip codes of our 
survey respondents, we found that of the beneficiaries who had HMOs in their area, 
about half (54 percent) did not know about them.  They had answered either No or 
Do Not Know when asked if their geographical area had a Medicare HMO.  Forty-
six percent of  beneficiaries who lived in an area with HMOs did know about them. 
We also asked the beneficiaries if they would be interested in joining an HMO.  One-
fourth (26 percent) of those who lived in an area where an HMO was located and did 
not know it, said they would be interested in joining an HMO. 
3 
Beneficiary Awareness of Medicare HMOs  OEI-04-97-00035  Those who knew about HMOs lived in urban areas with a 
strong health insurance market penetration 
Our analysis of the 621 beneficiaries who lived in geographical areas with HMOs 
showed that those beneficiaries who knew about the HMOs had some common 
characteristics.  They tended to live in urban areas that had a higher percentage of 
Medicare beneficiaries in HMOs, and they had medical coverage in addition to 
Medicare.  Beneficiaries knowledge of HMOs did not correlate with their age, gender, 
health status, or the average income in their area.2 
As illustrated in Figure 1 below, beneficiaries who lived in counties with higher 
Medicare HMO market penetration were more likely to know that HMOs were 
available. 
Figure 1

Beneficiary Knowledge 

by HMO Market Penetration

2For a complete list of the variables that we evaluated, see appendix A. 
4 
Beneficiary Awareness of Medicare HMOs  OEI-04-97-00035 Beneficiaries who lived in urban counties were more likely to know that HMOs were available, 
as shown in Figure 2 below. 
Figure 2

Beneficiary Knowledge

by Percent Urban Population

Beneficiaries who had insurance coverage in addition to Medicare or Medicaid were more 
likely to know that HMOs were available, as shown in the table below. 
Beneficiary Knowledge 
by Insurance Coverage 
Category  Percent Who Knew  Percent Who Did Not  Total 
of HMOs  Know of HMOs 
HAD Medical Coverage in 
Addition to  53  47  100 
Medicare and Medicaid 
NO Medical Coverage in 
Addition to  24  76  100 
Medicare and Medicaid 
Two other variables--disability and race--were only significant at the 90 percent confidence 
level  after adjusting for the three variables already described (market penetration, percent 
5 
Beneficiary Awareness of Medicare HMOs  OEI-04-97-00035  urban, and insurance coverage).  As shown in the tables below, beneficiaries who had never 
received Medicare based on disability, and beneficiaries who were white, were more likely to 
know that HMOs were available.  (The statistics in these tables are not adjusted for the 
influence of other variables.) 
Beneficiary Knowledge 
by Disability Category 
Category  Percent Who  Percent Who Did Not  Total 
Knew  Know of HMOs 
Of HMOs 
Never Received Medicare 
50  50  100 
Due to Disability 
Did Receive Medicare 
31  69  100 
Due to Disability 
Beneficiary Knowledge 
by Race Category 
Category  Percent Who Knew  Percent Who Did Not  Total 
of HMOs  Know of HMOs 
White  49  51  100 
Non-White  30  70  100 
HCFA Study 
Results of our analysis are similar to those found by HCFAs Office of Strategic Planning when 
they analyzed beneficiary responses to the Medicare Current Beneficiary Survey3.  The HCFA 
study found that (1) Medicare HMO market penetration, (2) beneficiaries educational level, 
and (3) beneficiaries self-reported health status influenced whether or not beneficiaries knew 
about Medicare HMOs in their area.  A direct comparison, however, between our study and 
HCFAs study cannot be made because definitions of some of the variables differed. 
3Health Care Financing Administration, Office of Strategic Planning, August 12, 1998 
6 
Beneficiary Awareness of Medicare HMOs  OEI-04-97-00035 CONCLUSION 
Clearly, beneficiary knowledge of managed care organizations in 1997 depended largely on 
commercial advertisements and marketing.  If this same dynamic holds true today, HCFA 
efforts to expand beneficiary knowledge will need to be focused on areas where Medicare 
managed care options are available, but where commercial advertising has not been effective in 
reaching Medicare beneficiaries. 
7 
Beneficiary Awareness of Medicare HMOs  OEI-04-97-00035  APPENDIX A 
VARIABLES INCLUDED IN LOGISTIC REGRESSION ANALYSIS

Variable  Description 
County HMO  Percent of Medicare beneficiaries who were enrolled in Medicare-
market penetration  contracted HMOs at the time of our survey, by county 
County percent  Percent of population in an urban area, by county (based on 1990 
urban  census) 
Zip code percent  Percent of population in an urban area, by zip code (based on 
urban  1990 census) 
County metropolitan 
Metropolitan statistical area designation, by county 
statistical area 
County median 
Median household income, by county (based on 1990 census) 
income 
Zip code median 
Median household income, by zip code (based on 1990 census) 
income 
Age  Beneficiarys age at time of survey 
Gender  Beneficiarys gender 
Race  Beneficiarys race 
Determines whether the beneficiary has ever received Medicare 
Disability 
benefits because of disability 
Determines whether the beneficiary had supplemental insurance.  If 
Supplemental 
yes, was it Medicaid only, or did it include other insurance such as 
insurance 
Medigap?  (This variable came from our beneficiary survey.) 
Total Medicare payments for the beneficiary, for the twelve months 
Medicare payments 
up to the survey date 
Health status score based on diagnosis mix in Medicare claims for 
Health status 
the twelve months up to the survey date 
8 
Beneficiary Awareness of Medicare HMOs  OEI-04-97-00035  The following table shows the five variables that remained in the final regression model, along 
with the confidence level that each variable was significant. 
Variable  Confidence level 
Natural logarithm of county 
greater than 99.9% 
HMO market penetration 
Supplemental insurance  greater than 99.9% 
County percent urban  99.8% 
Disability  92.1% 
Race  91.3% 
9 
Beneficiary Awareness of Medicare HMOs  OEI-04-97-00035  APPENDIX B 
CONFIDENCE INTERVALS 
The following table shows point estimates and 95 percent confidence intervals for selected 
statistics, in the order that they appear in the report. 
Statistic  Point  95% 
estimate  confidence interval 
Percent of Medicare beneficiaries who said that 
36.4%  33.3% - 39.5% 
they did live in an area with Medicare HMOs 
Percent of beneficiaries who said they did not live 
7.6%  5.9% - 9.3% 
in an area with Medicare HMOs 
Percent of beneficiaries who said they did not 
know if they lived in an area with Medicare  56.0%  52.8% - 59.2% 
HMOs 
Of beneficiaries who lived in a zip code with one 
or more Medicare HMOs, percent who did not  53.5%  49.4% - 57.6% 
know about them 
Of beneficiaries who (1) lived in a zip code with 
one or more Medicare HMOs and (2) did not 
25.5%  20.2% - 30.8% 
know about them, percent who said they would be 
interested in joining an HMO 
10 
Beneficiary Awareness of Medicare HMOs  OEI-04-97-00035