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 

HCFA’s 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-forservice 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 Administration’s (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. 

Beneficiary Awareness of Medicare HMOs 1 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 HCFA’s 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 President’s Council on Integrity and Efficiency. 

Beneficiary Awareness of Medicare HMOs 2 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 

with Medicare HMOs 

36 

Beneficiaries who said they did not live in an 

area with Medicare HMOs 

8 

Beneficiaries who said they did not know if 

they lived in an area with Medicare HMOs 

56 

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. Fortysix 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. Onefourth (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. 

Beneficiary Awareness of Medicare HMOs 3 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. 

Beneficiary Awareness of Medicare HMOs 4 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 

of HMOs 

Percent Who Did Not 

Know of HMOs 

Total 

HAD Medical Coverage in 

Addition to 

Medicare and Medicaid 

53 47 100 

NO Medical Coverage in 

Addition to 

Medicare and Medicaid 

24 76 100 

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 

Beneficiary Awareness of Medicare HMOs 5 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 

Knew 

Of HMOs 

Percent Who Did Not 

Know of HMOs 

Total 

Never Received Medicare 

Due to Disability 50 50 100 

Did Receive Medicare 

Due to Disability 31 69 100 

Beneficiary Knowledge 

by Race Category 

Category Percent Who Knew 

of HMOs 

Percent Who Did Not 

Know of HMOs 

Total 

White 49 51 100 

Non-White 30 70 100 

HCFA Study 

Results of our analysis are similar to those found by HCFA’s 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 

HCFA’s study cannot be made because definitions of some of the variables differed. 

3Health Care Financing Administration, Office of Strategic Planning, August 12, 1998 

Beneficiary Awareness of Medicare HMOs 6 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. 

Beneficiary Awareness of Medicare HMOs 7 OEI-04-97-00035 
APPENDIX A 

VARIABLES INCLUDED IN LOGISTIC REGRESSION ANALYSIS

Variable Description 

County HMO 

market penetration 

Percent of Medicare beneficiaries who were enrolled in Medicarecontracted HMOs at the time of our survey, by county 

County percent 

urban 

Percent of population in an “urban” area, by county (based on 1990 

census) 

Zip code percent 

urban 

Percent of population in an “urban” area, by zip code (based on 

1990 census) 

County metropolitan 

statistical area Metropolitan statistical area designation, by county 

County median 

income Median household income, by county (based on 1990 census) 

Zip code median 

income Median household income, by zip code (based on 1990 census) 

Age Beneficiary’s age at time of survey 

Gender Beneficiary’s gender 

Race Beneficiary’s race 

Disability Determines whether the beneficiary has ever received Medicare 

benefits because of disability 

Supplemental 

insurance 

Determines whether the beneficiary had supplemental insurance. If 

yes, was it Medicaid only, or did it include other insurance such as 

Medigap? (This variable came from our beneficiary survey.) 

Medicare payments Total Medicare payments for the beneficiary, for the twelve months 

up to the survey date 

Health status Health status score based on diagnosis mix in Medicare claims for 

the twelve months up to the survey date 

Beneficiary Awareness of Medicare HMOs 8 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 

HMO market penetration greater than 99.9% 

Supplemental insurance greater than 99.9% 

County percent urban 99.8% 

Disability 92.1% 

Race 91.3% 

Beneficiary Awareness of Medicare HMOs 9 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 

estimate 

95% 

confidence interval 

Percent of Medicare beneficiaries who said that 

they did live in an area with Medicare HMOs 36.4% 33.3% - 39.5% 

Percent of beneficiaries who said they did not live 

in an area with Medicare HMOs 7.6% 5.9% - 9.3% 

Percent of beneficiaries who said they did not 

know if they lived in an area with Medicare 

HMOs 

56.0% 52.8% - 59.2% 

Of beneficiaries who lived in a zip code with one 

or more Medicare HMOs, percent who did not 

know about them 

53.5% 49.4% - 57.6% 

Of beneficiaries who (1) lived in a zip code with 

one or more Medicare HMOs and (2) did not 

know about them, percent who said they would be 

interested in joining an HMO 

25.5% 20.2% - 30.8% 

Beneficiary Awareness of Medicare HMOs 10 OEI-04-97-00035