Rationing or rationalizing children's medical care: Comparison of a Medicaid HMO with fee-for-service care

Objectives. This paper examines how medical care obtained by children enrolled in a Medicaid health maintenance organization (HMO) differs from that obtained by similar children who receive care from fee-for-service Medicaid providers. Methods. In a randomized trial, some Medicaid households were assigned to remain in a traditional fee-for-service arrangement and others were randomly selected to join a Medicaid prepaid plan (an HMO). Participating households recorded data on children's health status and use of medical care. Results. The prepaid plan members and the fee-for-service recipients received equivalent numbers of checkup visits, but the children in the prepaid plan made significantly fewer acute care visits. This plan appeared to target its services to children with the greatest health care needs. However, the content of health visits in the two systems did not differ, nor did prepaid and fee-for-service enrollees use the emergency room differently. Conclusions. It is possible to design a Medicaid HMO that achieves financial savings without reducing services to the most vulnerable patients. However, these findings alone do not provide a basis for widespread policy change in the direction of Medicaid HMOs. Further research is needed to establish whether the children treated in the HMO differed in health outcomes from those treated by fee-for-service care.