A Report from Families USA
September 1999

Rural Neglect: Medicare HMOs Ignore Rural Communities

Introduction Today about 16 percent of Medicare's 39 million beneficiaries belong to Health Maintenance Organizations (HMOs) through the Medicare+Choice Program.1 The share of the Medicare population enrolled in managed care has grown steadily since the early 1990s and is likely to continue growing. This growth, coupled with a belief that managed care can help contain health care costs, has encouraged policymakers to make managed care a cornerstone of Medicare reform proposals. The two leading Medicare reform proposals now under consideration-one identified with Medicare Commission co-chairs Senator John Breaux and Representative William Thomas and the other developed by President Clinton-both include provisions designed to encourage beneficiaries to switch to HMOs. The Breaux-Thomas proposal, in fact, depends on the existence of competing HMOs and makes the traditional Medicare program compete with those HMOs.

What effect would Medicare reform proposals that rely on HMOs have on beneficiaries who live in rural communities? To gauge the ability of Medicare managed care plans to serve rural beneficiaries, Families USA analyzed the presence of Medicare+Choice plans in rural counties in 1999.2 Using HMO contract information from the Health Care Financing Administration (HCFA), we calculated the percentage of rural beneficiaries nationally and in each state who have access to no HMOs, access to just one HMO, and access to two or more HMOs.

Our analysis found that, for most of the 9.2 million Medicare beneficiaries who live in rural areas, the growing reliance on Medicare HMOs is, at best, irrelevant: there is no Medicare HMO serving the county in which they live. Those rural beneficiaries who do have access to a Medicare HMO generally cannot realize the benefits of competition among plans: the majority have only one HMO available to them. The results show that, when it comes to health care for rural Americans, HMOs are not the answer.  

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