Prior and Current Costs in Capitated Health Plans

We compared the prior and current costs of persons age 65 and older enrolling in a Social/Health Maintenance Organization in each of four sites with samples of persons using standard Medicare benefits in each site. Analyses were adjusted for individual health differences using case mix scores. Costs were examined in the year before S/HMO enrollment or prior to the sampling of a person using regular Medicare services as well as costs during the study. Costs during the study are analyzed using a two-stage procedure where first the propensity to enroll in a S/HMO is modeled and then costs derived from either Medicare sources or shadow prices assigned to service units provided in a S/HMO are modeled. The costs for case mix groups with different health and functional characteristics varied significantly. Cost differences between case mix classes differed between the S/HMO and FFS populations.