The Managed Care Backlash

The managed care backlash led many to predict the demise of health maintenance organizations (HMOs). This paper examines trends in HMO enrollment in all metropolitan communities from 1994 to 2000 to identify factors that led to diminishing enrollment in the backlash era and circumstances in which HMOs maintained or expanded their presence. The authors use a database constructed from a wide variety of sources that describe HMO penetration and other characteristics of all metropolitan statistical areas. The authors found the backlash is not evidenced in a large degree of consumer switching. However, HMOs were more likely to maintain their presence in areas with high-cost growth and with greater managed care experience. Medicaid HMO growth continued to expand rapidly, indicating the possibility of a two-tiered system in which low-income beneficiaries have less choice than the privately insured.