The Managed Care Backlash

Did Consumers Vote with Their Feet?

Fact Sheet

Enrollment in HMOs (health maintenance organizations) exploded during the early 1990s, fueled by employers and public policymakers hoping to control rising health care costs. (HMOs typically enforce tight cost controls.) However, by the late 1990s, initial consumer support for managed care had eroded; consumers expressed fear that needed care might be withheld, and many favored tighter government regulation. A RAND Corporation study examined whether consumers “voted with their feet” by leaving their HMO plans.

The table shows trends in HMO enrollments during 1994-1998 versus the “post-backlash” period of 1998-2001.

Trends in HMO Enrollment Pre- and Post-Backlash (in percentage)
All insured HMO Enrollment Change
1994 1998 2001 1994-1998 1998-2001
24 40 39 16 -1
Privately insured 31 48 45 17 -3
Medicare 10 18 18 8 <1
Medicaid 10 27 37 17 10
All insured (by region)
Northeast 26 48 45 22 -3
Midwest 22 32 31 10 -1
South 15 30 29 15 -1
West 37 53 57 16 4
NOTES: 1998-2001 is considered to be the post-backlash period. These results are population weighted. All numbers have been rounded.

  • Overall, for all insured consumers, there was only a 1 percent drop in HMO enrollment during the post-backlash period. There is evidence for two possible explanations:
  • Many consumers were more satisfied with their HMOs than had been thought.
  • Many HMOs relaxed their cost containment restrictions in order to avoid losing market share.
  • Privately insured patients were more likely than others to exit their HMOs.
  • Medicare HMO enrollment remained nearly steady; Medicaid enrollment increased significantly.
  • HMO enrollment grew even among the privately insured in areas with high health care cost increases.

This fact sheet is based on:

Marquis SM, Rogowski JA, and Escarce JJ, “The Managed Care Backlash: Did Consumers Vote With Their Feet?” Inquiry, Vol. 41, Winter 2004/2005, pp. 376-390.

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RB-9121 (2005)