HMOs' Rise Driven by Government,
By Twila Brase
March 29, 1999
Dissatisfaction with HMOs has led some to call for
increased regulation of the HMO industry. Government
officials express concern for patient protection and
access to health care. Yet government action did much
to encourage the spread of HMOs'and government action
continues to steer people into HMOs.
HMO Act of 1973
Unbeknownst to most, Congress has essentially mandated
managed care for everyone. In response to escalating
costs in the Medicaid and Medicare programs, Congress
looked to HMOs for assistance.
In 1973, it passed the HMO Act which offered government
subsidies to HMOs and gave nonlicensed HMO executives
the power to challenge the medical judgment of licensed
The Act also mandated that all businesses with more
than 25 employees offer HMOs as a health care option.
Until then, most employers, fearing increased costs
and utilization, had avoided HMOs.
States Force People Into Managed Care
During the early 1980's, Congress began allowing states,
through Medicaid Section 1115 waivers, to herd Medicaid
recipients against their will into managed care programs.
By June 1996, over 40 percent of Medicaid beneficiaries
were enrolled in managed care plans.
The Department of Health and Human Services (HHS)
touts the waivers as providing "states with the much-needed
flexibility to develop innovative solutions." That flexibility,
however, violates federal Medicaid law, which prohibits
limits on treatment or choice of doctor.
HMOs Gain Solid Ground
In 1995, Congress repealed the employer mandate, but
by then, HMOs had already gained a solid position in
the medical marketplace. According to the Health Resources
and Services Administration, the percentage of working
Americans with private insurance enrolled in managed
care rose from 29 percent in 1988 to over 50 percent
Who Benefits From HMOs?
By mandating managed care for some patient groups,
and by passing legislation allowing HMOs to deny care,
the government has assured maximum profit for HMOs,
with little risk. Public officials profit politically
by promising "free" health care. Managed care allows
politicians to promise health care without actually
guaranteeing access to it.
Americans are rightly concerned about managed care.
However, in public policy as in medicine, proper diagnosis
precedes proper treatment. Proposals to increase the
regulation of HMOs stem from an incorrect diagnosis.
Government- directed managed care is not the cure; individual
Twila Brase, RN, PHN, President of Citizens for
Choice in Health Care in St. Paul, Minnesota. This article
was originally published in the November/December 1998
issue of Intellectual Ammunition, published by
the Heartland Institute.