HEALTH MAINTENANCE ORGANIZATIONS (HMOS)
Health Maintenance Organizations (HMOs) in the United States have their roots in the first decades of the twentieth century. In the early 1900s millions of Americans belonged to fraternal orders and mutual benefit societies which provided prepaid medical care to their members. Many large companies, particularly those where injuries were commonplace such as railroads, created medical departments to care for their workers.
One of the first true HMOs was established by an agreement between the employees of the Los Angeles Department of Water and Power and practice of two doctors, Donald Ross and H. Clifford Loos. This agreement exhibited the basic traits that came to distinguish HMOs. The employees paid the doctors set fees, regardless of the state of their health. In return for these payments, the doctors provided whatever medical care was necessary for the employees or their families. This was as compared to traditional fee-for-service health care, in which a patient pays no money to a doctor unless he goes in to visit, but then has to pay that doctor for the cost of their particular treatment. In essence, the employees who joined the Ross-Loos plan were agreeing to pay smaller fees for health care that they might never need, rather than risk needing to pay a large fee, a fee which conventional health insurance might not cover entirely, if they became seriously ill. In return, Ross and Loos received a solid base of patients and a steady income.
In 1938, Henry J. Kaiser (1882–1967) established an HMO for workers at his shipyard. This plan, originally known simply as Dr. Garfield and Associates, was opened to the general public after World War II (1939–1945). Renamed Kaiser Permanente in 1955, it became the first large, national HMO. At this time, there was a widespread feeling among both doctors and the general public that arrangements such as Ross-Loos and Kaiser Permanente led to inferior care, and fee-for-service care and traditional health insurance continued to dominate the U.S. health care system.
All of this began to change in the 1970s. By this time, the cost of health care had risen to the point that it was becoming difficult for some to afford. It was also placing a strain on the federal government's new Medicaire and Medicaid programs. Many began touting systems such as Ross-Loos and Kaiser Permanente as a way to control medical costs and ensure that Americans received adequate care. It was at this time that the term HMO came into use to describe such managed care systems. In 1973 Congress passed the Health Maintenance Organization Act, which removed many legal barriers to the development of HMOs, leading to the formation of more than 200 HMOs by the end of the decade.
HMOs remained a minor part of the U.S. health care system at the beginning of the 1980s. Only four percent of the U.S. population belonged to an HMO, approximately half of which were in Kaiser Permanente. As the cost of health care in the United States, already the highest in the world, continued to rise during the decade, Americans began joining HMOs in large numbers. By 1995 three-quarters of all doctors were providing service as part of a managed care plan, and nearly three-quarters of all working Americans were members of such a plan.
As HMOs rose to dominate the U.S. health care system, attention turned from their supposed benefits to their perceived flaws. HMOs gave patients little choice over which doctors they could see, a fact that made many uncomfortable. New types of managed care, known as Preferred Provider Organizations (PPOs) and Point of Service (POS) plans became increasingly popular as systems which provided many of the cost-reducing benefits of HMOs while leaving members with some options as to what doctors to see.
Yet other problems, however, remained. HMOs and other forms of managed care generally had guidelines and standards of treatment that they expected participating physicians to follow. Some patients feared, and some doctors complained, that these guidelines were more concerned with keeping HMO costs low than with ensuring patients received the best possible treatment. And while HMOs were undoubtedly less expensive for many Americans than more traditional types of insurance, they remained too expensive for most to join except as part of a plan sponsored by their employer. Smaller businesses, their employees, and the self-employed remained largely unable to join HMOs.
