The Health Maintenance Organization in the United States Health Care Sector
Abstract
Health care is an important consideration that affects every person. Good health
enables us to work and to play and to live our lives in comfort and ease. However, the
economics of health care are a serious consideration in the face of skyrocketing costs and significant trends towards managed care. This report will present a broad overview of the health sector in the United States, focusing on the health maintenance organization (HMO) and some of the factors that have contributed to it's success.
There are two basic types of health care systems- socialized and decentralized.
The United States has taken the second approach, keeping health care largely in the
private sector. Physicians, nurses and other medical practitioners have typically worked
on a fee-for-service basis. However, medical costs increased such that fewer U.S. citizens were able to afford health care, spurring the HMO Act of 1973, enacted by the Nixon Administration. This served to establish the health maintenance organization, HMO, as a legitimate, government-supported alternative to the standard health care delivery system.
An HMO provides, on a prepaid basis, hospital and physician services which are either
contracted out or owned by the HMO company.
The HMO Act was written to free HMOs from restrictive state laws. It also
provided loans and grants in order to foster HMO growth and development. HMOs had
the potential to provide quality care at controlled costs, and to provide care in rural areas.
The HMO Act has been amended several times since it's origina11973 passage in order to
lift further regulations and impediments hampering their competition in the marketplace.
Today, HMOs have become a significant portion of the health care sector. As of 1995,
there were 630 HMOs servicing nearly 60 million members. This accounts for over 20
percent of the nation's population.
The success of the HMO has been extensively studied. Several studies are
presented in this report, all of which have concluded that HMOs have been able to cut
costs from 10 to 40 percent. These savings are largely the result of HMO management
techniques, which create incentives for lower utilization rates of hospital beds, reduction
of unnecessary procedures and more efficient practices.
One lingering concern of HMOs is the quality of care that may be affected by
aggressive cost cutting strategies. This report also examines several of the cases that have
studied this matter. They have concluded that patients in an HMO plan experience the
same levels of physiologic health as patients in a fee-for-service plan. This indicates that
the quality of care from an HMO is comparable to that of fee-for-service.
HMOs must market themselves in a competitive market. They recognize that
providing quality and customer satisfaction will lead to subsequent word-of-mouth of a
solid reputation, which is their most effective marketing tool. Their first priority of course
is providing quality care which means having quality physicians. HMOs utilize stringent
requirements during the application process and have been very selective. HMOs maintain
customer satisfaction by spending resources on customer relations representatives and
prompt handing of problems and complaints.
HMOs have experienced unprecedented success in metropolitan markets, with
approximately 90% of enrollees coming from such areas. In order to understand this
success, the metropolitan cities of Chicago, Detroit and Philadelphia are studied. The
demographics, populations changes, income, geographic distnbution and health care
resources are examined for each area.
Medicare and Medicaid HMOs have become a significant portion of the HMO
community. Utilized for their cost-cutting advantages, an increasing percentage of the
two programs have become enrolled in HMOs.
Finally, although HMOs have undoubtedly been successful in their original task of
controlling costs while providing quality care, health care costs continue to increase
unabated. This was the source for the debate in health care reform of the mid 1990s.
However, the Clinton Administration's proposed Health Security Act of 1993 did not
succeed. As the costs of medical care continue to increase, and less are able to afford
health care, it is inevitable that HMOs will continue to play a more prominent role of
shaping the health care sector in this country, as well as to shape health care policy of the
future.
Collections
Related items
Showing items related by title, author, creator and subject.
-
Affordable Health Care and Healthy Communities: The Importance of Community Health Center in Light of the Movement Toward Health care Reform
Lee, Heain (2009)In a traditional sense, while the Community Health Centers (CHCs) focus primarily on serving people without insurance, anyone is welcome to go to a CHC. As the U.S. as a nation is struggling to figure out the first best ... -
The Future of the Kalamazoo County Health Status: An analysis of the Past, the Medical Care . Market, The History of Health Care, and Health Reform in the United States
LoGrasso, Salvatore (2010)The focus of the research study was to examine the health care system, specifically how it pertains to the health status of Kalamazoo County. Kalamazoo County has a high ranking in quality of care, but the ranking drops ... -
Disaster Behavioral Health : Public Health’s Role in Providing Mental Health Services in Response to Mass Trauma
Schmidt, Ashley (2017)Because the potential of exposure to acts of mass violence and terrorism is increasing around the globe, disaster behavioral health has become an essential component of emergency preparedness. Disaster behavioral health ...