Health Maintenance Organizations: An Economic Response to the Medical Marketplace

Abstract

Health maintenance organizations first emerged in the 1920's but they "came of age" in the 1970's and 1980's. The medical marketplace in America altered in such a way as to accommodate the managed care systems of HMOs. Among all health care providers HMOs responded most appropriately to the pressures of the market and so they could thrive in the new market situation. Providers and purchasers both have resisted the changes of cost containment and utilization management. Providers fear the loss of private practice autonomy and purchasers are simply wary of an unfamiliar health care setting. HMOs have grown consistently in the last 10-20 years as Americans have become accustomed to the philosophy of managed care. The continuance of health care costs assures that the market pressures that first allowed HMOs to thrive will persist, and the increased popularity of HMOs secures their position in the health care market for the future.