Some of us have been around long enough to remember the promise of the HMO. With tons of government startup money as a result of the HMO Act of 1973, HMOs would gradually grow across the country and help to solve the health cost problem by providing quality, coordinated health care and by introducing new financial incentives for health care providers. HMOs were not new back then, but the concept was new to most Americans outside of California and a few other areas. And it was new to most physicians many of whom vigorously opposed HMOs or who tried to organize their own without actually changing the way health care was practiced.
The law forced employers to offer the HMO option, but many embraced the concept as their health cost salvation. Health maintenance and managed care were the answer. The problem was that outside the well-run, established plans like Kaiser, it didn’t work. Eventually patients, providers and employers revolted. Patients didn’t like the inability to see any doctor of choice and claims abounded that the incentives caused skimping on care. One woman even wrote a book, “The HMO Killed My Daughter.” The value of the HMO as originally conceived was watered down and eventually evaporated.
Why the history lesson? Because it is a good example of how political hype can go bad. Today we are putting our bets on the success of Accountable Care Organizations (ACOs). We hear all the glowing reports as if they have actually operated long enough or enroll a number of people to have an impact. ACOs are not HMOs of course, for one, patients are not limited to using ACO doctors which is good for patients, but not so good for fully coordinating ones health care.
The point is there is no success to report on ACOs. It will take years before we can evaluate any lasting results, good or bad. The goal is higher quality health care with quantifiable results plus lower costs. Despite the propagandizing claims of success, only time will tell.
FALL FROM GRACE
None of these varying forms saved HMOs from the backlash that began in the mid-1990s. Patients complained about services denied and referrals refused, but the disgruntlement actually started among physicians. Most doctors working under HMOs, with the exception of the integrated-delivery and network models, still preferred the traditional practice model (choice of provider, choice of treatment, fee-for-service payment), but that model had become too costly for many employer groups. Feeling coerced by market forces, doctors complained to their patients.
Dissatisfaction was strongest among people not in HMOs by choice.
As for patients, many of them were forced into HMOs by their employers, who gave them no choice, little explanation, and none of the financial benefit. Research showed that dissatisfaction was strongest among people in HMOs not by choice. Research also showed that the most satisfied patients and doctors in California were in Kaiser Permanente, presumably in part because they were all there because they wanted to be. The for-profit carrier-based HMOs came in for a disproportionate share of criticism both because their cost-saving efforts were ascribed to profit-seeking, rather than consumer benefit, and because they were mainly perceived as imposing limits on care, rather than organizing and delivering care in better ways.
In response to the backlash, carrier-based HMOs morphed into practically all-inclusive networks of unaffiliated doctors, so that the employees who were not members by choice could still have insured access to the doctor of their choice. This weakened the HMOs’ ability to control quality and expenditures. The carriers also offered “preferred provider organizations,” or PPOs, which gave employees incentives to go to contracting doctors—who in turn had an incentive to accept discounted fee schedules. Not medical care organizations at all, PPOs are discounted fee-for-service systems, close to the traditional model. But they are very flexible vehicles. They can be set up quickly, without actually changing the delivery of medical care. They can be used by employers who prefer to self-insure, or by insurance companies that bear risk. Their only problem is that they can’t do much to moderate the growth in health expenditures. Yet PPOs, whose market share nationally was 28 percent in 1996, grew to 55 percent of the market by 2004, by which time the HMO share was down to 25 percent (from 31 percent in 1996).
While complaining about the rapid increase in health expenditures, employers have remained, in practice, committed to fee-for-service and unorganized medical care delivery. Most offer only PPOs or carrier-based HMOs with wide networks. Those who do offer delivery-system-based HMOs as a choice also offer PPOs and pay a flat 80 percent to 100 percent of the premium of either. With employers effectively willing to pay more for fee-for-service and PPOs, providers of care see no reward for organizing efficient delivery systems. Employers do not understand medical organization. If they did, they would not choose insurance policies that attack efficient forms of delivery.
The Marshfield Clinic and Security Health Plan suffered in terms of payment from government programs as a result of their own success in controlling costs. As Coombs recounts: “Reimbursement from the state and federal [Medicaid and Medicare] contracts were based on a percentage of the average fee-for-service costs for serving beneficiaries. Local charges in central Wisconsin were unusually low because of the influence of the cost-efficient clinic, so GMCHP’s Medicaid reimbursements were a great deal lower than what HMOs in two of Wisconsin’s urban counties received a few years later.”
via emThe Rise and Fall of HMOsem shows how a worthy idea went wrong – CommonWealth Magazine.
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