Why were HMOs formed? How has the relationship between the government and HMOs changed over the past 7 years?
A combination of legal, regulatory, and market forces have always driven change in managed health care. Beware. HMOs did NOT start in the 1980’s. The history of HMOs is long and full of insightful information about how insurance has evolved. Sometimes we have to look at where we been before we complain about the future.
Why were HMOs formed? How has the relationship between the government and HMOs changed over the past 7 years?
“The formation of the HMO plans reflected not consumers’ demanding coverage or nonphysician entrepreneurs seeking to establish a business but rather providers’ wanting to protect and enhance patient revenues.
HMOs first appeared in the 1920s and 1930s as collectives to offer groups of workers affordable health care insurance. They quickly became popular during the Great Depression with both workers and employers. Offering health insurance to workers as a part of compensation packages became attractive to employers. HMOs grew in popularity in post-war United States as the baby boom began.
Read more: HMO History & Information | eHow.com http://www.ehow.com/about_6578577_hmo-history-information.html#ixzz2MVyPwXdz
HMO’S were formed because the consumers demand of coverage were increasing and out of need to curb spiraling costs and they formed profits centers. Also, many businessmen did not want to deal with the lengthy administrative part of the healthcare so why not establish a healthcare gatekeeper.
The relationship between the government and HMO’s changed over the past 7 years because the rapid growth in managed care and the government efforts of getting involved has changed the relationship. There are different types of providers and the arrangements between hospitals and physicians have changed the competition which involves the competition of Hmo’s and PPO’s. Also, the government efforts to reduce the growing health care expenditures have caused the changes of the health care markets. Also, due to the competitive effects of regulatory changes by Health care financing administration have changed hmo over several years.
Health-Maintenance Organizations is a type of health insurance. They were formed to manage care better and to keep costs down. Some of the ways in which an HMO contains costs are to have patients pay some portion of the bill (deductible, premium, or copay), require the use of primary care providers for referrals (as gatekeepers), and provide a network of providers that the HMO contracts for better prices on. When patients see their in network providers, they pay less. All of these methods help to contain costs and manage the growing use of healthcare. The government has put in place many regulations to ensure that minimum benefits are offered and to regulate the providers as well as the insurance companies and set standards that these industries must abide by.
Sometimes it is difficult to start the discussion off with HMOs due to many reasons. However, many of you have included in your post that HMOs and the earlier versions were really focused on keeping the costs down and are not the same HMOs of today. They were established at least in part by consumer demand. For example, Group Health Cooperative of Puget Sound, legally structured to this day as a consumer cooperative, was organized by consumers. However, it is an exception, and the origins of individual HMOs are highly varied. For example:
- The Kaiser Foundation Health Plans and the Health Insurance Plan of Greater New York were formed at the behest of employers. In the case of Kaiser, the motivation was to provide medical care in an otherwise underserved area where the Kaiser construction company was building the Grand Cooley Dam.
- The Group Health Association in Washington, DC, was formed at the behest of the Home Owners Loan Cooperative, which sought to reduce the number of mortgage defaults.
- Many of the early independent practice association type of plans were formed by community physicians seeking to protect revenue sources in the face of competition from Kaiser and other staff or group model HMOs.
HMO has changed over the years and plays a major role in the healthcare industry. HMO advantages are low premiums and most of the doctors are usually in the network. Also, there are different Medicare plan used through Hmo or PPO. I believe with the HMO plan medicare medicine is a lot lower than the PPO plan as per a article I was reviewing below. Also, it appears not if one has Medicare coverage you have a choice of HMO or PPO service providers.
HMOs does have the advantage of lower premiums but more people are joining PPO for the flexibility and the option of choice. In this economy, why do you think people are willing to pay more for a PPO?
I think that people are willing to pay more for what they felt is quality health care. An article on the website insurance.com helps to explain some of the differences between the HMO and PPO. The article states ” PPO health insurance will cover some – but not all – of the cost of care administered by out-of-network providers. If you select a PPO, you will have low co-payments as long as you see in-network physicians. Another advantage of PPO insurance is that unlike an HMO, you do not need a primary care physician’s permission to see a specialist (as long as the specialist is in network).”
So if there is an ‘out-of-network’ specialist known for having great outcomes with his/her patients, then some one with PPO insurance could see this specialist without the hassall of getting referral from their primary. This flexibility means a lot because most people will pay the necessary charges if they have a serious health concern.
Many people are willing to pay higher costs for a PPO because they just provide more freedom to patiens, particularly when they need to see a specialist and know they are able to choose one of their choice. For example, the textbook states that “a PPO offered by a BC/BS plan provides a degree of network coverage even if the member does not go to a PPO-contracted provider” (Kongstvedt, p.23). So this is why PPO’s market better than HMO’s. The modern market presents people who enjoy variety and the freedom to choose from that variety. PPO offers that option for them. People are putting health high no the priority list and are willing to pay more to be able to have the flexibility of to see the specialist of your choice. You can have a primary care doctor in a PPO, but you do not have to. You can go to a specialist and get other services without seeing a primary care doctor first. People know there will be a differential for going outside of the network, but spending a little more to see the physician of preference is palatable since that is a very personal choice. I think many people do not like the confines of a limited group of providers, but if the network offering is large, then members feel better about having choices. I know that I prefer to have the flexibility to see which physician I would like to see, but have experienced where some of my physicians were not in my network. However, in two cases I switched and in the other I pay the differential, but I will be looking to switch that one as well. The crazy cost of healthcare does drive people to see the physicians listed as in-network; otherwise you end up with some really big medical bills for some basic services, much less the big ones. They are willing to pay more the PPO because it provides a better variety of doctors to choose from and they do not have to risk not being able to get the right doctor or specialist for the specific patient needs. Also, the many other healthcare services that they offer like more professional care and does not limit the patient care.
HMO’s were formed to protect funds from being spent on unnecessary care that could have been provided by a patients primary care physician. Often times patients were going to see specialist and insurance companies were being billed with outrageous charges. HMO created a “GateKeeper” to control if they patient really and truly needed to see a specialist by providing a referral to the patient in order to insure cost remained minimum in billing the insurance company. This method was suppose to help control the cost of future insurance premiums by managing health care visits.
But when we look at a hospital bill we have to realize that there are many organizations that benefit from your stay. The durable medical equipment companies, the pharma or drug companies, medical informatics (IT), staff, utility companies,etc. These services may not charge as much as they do in other countries—therefore, our bills can be inflated. Kaiser is a little different because they own the brick and mortar and the insurance. Just think about the cost of these services in other countries?
Most other countries charge less for the exact same service (with the same or better care and service)- how is that? In a book a just read it said that the United States has to incoorporate the costs of all the law suits, etc. in their price. There are pros and cons for everything but you are most likely not going to sue your hospital or physician in Germany as you will get nothing out of it. My aunt had a surgery 20 some years ago to remove her appendix. A year ago she had horrible pain in her lower abdomen and as she had the surgery for the appendix already so they tested for a lot of other stuff before they finally tested for the appendix again. As it turned out they didn’t remove the appendix the first time…I am sure she could have sued if she lived in the States. It wasn’t even a thought on her mind as it is not practice there…..
A big difference a saw in the bill I was talking about earlier were the charges per day for a hospital stay and the physician services. How come a Doctor charges 20 times as much for the same service here than they do in other countries?
In many countries the prices that these companies can charge is regulated by the government. At least in countries that have universal healthcare or a single payer system. The government bargains with those companies and sets the rates that they will pay for those services offered. Now if that company happens to be an international company like a drug company, they will then turn around and charge other countries like the US, where the government doesn’t bargain for deep discounts more, to make up for what they are losing from the other countries. That’s why Canadian drugs are so much cheaper than those purchased in the US. It’s been said that the US government should do the same for Medicare, the VA and Medicaid and we would save billions just on drug prices alone. But we love capitalism here and that doesn’t pass Congress, no matter how much money it would save these programs or the people in them.
It is amazing how the costs for health care have climbed so high that a person with a decent job needing individual insurance would not be able to pay for it. This is a social responsibility that we expect of our country’s citizens in order to take care of one’s own healthcare issues rather than having other people pay for them through taxes. However, you can see why people need to use Medicaid when low income jobs, without benefits, would make it impossible for them to afford decent insurance. The difference is that many other nations have a single payer system or like Japan, the government sets the prices. I personally think that if things were left to the market, it would be a “wild, wild west” type situation and many people wouldn’t be able to afford insurance even in group plans; more people would lose their insurance when they needed it most. There would be no way to appeal decisions and it would be a more corporate mindset instead of one geared towards healthcare. It was getting that way before prices starting getting to a point that people had to take a step back
Disadvantages of HMO, when compared to a traditional health insurance policy, include the requirement for the patient to abandon his/her previous primary care provider and being assigned to a new one approved by the HMO. This may not work in favor of the patient if he/she was comfortable with the previous physician. Another disadvantage of the HMO is the need for a referral in order to see a specialist. This can be problematic and difficult to obtain “if the doctor is more interested in the bottom line and less in the welfare of the patient.” (Wisegeek)
Medicaid HMOs vary from state to state. It is generally state that dicates the services for Medicaid and many states are moving towards an HMO plan to reduce the cost. On the other hand, physicians and physician practice groups are looking at the payment and would rather not accept to help with the insurance payer mix than accept and lose cash flow. It’s difficult but each state and physician practice has it own reasons to why or why not accept an insurance policy.
Managed care integrates the following components into its overall patient-care philosophy: wellness and prevention, primary-care orientation, and utilization management. Select one component, and provide an example.
Prevention plays an important role in managed care because providing effective preventive options could help reduce the likeness of costly medical treatments. The patient’s overall health also benefits from having access to preventive measures such as immunizations, health screenings, and patient education. Prevention is a win-win component because all stakeholders could benefit from having a healthier community.
Here is a good study that talks about the cost effectiveness of preventive services:
Prevention and wellness are components of the Affordable Care Act which makes prevention affordable for all Americans through elimination of cost sharing or preventive service, Medicare services for seniors, grants for chronic disease, established the National Preventative Strategy, establish wellness programs for small employers, and provide resource to the States to promote wellness and prevention. ACA is composed of 17 federal agencies and some executive agencies at the federal level coordination and leadership. There are seven priorities under this group which are: tobacco free living, preventing drug abuse and excessive alcohol use, healthy eating, active living, injury and violence free living, reproductive and sexual health, and mental and emotional well-being.