THE HMO ACT TURNS 30 - few are expected to celebrate

(St. Paul, Minnesota) - In five days, the HMO Act turns 30. On December 29, 1973, Republican President Richard M. Nixon signed the Health Maintenance Organization Act of 1973 into law.

"Congress turned the entire American health care system on its head hoping the HMO could solve the budget problems they created with Medicare. It didn't work, but patients everywhere have suffered as a result," says Twila Brase, president of the Citizens' Council on Health Care (CCHC).

Medicare was enacted in 1965 and, to assure opponents that rationing would not occur, federal officials were prohibited from interfering with medical treatment decisions. Health care spending rose sharply after seniors began enrolling in 1966. By 1967, President Lyndon Johnson called for an investigation into rising medical costs. The HMO Act, authored by Senator Edward Kennedy (D-Mass), came on the heels of several hearings Sen. Kennedy held in 1971 regarding the "Health Care Crisis in America," and several more hearings on HMOs.

To secure financial stability of the virtually unproven HMO, the HMO Act:

  • provided $375 million for HMO development and subsidization of HMO premiums.
  • required private employers with 25 employees or more to offer HMOs.

"To make sure HMOs could handle the higher costs of the less healthy public sector, Congress pulled the healthy private sector in first," explains Brase.

After 30 years, Congress has not yet convinced most seniors to enroll in HMOs. Although many employees have no choice about entering a managed care plan, senior citizens can choose. Of the nearly 182 million managed care enrollees in 2002, only 5.3 million were senior citizens.

"Congress didn't want to do the dirty work of denying health care to seniors. They wanted HMOs to do it. But seniors look at what is happening to younger HMO enrollees and most of them say, 'no way,'" said Brase.

"As the new tax-free health savings accounts give patients more personal control over their health care dollars, we're likely to see a lot more people saying 'no way' as well," Brase adds.

FMI: TWILA BRASE'S ARTICLE ON HMO HISTORY (Re-published in the Congressional Record, 2/2001): /privacy/hmoart.php3

Media Contact:

Twila Brase, President
Phone: 651-646-8935 (office)