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What You—and Your Employer—Probably Don't Know About Your Health Plan
The History of HMOs
By Scott Holleran
The new year begins as employees
begin a process called open enrollment—when many employees
designate a health plan through their employer. Unfortunately,
most are forced to enroll in a managed care plan, i.e., an HMO
or PPO. That’s right: force actually lies at the core of today's
health care system.
From their beginnings, HMOs were designed—by Democrats and
Republicans—to eliminate individual health insurance. The
result is a vast network of health care collectives (HMOs, PPOs,
Point-of-Service plans) created by government that are destined
to do harm to individuals.
The individual was first discouraged from buying insurance in
1942 when employee health premiums were made tax deductible to
employers—not to individuals. Congress created Medicare in 1965,
making individual insurance for those over 65 obsolete.
Subsidized, unrestricted health care for seniors lead to an
unprecedented frenzy of spending by patients and doctors.
Costs went up, introducing an economic obstacle to individual
health insurance. As costs rose, those on the New Left,
including then freshman Sen. Ted Kennedy, argued that government
ought to pay for everyone’s health care and promoted the
idea of a health maintenance organization, a term coined by a
left-wing college professor.
President Nixon appeased the left and proposed the HMO Act,
which Congress passed in 1973. The law created new, supposedly
cheaper health coverage with millions of dollars to HMOs, which,
until then, constituted a small portion of the market. Kaiser
Permanente was the only major HMO in the country by 1969 and
most of its members were compelled to join through unions.
Combined with Medicare, the HMO Act eventually eliminated the
market for affordable individual health insurance.
The new managed care plans mushroomed with federal subsidies.
Employers perceived managed care as less expensive than
individual insurance and stopped offering a choice of plans,
making insurance more expensive for the individual. The
government had effectively instituted HMOs, at the insistence of
the left and the capitulation of conservatives and pragmatic
businessmen.
Nixon’s HMO Act was passed 25 years ago. Since then, the
individual has become a prisoner of the tax code. Covered by an
employer and herded into managed care, the individual patient is
powerless. Under managed care, if the patient gets sick, he or
she may wander the maze of managed
bureaucracy, be treated, or, languish in pain awaiting
treatment. The patient may also be refused treatment and die.
Premiums under managed care do not pay for an insured contract
for medical care decided between the patient and the
physician—premiums pay for the management of care, i.e., health
maintenance, by a third party.
Unrestricted free choice in medicine—health insurance chosen,
provided and paid for by the individual—has practically
vanished. A few indispensable provisions of the House GOP’s
recent health care proposal, crafted by prospective House
Speaker J. Dennis Hastert, (R, IL), offer renewed hope.
Hastert’s proposal offers every patient a choice to purchase
health insurance as an individual—neither through an employer
nor through government—by legalizing Medical Savings Accounts
(MSAs) for all Americans, (MSAs are currently restricted to a
small group of self employed, uninsured, small business people
and 390,000 Medicare recipients.)
The GOP proposes to make every patient eligible for MSAs, lift
restrictions, and grant full tax deductibility to the
self-employed for health insurance premiums.
MSA opponents, including Hillary Clinton and Kennedy, believe
MSAs will attract young and healthy patients and, therefore,
raise premiums for the remaining population. According to the
IRS and private health plans, the opposite is true: fully one
third of thousands of MSA enrollees were previously lacking any
health insurance and the median age for an MSA health insurance
policyholder is over 40.
The distinct lack of a free market in individual health
insurance, not a lack of regulations, lead to the domination of
managed care. The next Congress, possibly under Hastert’s
leadership, should grant 100 percent individual tax
deductibility and fully expand MSAs and it should do so
immediately. Alabama Sen. Richard Shelby, an MSA proponent,
ought to take the lead in proclaiming the provisions as a step
toward what America’s health care system needs most: health
insurance which preserves the right to choose—and pay for—one’s
own health care.
Scott Holleran ()
is a health care correspondent and commentator. Holleran was a
campaign aide and congressional assistant to House Labor, Health
and Human Services, and Education Appropriations Subcommittee
Chairman Rep. John Porter, (R, IL,). Holleran’s articles have
been published in the Wall Street Journal, Silicon
Valley Business Journal, Philadelphia Inquirer and
the Los Angeles Times.
This column was published in the Arizona Republic in
1999.
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