NCPA - National Center for Policy Analysis

Managed Care -- A Creation Of Congress

February 5, 2001

A lot of rage has been directed at managed care generally, and HMOs (Health Maintenance Organizations) specifically, in the ongoing debate over legislation to protect patients against abuses. However, the legislative history puts the responsibility and blame for HMOs squarely in the collective lap of Congress, says Twila Brase, a registered nurse and president of the Citizens' Council on Health Care.

The nation's health-care bill nearly doubled after the 1965 enactment of Medicare and Medicaid -- from $39 billion in 1965 to $75 billion in 1971. As a result, Congress held hearings on the out-of-control cost crisis, and in 1971 began to manage costs by restricting payments to doctors and hospitals for Medicare and Medicaid patient care.

  • Also in 1971, the Nixon Administration authorized $8.4 million for policy studies aimed at designing a national health insurance plan, and, without specific legislative authority, authorized $26 million for 110 HMO projects around the nation.
  • In 1973, Sen. Edward Kennedy's (D-Mass) HMO Act of 1973 was enacted, which forced employers with 25 employees or more to offer an HMO, and provided $375 million to HMOs to subsidize start-up costs and higher premiums in an effort to compete against traditional fee-for-service insurance policies.

The federal government also established the Center for Managed Care, which helped develop public-private partnerships between HMOs and state and federal governments. In particular, relationships have developed that give government officials access to millions of personal medical records from not only public sector, but also private sector patients.

Cost-containment at the point of service and effective empowerment of patients against restrictive managed care treatment decisions requires, not more regulation, but more patient control of health care dollars, says Brase.

Source: Twila Brase, R.N., P.H.N. (president, Citizens' Council on Health Care), "Blame Congress for HMOs," Ideas on Liberty, February 2000, Foundation for Economic Education, 30 South Broadway, Irvington-on-Hudson, N.Y. 10533, (914) 591-7230.


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