Due to vast implications of private group insurance companies such as Kaiser Permanente in providing complete health insurance on lifetime medical services, President Nixon started to consider lowering the funds related to healthcare. The term “health maintenance organizations or HMOs” were coined by Paul M. Ellwood Jr, who studied the structure in order to lower the medical costs and increased health consciousness by gradually replacing the fee for service program with prepaid comprehensive medical care. His vision rested on the concept that a maintained good health will lead to meeting the objective of proper healthcare in prepaid scenario. He defined a stable working plan for this project by insisting that the government should fund Medicare and Medicaid insurances. The federal money collected will lay foundation for the prepaid HMO plans which were earlier rebuked due to distrust and inefficiency during the Depression. Few people still endorsed them in late 1960s.
The competition between private insurers and national insurance plans such as Medicaid and Medicare paved a way to health maintenance organizations that in the meantime became efficient enough to run comprehensive health care. President Nixon argued in 1971 to allocate more grants and loans for the HMOs and gradually the strength rose to 1,700 by 1976. Senator Ted Kennedy despite opposition from AMA for HMOs fought for new goals which were not included earlier. The communities with poor health status were now eligible for enrollment in HMOs. Year 1972 amendments to the HMO bill ensured these changes and Nixon passed grant of $3.2 million to the project.
The Rise of Managed CareIn 1976 due to rise in inflation and unemployment, the focus of then President Ford shifted to economy. Following him, President Jimmy Carter also backed out on his promises to give health care plan a priority to focus on economy due to persistent conditions of inflation. Mental illnesses back then were not properly discussed and few medical services were directed under managed care.
Jimmy Carter proposed commission on mental health and deeply rooted causes behind its proper treatment were studied and an act is passed in 1980 providing people with chronic and severe mental conditions proper treatment. However, this act was repealed once Ronald Reagan occupied the Oval office. Ronald Reagan criticized the flowing of federal funding into the health care system and shifted responsibility to the trade. Congress curtailed most of the federal funding to the Medicaid and Medicare. For a medical treatment, the patients were required to get recommendation and the medical services came at prepaid plans. This impacted HMOs too where medical costs were further constrained due to choice of physicians. The in-network physicians were participating with pre-determined fee plan and the medical treatments were planned with use of drugs and services that were provided on consolidated fees. The physicians who kept their fees under the plans were also provided incentives and otherwise threatened being delisted from national insurance program.
Subsequently, there was stress on regulation of HMOs to cater non-discriminatory services to the patients who require out-network medical services because of nature of their diagnosis and lifestyle. More varied versions of the insurance coverage like PPO or POS plan came up with provided better managed care to the participants with freedom to choose physicians and services.