Health Care System Evolution and HMO

In the context of poor countries, millions of lives have perished due to socio-economic conditions where health care is not readily made accessible to the low income class (Sholmo, White, Marmot, 1996: 1013). The health standards of a country often affect the social, economic well-being of its ordinary citizen. Often economic and social growth of a given society is directly dependent on the health of its constituents. In response, the American government with an ultimate desire for optimum well-being for its constituents sees the encountered problems of other countries as detrimental to the health of the nation.

The health care system and services in the United States has therefore faced dramatic changes over the years from one country doctor with little training to a complicated and sophisticated array of health providers and institutions. The societal changes attempts to provide finance and promote health into the US population as the public faced a cacophony of health problems from cholera, typhoid and smallpox brought about by poor living conditions. Public health programs evolved to promote sanitation through water purification, quarantine and hygiene measures in an effective way to reduce epidemics.

Medical science searched for the miracle cure that will eliminate prevalent diseases and came forth with the development of antibiotics and vaccines that significantly reduce acute diseases. Ample medical care is spent by the government for at least $ 1. 55 Trillion in 2002 alone according to the Human Development Report (2005). The huge spending has a 35% accounted solely for hospital services allocation where majority of bulk spending is determined. Hospitals get most of their capital from bond proceeds issued in behalf of the state, county and city finance in the tax-exempt bond markets.

Yet with the rapid growth of managed care plans and organizations, a dramatic change in the health provision was observed. Care plans in the form of Health Maintenance Organization and Preferred Provider Organizations (PPO) restrict provider choices by patients, limit services and bargain with provider networks to obtain lower prices (Cutler, McClellan, and Newhouse, 2000: 526). h Looking back to the classic health system endeavors revitalize the need to understand how the current system evolved as it is.

In the 1800’s, health care primarily consisted of a loose collection of individual services functioning independently, with little or no relationship to one another (Starr,1982:216). There were few hospitals whose main aim was to isolate sick people from the rest of society or to serve as a place where one went to die. As formalized training for doctors developed, the institutionalization of health care also advanced. Yet with poor living conditions, people were exposed to natural elements that vary with excessive heat or cold.

The lack of safety nets, such as health insurance in the past contributes to the health vulnerability of the people and in particular the urban poor. Most healthcare facilities were concentrated in the urban areas, and socio-economic barriers which include cost of healthcare, and the lack of culturally appropriate services, WHO (2003) were the contributing factors leading to an increasing health problem. Medical innovations soon corresponded with health care services that increased the number of hospitals.

Socio-economic events of the 20th century soon directed towards the financing of health care with health insurance plans such as the Blue Cross and Blue Shield. Insurance mechanisms were flaunted across the working population which grew rapidly during the WWII because all wages were frozen and health insurance became an important component of collective bargaining (Starr;15). Plans like the Blue Cross and Blue Shield soon guaranteed payment of hospital costs in an environment of limited technology and patient self-rationing which covered only hospital costs (Muney, 2003).

Physicians sought to keep coverage limited amidst fears that if third-party payers became intermediaries, they would eventually play a significant role in regulating professional fees. Thus, an increasing health care access gap began to develop between those who had either health insurance or wealth, and consequently could afford the cost of health care services, and those who did not. A new relationship soon began as a third party payer emerged as part of the health care system in the 1970’s (Suszkowski, 1986: 92).

A triangular relationship is established between the physician as the health care provider, the health care recipient and the third party payer. The physician professionally strives and is legally bound to act in the best interest of the patient and provide optimum service in order to be paid for the medical service rendered. The third party payer acts as an intermediary between the patient and the physician and is known as health maintenance organizations (HMO).

An HMO is an organized system of health care delivery for both hospital and physician services in which care delivery and financing functions are offered the organization bargaining (Rosenbaum, Silver and Wehr; 3). They provide “managed care” products to the enrolled members at a fixed prepaid fee and encourage lesser hospital admissions by providing preventive outpatient procedures. At first, physicians were hostile towards managed care services and worked towards banning the program in different states.

However when sky-high health care costs were sooner observed the government faced an increased the pressure to pass conventional insurance provisions to the working populace. The emergence of health maintenance organizations (HMO’s) was an answer to the “cash barrier” problem between the people needing services and the nation’s capacity to provide for them. A federally qualified HMO began as an alternative to conventional insurance that increased dramatically as government loan allocations were provided to federally approved Health Maintenance Organizations (Rosenbaum, Silver, Wehr; 1998 : p.

4). . HMO’s work to provide an effective cost control mechanism acting for a cash-strapped recipient. As third-party payers, they are able to establish an efficient cost control method through reduced medical fees for services with little or no effect on the quality of care (Cutler, McClellan, and Newhouse;546). With the degree of spending that the US allocates on health alone, it is clear how health maintenance organizations and the like evolved.

This was designed in order to limit the financial burdens of the cash strapped patient as the recipient of services. The rising cost of medical and professional service fees also heavily contributed to the pressures encountered by the government to establish guidelines that marked to provide a cost-effective product for the populace. At the same time, the capacity of the third-party payers in this instance the HMO to penalize and reward medical professions based on the quality of service ensures a medium of control.

By the 1980’s, managed care products and providers were begging for HMO’s to enter into agreements with them as more and more individuals and entities were provided with employer-sponsored health plans. With health care still categorized under a business oriented activity, there is still a need for legal theories that particularly studies on profit-seeking elements in order for the structure to proceed at the patient’s best interest. From the evolution of the US health care system, there is very little room for negative comparison to the contemporary services made available.

It has evolved from a provider-based system to a third party payer system that is designed and implemented to provide an alternative means for people to attain a standard health system. The health care system has therefore evolved in response to the different changes for the care-recipient; the care-provider and the institution and the financing institution and the government under which the system is functioning. It is therefore equally important to recognize that health insurance cannot be the central reason for the better health outcomes in the working sector.

Much evidence points to the social determinants of health—the circumstances in which people live and work—as explanation for social gradients in health according to Marmot and Wilkinson (2005). Thus despite the availability of HMO’s, the government still has to present a solution to the disappointing state of private healthcare that underscores the importance of social and economic inequality as a stumbling block.

Works Cited

Marmot M. , Wilkinson R. (2005). Social Determinants of Health. (2nd ed. ) London, England: Oxford.Muney, A. (2003). Health Inequality, Education, and Medical Innovation. (NBER Working Paper No. 9738), May 2003. Starr, Paul. (1982). The Social Transformation of American Medicine. New York: Basic Books. 215-16 Suszkowski, Geoffrey John. (1986). Health Maintenance Organizations: An Analysis of their Evolution, Developmental Obstacles, and Future Role in the Health Care Delivery System. Pace University. (PDF) Cutler, D. , McClellan, M. , and Newhouse, J. (2000) Price and Productivity in Managed Care Insurance.

(NBER Working Paper No. 667) (Journal of Economics) 526-48. Dor, A. , Sudano, J. , Baker, D. (2006). The Effect of Private Insurance on the Health of Older, Working Age Adults: Evidence from the Health and Retirement Study. Health Services Research 41, 759–787. World Health Organization. (2003) The World Health Report. Rosenbaum, Sara, Silver, Karen, Wehr, Elizabeth. (1998). An Evaluation of Contracts between Managed Care Organizations and Community Mental Health. Diane Publishing.

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