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At its start, in 1966, Medicare cost $3 billion. The House Ways and Means Committee estimated that Medicare would cost only about $ 12 billion by 1990 (a figure that included an allowance for inflation). This was a supposedly "conservative" estimate. But in 1990 Medicare actually cost $107 billion.
federal legislation requiring employers with traditional health plans to also provide an HMO to its employees. The act also makes it mandatory for employers to contribute as much to the HMO as they did to their regular plan. The requirement that employers offer an HMO alternative was repealed in 1993. In 1988, the act was amended so that the employer gained greater flexibility in determining its HMO contributions
Only Kaiser Permanente was an HMO in 1969
Kaiser Permanente is a not-for-profit integrated health care organization based in Oakland, California that serves as an umbrella for a federation of for-profit medical groups. The organization was founded in 1945 by industrialist Henry J. Kaiser and physician Sidney R. Garfield.
Perhaps the best introduction to the Kaiser HMO and Kaiser Permanente Medical Care Plan is the summary by Mr. Edgar Kaiser that the less Kaiser does for patients the more money it makes. To get the full context one can go to the University of Virginia and review the presentation Mr. Edgar Kaiser (then Kaiser CEO) made to President Nixon through Mr. Erlichman – the less we do the more we earn. This convinced President Nixon to go forward with the HMO Act of 1973 with Kaiser as the template. The conversation is recorded below within the Nixon Whitehouse Tapes.
John D. Ehrlichman: "On the … on the health business …"
President Nixon: "Yeah."
Ehrlichman: "… we have now narrowed down the vice president's problems on this thing to one issue and that is whether we should include these health maintenance organizations like Edgar Kaiser's Permanente thing. The vice president just cannot see it. We tried 15 ways from Friday to explain it to him and then help him to understand it. He finally says, 'Well, I don't think they'll work, but if the President thinks it's a good idea, I'll support him a hundred percent.'"
President Nixon: "Well, what's … what's the judgment?"
Ehrlichman: "Well, everybody else's judgment very strongly is that we go with it."
President Nixon: "All right."
Ehrlichman: "And, uh, uh, he's the one holdout that we have in the whole office."
President Nixon: "Say that I … I … I'd tell him I have doubts about it, but I think that it's, uh, now let me ask you, now you give me your judgment. You know I'm not to keen on any of these damn medical programs."
Ehrlichman: "This, uh, let me, let me tell you how I am …"
President Nixon: [Unclear.]
Ehrlichman: "This … this is a …"
President Nixon: "I don't [unclear] …"
Ehrlichman: "… private enterprise one."
President Nixon: "Well, that appeals to me."
Ehrlichman: "Edgar Kaiser is running his Permanente deal for profit. And the reason that he can … the reason he can do it … I had Edgar Kaiser come in … talk to me about this and I went into it in some depth. All the incentives are toward less medical care, because …"
President Nixon: [Unclear.]
Ehrlichman: "… the less care they give them, the more money they make."
President Nixon: "Fine." [Unclear.]
Ehrlichman: [Unclear] "… and the incentives run the right way."
President Nixon: "Not bad."
In the 1970's, doctors where strong armed into joining with the HMO plans by being told that the insurance company would get their own doctors and take all your current patients away. Since a great many of people now were on HMO due to their work, there was reason for doctors to be concerned. Doctors joined so they would not lose their patients out of fear the insurance company would ruin their practice. The Insurance company would add more and more rules each time the doctor's contract was to be renewed, and since the majority of the patients had HMO plans they accepted the conditions. If the doctor refused the new terms they were at risk for losing their patients as well as their income all at once, so they agreed to see more patients, to confidentiality agreements, and for more services requiring pre-approvals.
We don’t ration care Unlike citizens in the U.K. and Canada, we don’t have to wait weeks for elective surgery or an MRI. But when researchers from the Johns Hopkins Bloomberg School of Public Health looked at the 15 procedures and tests that account for the majority of waiting lists in other countries, they found that they amounted to just 3 percent of costs in the United States, not nearly enough to explain the huge difference in spending. Malpractice is the culprit Doctors say their worries about lawsuits drive them to order costly tests and procedures that their patients do not actually need. Malpractice reform will help save money, but not as much as some people believe. The Congressional Budget Office estimates that while tort reforms could lower malpractice-insurance premiums for physicians by as much as 25 to 30 percent, the overall savings to our health care system would be a minuscule one-half percent. • Inefficient insurance companies are to blame We devote nearly a third of our health care dollars to administrative costs—paper pushing, in effect. (Canada’s single-payer system, by contrast, is a model of efficiency, spending only about 16 percent of its health care dollars on administrative overhead.) If we could be as efficient as Canada, we could save $360 billion each year. That’s a lot of money, but it’s only about one seventh of our total health care spending.
Many health care corporations, including insurers, hospital networks and large medical groups, have posted significant earnings gains in recent years. WellPoint Health Networks Inc. of Thousand Oaks, which Indiana's Anthem Inc. is trying to buy to create the country's largest health plan, reported a 34 percent increase in earnings for the second quarter compared with the same period in 2003. Nonprofit Sutter Health, which has 26 hospitals in Northern California, saw its income increase nearly 64 percent from 2002 to 2003.
New medical technologies -- everything from faster CT scans and drug- coated stents to targeted chemotherapies -- may be responsible for as much as 50 percent of U.S. medical cost growth, according to some health economists.
Read more: www.sfgate.com.../c/a/2004/10/11/MNGII96CVP1.DTL#ixzz0LYtGdmS3
Read more: www.sfgate.com.../c/a/2004/10/11/MNGII96CVP1.DTL#ixzz0LYtA9oWB
Drugs represent the fastest growing part of the health care bill, with Americans paying the world's highest prices for medication. While the industry says it needs to charge high prices to finance research and development, the largest pharmaceutical companies in 2002 spent 14 percent of their revenues on research and development while devoting 31 percent to marketing and administration Read more: www.sfgate.com.../c/a/2004/10/11/MNGII96CVP1.DTL#ixzz0LYsw6LTA
Rapid technological advances have occurred repeatedly since the Industrial Revolution—in agriculture, steam engines, railroads, telephones, electricity, automobiles, radio, television, and, most recently, computers and telecommunication. The other two features seem unique to medicine. It is true that spending initially increased after nonmedical technical advances, but the fraction of national income spent did not increase dramatically after the initial phase of widespread acceptance. On the contrary, technological development lowered cost, so that the fraction of national income spent on food, transportation, communication, and much more has gone down, releasing resources to produce new products or services. Similarly, there seems no counterpart in these other areas to the rising dissatisfaction with the delivery of medical care.