US healthcare: What was behind Managed Care Organizations? The whole story
In the previous blog about US healthcare development, we discussed how the US health insurance was born from the uterus of need around the time of WWI. We also highlighted the fact that paying for the patients as a third party was not very appealing to physicians, who constantly raised the issue of letting the US federal government take the upper hand in providing money for health insurance policies. It was about 1965 when their efforts succeeded in letting the US government sponsor health insurance only for the old and medically disabled people through Medicare and Medicaid laws. These two laws solved a huge cost problem that Americans were experiencing with their healthcare, but there were another two problems that needed solving.
What are the major three problems of any healthcare system?
Any healthcare system, and specifically for the US, has three major potential problems; access, cost, and quality. They are the three holes that should be patched if we want to run an effective and efficient healthcare. Practically, it goes without saying that it takes either a genius or a system without demographic or economic changes to sustain development without being bothered by any of these problems. From a historical point of view, the US government overcorrected the access problem for the Americans at the expense of both cost and quality.
How did the US government overcorrect healthcare's access problem?
First: The US government was the sole provider of some health related programs with only minor competition from the state government or the private sector. For example, it was paying for physicians training and the education of other healthcare workers. It provided money for research, development, hospital expansions. The best example to illustrate that was the establishment of the National Institute of Health in 1930 to support the biomedical research.
Second: The US government established some laws to allow more access to more categories of the American people under the umbrella of healthcare. One of which was the Social Security Act of 1935. By this Act, the federal government provided financial and other help to states for public health and welfare aid. All women and children were covered by this Act, together with covering healthcare expenses for children with disabilities.
Third: The US government established the Food, Drug, and Cosmetics Act in 1938, and modified it in 1962 with amendments that allowed assistance to various medical, dental, pharmacy, and nursing schools. It also allowed a place in the US budget for new terms like health planning and consumer protection.
All that was fine and would have led to a great positive change in the US healthcare strategies, but it is well known that "Change is the only constant" in our lives, and that's why reassessment is a big part of being a leader. It seemed that a cost problem was beginning to emerge in the 1960s, part of which was simply natural. It was caused by the growth in the population of the American people, which had led to more citizens above 65 years of age and more disabled persons, leading to more burdens on the existing Medicare and Medicaid based health system.
What else happened in the 60s to make the problem even uglier?
Simply, the government tried to involve more healthcare professionals like physicians and hospital administrators into the decision making positions of the proposed health care services in an attempt to keep the developments within the hands of its providers and not to repeat the previous mistake when the earlier versions of health insurance were so intimidating to the AMA, that physicians started a counter pressure to stop it.
For the first impression, it was a good idea, but still, physicians and other healthcare professionals were so much into their careers, and knew very little about management and prioritization, that their presence in such sensitive positions didn't provide much of the value that was expected from them.
For example, when the government tried to make programs dealing with the major lethal diseases in the US to contain the costs of healthcare for those diseases, the health professional mainly discussed research opportunities, training programs, and clinical resources to deal with those diseases, not necessarily other ways to prevent the occurrence of those diseases to start with. All that made the suggested programs fall far from their expected returns on costs. That was so clear with the 1965 Public Health Service Act that established nationwide medical programs for heart diseases, cancer, and stroke.
Another related example was in the 1966 Comprehensive Health Planning Act, when the US government wanted to create more regional programs for preventive services. Although the Act required that these programs include partnerships from local authorities as well a sample of patients on their board for better decisions, there was a bias towards putting most of the money on research. Also, there was unfair representation of the board members which made the utility of such programs unworthy of any more federal spending.
What was the solution for all those dilemmas?
It wasn't until 1973, when the US government realized that to solve the healthcare cost problems on a nationwide basis was too good to be true. Instead, there were opinions calling for a more localized bailout plan. So, Health Maintenance Organizations (HMOs) were developed, where every HMO was responsible for financing and delivery of comprehensive (including preventive and control services) healthcare to an affiliated population for a prepaid, fixed amount of money.
How are HMOs different?
It is a healthcare model in which health services are covered totally by a facility that may or may not be linked to the government, while the cost is being done by the accountants of of the organization. Management and quality are monitored through independent management teams. They have the advantage of focusing more on quality, hiring case managers, containing costs through a collaborative team environment. It seems like at last the US healthcare system has found its salvation from its cost problems.
Do you think so? Don't believe that. The US healthcare cost problem is far from over. I'll explain that in my future blogs. So, stay tuned ...
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