Recent Republican health care proposals to expand medical savings accounts to every American and grant immediate, full tax deductibility of health insurance premiums to individuals are a step in the right direction.

They imply, properly, that the solution to the HMO backlash lies in patient power. The true horror of HMOs lies in their origins. HMOs were designed by Democrats and Republicans to eliminate individual health insurance.

The proliferation of HMOs has practically eliminated individual health care. The individual was first discouraged from buying insurance in 1942 when employee health premiums were made tax-deductible to employers. Congress created Medicare in 1965, pushing seniors into health care through government and making individual insurance for those over 65 obsolete. Subsidized, unrestricted health care for seniors led to an unprecedented frenzy of spending by patients and doctors.

Costs went up, introducing an economic obstacle to individual health insurance. As costs rose, those on the New Left, including then-freshman Sen. Ted Kennedy, argued that government ought to pay for everyone's health care and promoted the idea of a health maintenance organization, a term coined by a left-wing college professor. President Nixon, who had already embraced wage and price controls, was eager to appease the left and proposed the HMO Act, which Congress passed in 1973.

The law created new, supposedly cheaper health coverage with millions of dollars in grants and subsidies to HMOs, which until then constituted a small portion of the market. Kaiser Permanente was the only major HMO in the country by 1969 and most of its members were compelled to join through unions. Combined with Medicare, the HMO Act eventually eliminated the market for affordable individual health insurance.

The new government-created managed care plans mushroomed with the federal subsidies. Employers perceived managed care as less expensive than individual insurance policies and stopped offering a choice of plans, making insurance even more expensive for the individual. HMOs' domination of the health care industry had effectively been subsidized into existence.

Nixon's HMO Act was passed 25 years ago. Since then, the individual has become a prisoner of the tax code. Covered by an employer and herded into an annual process called "open enrollment" in which the employee has no choice among health plans, the individual patient is lost in today's health care economy.

Under managed care, if the patient gets sick, he or she may wander the maze of managed bureaucracy, be treated, or languish in pain awaiting treatment. The patient may also be refused treatment and die.


For reprint and licensing requests for this article, CLICK HERE.