Health Maintenance Organisation (HMO) costs double in U.S.

The U.S. Health Care Financing Administration (HCFA) reports the costs of Health Maintenance Organisations (HMOs) are rising at a double-digit annual pace. The last time employers faced such inflation in health costs, it ignited a revolution in health care delivery, one that saw 60 percent of patients switch from traditional insurance to HMOs in the decade after 1988.

Or, as critics put it, goodbye doctor-patient relationships, hello HMO second-guessing.

Now, new changes could be coming from employers that would make patients painfully aware of the cost of modern medicine. Among them:

  • Workers could pay more of the premiums, lowering employers' costs without giving workers an increased say in their coverage.

  • Co-payments and deductibles could be raised, forcing workers to pay a greater share of doctor and hospital bills out of pocket.

  • Tiered drug benefits could lower the cost of generic drugs and steer patients away from higher-priced name versions.

  • Employers could use a defined contribution plan, paying a fixed amount toward a range of health-plan options with workers paying the difference for more expensive plans - a radical change that would cap the amount companies pay for benefits.

    The defined benefit option has at least two potential pluses, analysts believe. First, it would force the health care industry to answer to individuals, rather than corporations that pay the bills. Second, properly designed defined contribution plans would force health plans to compete on price and quality, and unhappy customers could simply take their business elsewhere.

    A Booz-Allen & Hamilton survey found all but a handful of companies queried, expected a switch to defined benefit plans in the future.

    Source/: Editorial, HMOs' Failures to Tame Costs Spurs Quick-Fix Replacements, USA Today, March 14, 2001

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