EveryBody's Guide to the Law

HEALTH MAINTENANCE ORGANIZATIONS (HMOS)
That medicine has turned into a big business is demonstrated by the proliferation of health
maintenance organizations (HMOs) in the last fifteen years or so. Employers like HMOs
because they let them provide health care benefits to their employees at a reduced rate. Seniors
in some parts of the country like Medicare HMOs because they offer some important services
and benefits that Medicare does not provide—particularly a prescription drug benefit
(although there may be an annual dollar limit as to how much the HMO will pay out for prescription
drugs). However, HMOs do require sacrifices of care you receive from the fee-for-service
methods of traditional doctors.
HMOs make up for their lower fees by dealing in volume business. The typical doctor is
given about five to seven minutes with a patient. In this short time, the doctor must take an
oral history of the patient’s illness or disease, conduct a physical examination as needed, make
a diagnosis, and prescribe an appropriate remedy, whether that be prescription drugs or something
as simple as, say, bed rest for a week.
Although HMOs offer prescription drug benefits (you will generally have a copay, though),
the doctor usually is limited to prescribing drugs on the approved “formulary” drug list. Instead
of prescribing the latest, most effective drugs, the doctor must generally stick to drugs on the
approved “formulary” drug list. The formulary drug list usually contains drugs that are lower in
cost, usually have been around for some years, are available in generic form, and may not be as
effective as the newer drugs. If a patient wants a drug that is not on the formulary list, he or
she will have to pay a higher copay to make up the difference.
But all is not well with HMOs. In the late 1990s and early 2000s, a number of HMOs either
went out of business completely or pulled out of certain unprofitable states. Some HMOs are
increasing the premiums paid by the HMO member to keep a sufficiently profitable margin.
For example, Medicare HMOs for seniors have premiums as high as $179 a month and have a
limit of just $500 a year for medications.
If you are covered by an HMO, you usually must deal with a doctor who is part of the HMO
plan. If you are a new HMO subscriber, your selection of doctors is limited greatly. Chances
are that the family doctor whom you’ve been seeing for years is not a member of your new
HMO, so you’ll have to start from zero.
Doctors who are part of an HMO plan are strongly encouraged to keep costs low, and typically
receive bonuses from the HMO at the end of the year for keeping costs down. Unfortunately,
this is often at the patient’s expense of getting high quality medical care. To control
costs, the HMO doctor may not order tests that a reasonable doctor would order to obtain or
confirm a diagnosis. Additionally, HMO doctors may be encouraged not to send the patients
to specialists because of the added cost. This results in the patient receiving less than adequate
health care and the possibility of a worsening of his or her medical condition.
Medicine, Malpractice, and You 307