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HMOs: Health Care Cost Containment

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HMOs: Health Care Cost Containment

December 16, 2008

Health Maintenance Organizations (HMOs) are a form of insurance-financed managed care. In a managed care system, a health insurance plan pays a closed network of doctors and hospitals an annual rate for each enrollee regardless of how much health care that enrollee uses. If a group of enrollees uses less health care than the insurance company paid for in advance, the doctors and hospitals keep the difference as a bonus. This system is called "capitation." A primary care doctor typically acts as a gatekeeper for an HMO enrollee and refers him to a closed network of specialists when necessary. Theoretically, managed care should keep health care costs down by providing doctors with incentives to keep their patients healthy and avoid expensive hospital care. HMOs became very popular in the late 1980s and throughout the 1990s as a cost-containment method, but in recent years, patients began to revolt against them. Some patients didn't like the closed provider network, and others questioned their physician's and insurance companies' motives when they were denied care. Almost 64.5 million people belonged to an HMO as of July 2008, according to, a website sponsored by the Henry J. Kaiser Family Foundation. This is their most recent estimate as of August 2009. Updated February 2010


Soaring out-of-pocket costs, rising premiums, and shaky insurance exchanges raise urgent questions this election season. What policies might address these problems, and how do the presidential candidates’ health plans differ? This webinar will give an overview of each candidates’ policy prescriptions and provide reporters with crucial context for covering one of the election’s most important but overlooked issues.

The 2017 California Fellowship, for California-based journalists only, will be held March 5-9, 2017 in Los Angeles. This Fellowship will focus on vulnerable populations and access to care and health care reform and innovation. We also take an in-depth look at how community conditions influence individuals' prospects for health. Each Fellow receives a $1,000 stipend to assist with the costs of reporting an ambitious Fellowship project on a California health issue, as well as six months of mentoring by a Senior Fellow. Deadline to apply is Dec. 1.  For more information, go here.


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