Markets at Risk— Current and Future Challenges in a Managed Care Marketplace. B. HMOs will survive but more as niche-product.


Kaiser CEO David Lawrence is often quoted as noting the irony that in a twenty-five year period HMOs went from being “a communist conspiracy to a capitalist conspiracy.” Lawrence’s statement underscores that the insurgency that used to denote HMOs has disappeared, as its model of combining care and financing was commandeered and co-opted by the traditional health insurance industry which once, along with organized medicine, was among the most trenchant critics of the HMO model. A corollary of this viewpoint is that the HMO model’s reach may have exceeded its grasp when it sponsors or expropriators tried to make a mainstream, rather than alternative model of care. It appears that the survival of HMO models now depends largely on their embedded-ness in certain regional markets with a strong consumer commitment to network-based care, and/or a belief in community-rated products among a sizable number of major purchasers. In addition, there has to be the means and mechanisms to create plan-provider relationships that achieve a level of peaceful coexistence and long term partnership. In effect, then, the HMO is likely to survive as a niche product/model, a taste for and tolerance of will not be for everyone. However, it also may not even be designed for persons in pursuit of the least costly product.