The concept of managed care, often typified by HMOs, was given federal
support to blunt the political initiative for a unified, equitable national
health care system. HMOs were hailed as the solution to greedy fee-for-ser-
vice physicians and rapacious health insurance corporations. Now most
HMOs are owned by health insurance companies, the very institutions
HMOs were established to counter. For-profit managed care commonly lim-
its the choice of health care providers, may not save money compared to
other social forms of health care delivery, establishes wasteful practices and
bureaucracies, and may encourage undertreatment by health care providers.
Moreover, the elderly and those with serious and chronic health care prob-
lems tend to be excluded from HMOs. The same social forces that have
shaped a two-track hospital system are influencing the development of man-
aged care--with similar consequences.

Until the 1940s most physicians and hospitals dealt directly with a patient
on a fee-for-service basis. During the next few decades traditional indemnity
health insurance grew to cover tens of millions of Americans. This kind of
health insurance provides coverage regardless of which physician or hospital
the patient goes to. Since the 1970s, however, and particularly in the 1980s
managed care has begun to displace indemnity health insurance because of
managed care's reputed ability to reduce the cost of health care. Managed
care organizations ( MCOS) come in all sizes and flavors, but John Iglehart
( 1992) has developed a generic definition that seems to capture the central
similarities among them. Managed care organizations combine health care
financing and delivery functions via

contracts with selected physicians and hospitals that furnish a comprehensive set
of health care services to enrolled members, usually for a predetermined
monthly premium; utilization and quality controls that contracting providers
agree to accept; financial incentives for patients to use the providers and facili-
ties associated with the plan; and the assumption of some financial risk by doc-
tors. ( Iglehart 1992, 742)

-84-