has become increasingly less so as the industry has grown to the
largest in the state, now covering well over half of all Californians.
The regulatory structure it imposes was primarily designed in 1975
when the original Knox-Keene Act was passed, and the industry has
evolved significantly since then. Given the size, the complexity, and
the degree of public interest in managed care, the task force recommended
the creation of a new regulatory agency, one devoted
specifically to managed care organizations, whose leadership would
have the expertise and vision necessary for effective regulation.
As we have seen, government need not and should not attempt
to regulate the health care industry alone. Neither should a completely
free market be left to distribute health care; because of market
failures, it cannot do so in a morally acceptable way. But the
market, made up of purchasers and competitors, the industry, and
government together can structure an appropriate set of incentives
that will create accessible, quality health care for consumers.
Pear, R. “Business Coalition to Fight Legislation Protecting Patients'
Rights.” The New York Times, January 21, 1998, p. A18.
Freudenheim, M. “Progress on Health Costs, But Nagging Woes Persist.” The New York Times, January 5, 1998, p. D10.
Sinton, P., and Russell, S. “Kaiser Raising Rates Up to 11 Percent.” San Francisco Chronicle, March 31, 1998, p. D1.
“Medicare and Medicaid Statistical Supplement” (Table 21). Health
Care Financing Review, 1997, pp. 56–58.
California Department of Health Services, Managed Care Division,
According to a study by the Barents Group, 86 percent of workers
who are offered one plan only are offered a plan with a nonnetwork
component. Barents Group. “Health Care Choices.” Report commissioned
by American Association of Health Plans, December
California Managed Health Care Improvement Task Force. “Exp
anding Consumer Choice: Background Paper.” Sacramento, Calif.:
Author, 1998. Data for 1996 were provided by KPMG Peat Marwick,
Tysons Corner, Va., 1997.
California Managed Health Care Improvement Task Force. “Public
Perceptions and Experiences with Managed Care: Background
Paper.” Sacramento, Calif.: Author, 1998.