Implementation of the Health Maintenance Organization Act of 1973, as Amended

The Health Maintenance Organization (HMO) Act of 1973 provided for a Federal program to develop alternatives to the traditional forms of health care delivery and financing by assisting and encouraging the establishment and expansion of HMOs. Through December 31, 1977, the Department of Health, Education, and Welfare (HEW), had awarded $131.3 million in grant and loan assistance under the act to 1972 organizations, and 2 additional organizations received loan guarantees for $2.2 million. As of the same date, there were 51 federally qualified HMOs. A review of 14 HMOs which had obtained Federal financial assistance under the act indicated that each of the HMOs is generally providing health services as required by the act and that each generally has been organized and operated according to the Act's provisions. Exceptions exist in the area of enrollment of elderly, indigent, or medically high-risk people. One of the HMOs reached its financial breakeven point during the quarter ended December 1977. Six of the remaining 14 HMOs have a poor chance of breaking even within 5 years, and 6 have a fair to good chance of breaking even. No conclusion was reached about the other HMO. Concern remains over the ability of HEW to issue regulations and guidelines needed to implement the act and to organize the program effectively. HEW has made a concerted effort to issue regulations in a timely manner, but the agency does not have the numbers and types of personnel needed to implement the HMO program effectively.