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

The Health Maintenance Organization (HMO) Act of 1973 provided for a trial Federal program to develop alternatives to traditional forms of health care delivery and financing by assisting and encouraging the establishment and expansion of HMO's. Through May 31, 1978, the Department of Health, Education, and Welfare (HEW) had awarded $151.5 million in grant and loan assistance under the act to 215 organizations--$71.3 million in grants and $80.2 million in loans. Two additional organizations received loan guarantees for $2.2 million. HEW considers 131 of the 215 organizations to be active grantees or active loan recipients. As of June 20, 1978, there were 63 federally qualified HMO's. A review of 14 HMO's indicated that each was generally providing health services in the manner required by the act and that each was generally organized and operated in the manner prescribed. The 14 HMO's, however, had not expended extensive effort to enroll elderly, indigent, or medically high-risk people. Three of the 14 HMO's reviewed have a good chance of being able to operate without Federal financial assistance within 5 years after qualification; 5 HMO's have a fair chance; and 6 have a poor chance. Of the six HMO's with a poor chance of operating without Federal assistance, three have received notices of noncompliance from HEW. Concern remains regarding the ability of HEW to issue regulations and guidelines needed to implement the act effectively and uniformly and to organize the HMO program and obtain the numbers and types of personnel needed. Although the financial assistance proposed by H.R. 13266 could benefit HMO's, there are reservations about expanding the loan assistance because HEW has not demonstrated the ability to effectively monitor and administer the loan program already in effect.