>The ascendancy of HMOs is bringing corporate power and
>industrial methods to medical services. My impression is
>that presently the HMOs are trying to cut costs and improve
>profits by reducing the quality of the services, but they
>do seem cognizant of price resistance.
Years ago, skeptics said that HMOs would probably result only in a brief capping of costs, and it looks like they were right. U.S. medical inflation fell to just 0.6-0.7 percentage points above general inflation in 1996 and 1997, but in 1998 and 1999 the gap has picked up to the 1.5-point range, or about twice overall inflation. Part of the reason is no doubt that managed care entities have huge administrative expenses. Also, many of them initially priced their services too low - like the notorious Oxford in the NYC area - in an effort to build credibility and market share. Now they're raising prices and cutting services (the equivalent of a price increase according to the CPI accountants).
Doug