The impact of health maintenance organizations on health care costs

Health maintenance organizations (HMO) initially increase, but will eventually significantly decrease, a population's health care costs. Thus, HMOs appear to require a significant amount of time to control effectively physician and patient behavior and achieve reductions in costs. Unlike health care costs, HMOs are found to have no significant impact on a population's aggregate health in either the short- or the long-run. Therefore, HMOs are found to achieve savings in health care costs in the long-run and they apparently do so with no resultant decline in health. Important implications for the National Health Service (NHS) in the UK are discussed, given the similarities that exist between HMO physician reimbursement and NHS funding of its general practitioners.