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A long-lived but inaccurate meme on social media ties an act signed into law in 1973 by President Richard Nixon to the development of for-profit HMO and health insurance agencies: This text conflates two separate issues: the development of Health Maintenance Organizations (HMOs) in conjunction with alleged cozy ties between Kaiser-Permanente and the Nixon Administration, and the legal permissibility of for-profit healthcare. However, as for-profit health care existed prior to 1973, the Health Maintenance Organization Act clearly did not create or enable that phenomenon. The growth of employer-sponsored health insurance was instrumental to the development of the current for-profit healthcare insurance system in America, which arose largely as a result of federally mandated wage freezes that occurred during and after World War II. This progression was described in a history of American Healthcare by Elisabeth Rosenthal, abridged in a Spring 2017 issue of Stanford Medicine: As time wore on and medical science became both more advanced and more expensive, other organizations realized the existence of a market for plans tailored to younger and healthier people, and by 1951 both Aetna and Cigna were major players in offering major medical coverage in a for-profit model: It is inaccurate to say that before 1973 it was illegal in the US to profit off of health care, as Aetna and Cigna had been profiting from health care for over 20 years before that. Ballooning health care costs became a serious political issue in the 1970s, and it was in this environment that the concept of HMOs grew in popularity. An HMO differed from the other insurance models in that it was a prepaid, managed plan that granted a patient access to a specifically contracted network of physicians and specialists, generally combined with some form of financing: The concept had existed in various forms prior to the 1970s, but during the Nixon administration the HMO model was viewed as the solution to massive increases in government spending taken on by the federal government through the Medicare and Medicaid programs. Both liberals and conservatives supported the concept at the time, as described by Stuart Altman and David Shactman in their book Power, Politics, and Universal Health Care: Differences between liberal Democrats and conservative Republicans shaped the trajectory of legislation that would become the Health Maintenance Organization Act of 1973, which was signed into law with bipartisan support. The act initially provided $45 million in grants and loans and $300 million in loan guarantees to spur the development of HMOs: Over time, the restrictions on which HMOs could receive federal endorsements were eased in a series of amendments to the act, leading to a massive increase in for-profit HMOs that medical historian Paul Starr described as the conservative appropriation of liberal reform: In this light, it is fair to say that Richard Nixon’s support for HMOs presaged a dramatic transition in the American healthcare system that increased for-profit health insurance enterprises, but it is not fair to say that the act itself first made for-profit health insurance legal. The primary emotional hook in the meme is the assertion that the HMO Act was a handout to Edgar Kaiser, a friend of Nixon’s who donated heavily to his campaign for president. It is true that Kaiser advocated on behalf of the HMO Act to Nixon’s aide John Ehrlichman, and that the concept proposed in the bill was modeled on HMO plans already offered by Kaiser. The claim that the act was a quid pro quo, however, is belied by the fact that the original 1973 act, in its final form, did not allow Kaiser’s plan to be recognized: Such a truth also makes the meme’s claim that Kaiser was the insurance company to get the first taste of federal subsidies incorrect. Additional controversy stems from a conversation between Ehrlichman and Nixon captured in the Nixon White House tapes that makes it sound as though Nixon believed the motivation behind the act was that the less care [insurance companies] give [patients], the more money they make: Kaiser Permanente contended that this was a crude and inarticulate paraphrase of what Edgar Kaiser was trying to explain to Ehrlichman, and that Nixon’s later statements to Congress about the act made it clear what the two men were attempting to explain. The issue was that doctors needed to be incentivized to provide preventative medicine to reduce overall healthcare costs, but the rate-based, for-profit insurance model currently in play did not provide incentives for this less profitable area of healthcare, unlike HMOs: All told, little factual basis supports the meme’s assertion that Nixon altered the legality of for-profit insurance by signing the HMO Act of 1973, or its claims that the act was a secret method for Nixon and his cronies to enrich themselves. The only sliver of truth here is the fact that the increase in popularity of HMOs that occurred after passage of the act (and its amendments) greatly expanded for-profit health care in America.
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