The HMO industry, and what we should learn from the S&L crisis

Few issues have received as much recent media coverage as the savings and loan crisis. While bail-out legislation is in the process of being implemented, the cost of dealing with the S&L industry's problems have escalated beyond anyone's expectations. Alarmingly, there appear to be numerous similarities between today's HMO industry and the S&L industry of five years ago. Several factors that brought on the S&L crisis are present in the HMO industry. Many people believe the Maxicare failure represented the "bottoming-out" of the industry's problems. This belief is supported by the record earnings now being reported by a number of plans. However, this turnaround may be the result of lessened competition and cyclical factor, and does not necessarily indicate the industry's problems are over. The better managed plans are likely to survive, but widespread insolvencies may still be on the horizon under current conditions. Unless we learn from the S&L crisis and modify some of the basic underpinnings of the HMO industry, we will face a similar crisis in the nation's health care delivery system.