Health maintenance insurance: Toward an optimal HMO

The financial incentive structure of today's health maintenance organizations addresses certain problems attributed to fee-for-service medical care, but at a theoretical level it does not induce optimal provider behavior. Health maintenance insurance—a combined package of medical, morbidity/disability, and life insurance—encourages providers to compete for the health dollar, and not simply the medical care dollar, thereby remedying deficiencies in prepayment and promoting true health maintenance. The principle underlying health maintenance insurance emphasizes the need to search for effective means of preventing disability, morbidity, and premature death.This is a revised version of a paper presented at the 105th Annual Meeting of the American Public Health Association, Washington, D.C., October 30–November 3, 1977.