Further research on this issue has revealed that the problem extends well beyond the HMO Act of 1973 to include four subsequent federal laws that reinforced its managed care architecture. This page has been revised accordingly. The original version is available for reference.
Key Points
Bracketed numbers refer to the full reference list in A Deeper Dive, below.
- We nearly doubled the number of doctors per patient since the 1970s, but physicians now spend only 27% of their day with patients; the rest goes to paperwork. [4]
- 93% of physicians say prior authorization delays patient care, and 73% of denials in radiation oncology are overturned on appeal; the majority were wrong from the start. [5], [7]
- For every dollar the American economy grew between 1970 and 2024, healthcare spending grew $2.65. Managed care did not “contain” costs; it increased them. Disastrously. [8]–[11]
- Hospitals spent $43 billion in 2025 collecting payments insurers owed; of that $43 billion, $18 billion went to overturning the insurers’ own denials. [12]
- The problem is not one law but five: the HMO Act (1973), ERISA (1974), HITECH (2009), MACRA (2015), and an unregulated prior authorization system.
The Issue at a Glance
In 1973, the Health Maintenance Organization Act changed the rules of American healthcare. Instead of paying doctors for the care they deliver, managed care organizations pay a flat fee per patient per month, whether that patient needs brain surgery or a Band-Aid. The idea was to encourage preventive care and discourage unnecessary procedures. In practice, it built a system where somebody other than your doctor decides what care you get.
That system has grown into a massive administrative apparatus. Your doctor now spends less than a third of the workday actually seeing patients. The rest goes to typing notes into an electronic health record, filling out insurance paperwork, and fighting with insurance companies for permission to treat you. For every hour your doctor spends with you, the system demands two more hours of desk work.
The most destructive part is called prior authorization. Before your doctor can prescribe many treatments, medications, or procedures, an insurance company has to approve it first. That process takes an average of 13 hours of staff time per week per doctor. 93% of physicians say it delays care. 82% say patients give up and walk away from recommended treatment because of it. And 29% say it has caused a serious adverse event for a patient, including death.
In cancer treatment, the numbers are worse. 73% of prior authorization denials in radiation oncology are overturned on appeal; the insurance company was wrong nearly three-quarters of the time, and the only thing the denial accomplished was making a cancer patient wait longer for treatment.
The whole system was supposed to save money. It did the opposite. For every dollar the economy grew over the last fifty-four years, healthcare spending grew $2.65. Hospitals spent $43 billion last year just trying to get insurers to pay bills they already owed; of that $43 billion, $18 billion went to overturning the insurers’ own denials. We are spending more money arguing about healthcare than many countries spend on healthcare.
Here is what we propose. This is not a one-law problem, and single-statute repeal will not fix it. The HMO Act built the foundation, but four subsequent federal laws reinforced the architecture. We will address all five: repeal the managed care mandates, reform ERISA so states can hold insurers accountable, rationalize the documentation requirements that consume physicians’ time, restructure quality reporting, and put binding timelines and legal liability on prior authorization. When your doctor says you need a treatment, that should be the end of the conversation; not the beginning of an appeals process.
▸ A Deeper Dive ▶ Click to read the full Issue The full policy case: what managed care has done to American medicine, what we propose to do about it, and how we’ll measure success, with complete sources and accountability metrics.
The Problem
In 1973, the Health Maintenance Organization Act fundamentally changed American healthcare by promoting managed care organizations [1]. What was intended to reduce costs instead created the foundation for a vast administrative architecture; one that was reinforced by four subsequent federal laws and that now consumes the majority of the American physician’s working day.
Between the mid-1970s and 2024, we nearly doubled the number of doctors per patient in this country; from 153 to 304 physicians per 100,000 population, an increase of 98.7% [2], [3]. That should have been transformative. More doctors should mean more time with each patient, shorter waits, and less pressure on the people we trust with our lives. Instead, a time-motion study published in the Annals of Internal Medicine found that physicians now spend only 27.0% of their office day in direct face-to-face contact with patients, while 49.2% is consumed by electronic health record documentation and desk work [4]. For every hour your doctor spends with you, the system demands two more hours of paperwork.
The most visible chokepoint is prior authorization: the requirement that your doctor get permission from an insurance company before treating you. The American Medical Association’s 2025 survey of 1,000 practicing physicians found that 93% report prior authorization delays patient care; 82% report patients abandoning recommended treatment because of it; and 29% report it has caused a serious adverse event for a patient, including hospitalization, life-threatening complications, or death [5], [6]. In radiation oncology, the American Society for Radiation Oncology found that 73% of prior authorization denials are ultimately overturned on appeal [7]; the majority of denials were wrong from the start, and the only thing they accomplished was delay.
And the cost-containment promise? The whole reason we were told we needed managed care? For every dollar the American economy grew between 1970 and 2024, healthcare spending grew $2.65 [8], [9], [10], [11]. Managed care did not “contain” costs; it increased them. Disastrously. Hospitals spent $43 billion in 2025 just trying to collect payments that insurers owed for care already delivered; of that $43 billion, $18 billion went to overturning the insurers’ own denials [12].
The system was built to stop waste. It has become the waste.
References
[1] P.L. 93-222, “Health Maintenance Organization Act of 1973,” 87 Stat. 914, Dec. 29, 1973.
[2] CDC/NCHS, “Active Physicians in Patient Care,” Health, United States, 2019, Table 41.
[3] AAMC, “2025 Key Findings,” 2025.
[5] AMA, “Fixing Prior Auth: Nearly 40 Prior Authorizations a Week Is Way Too Many,” Apr. 2025.
[6] AMA, “Physicians Concerned AI Increases Prior Authorization Denials,” Feb. 2025.
[7] ASTRO, “Prior Authorization Delays Lead to Serious Harm for People with Cancer,” Dec. 2024.
[8] BTS, “U.S. GDP: 1970–2001,” Table C-3.
[9] BEA, “GDP, 4th Quarter and Year 2024,” Mar. 2025.
[10] CMS, “National Health Expenditure Data: Historical.”
[11] S. P. Keehan et al., “National Health Expenditure Projections, 2024–33,” Health Affairs, Jul. 2025.
[12] AHA, “Costs of Caring,” Mar. 2026.
[14] Health Affairs, “The Role of Administrative Waste in Excess US Health Spending,” Oct. 2022.
[16] AMA, “Physician Burnout Rate Continues to Decline, Falling to Nearly 42%,” Apr. 2026.
What We Propose
Our original position called for single-statute repeal of the HMO Act of 1973. Further research has revealed that the problem is bigger than one law. The HMO Act built the foundation, but four subsequent federal laws reinforced it, and a comprehensive solution must address the full stack.
1. Dismantle the managed care incentive structure that the HMO Act of 1973 created. The Act inserted corporate cost-containment logic into clinical decision-making and established the capitated payment architecture that financially rewards physicians for withholding care [1]. We will repeal the statutory provisions that mandate employer offering of HMO options and that provide federal subsidies for managed care structures.
2. Reform ERISA to restore state-level regulatory authority over health plans. The Employee Retirement Income Security Act of 1974 pre-empted state regulation of employer-sponsored health plans, effectively shielding managed care organizations from state-level tort accountability. For fifty years, this has meant that when an insurer’s administrative delay harms a patient, the patient has no meaningful legal remedy in most states. We will restore that authority, so that states can hold insurers accountable for patient harm caused by administrative obstruction.
3. Rationalize EHR documentation requirements to clinical necessity. The HITECH Act of 2009 and its Meaningful Use mandates drove EHR adoption but also imposed documentation requirements that now consume 51.8% of the physician workday [4]. Physicians did not go to medical school to become data-entry clerks. Documentation standards should serve clinical care, not billing compliance.
4. Restructure quality reporting to reduce the administrative tax on clinical practice. The Merit-based Incentive Payment System (MIPS) under MACRA (2015) layered additional reporting requirements onto an already overburdened system. Quality measurement matters; it should not require physicians to spend more time reporting on care than delivering it.
5. Establish binding timelines for prior authorization decisions, require same-specialty clinical review of all denials, and impose liability on payers for documented harms resulting from administrative delays. When 29% of physicians report that prior authorization has caused a serious adverse event for a patient [5], [6], and when 58% of oncologists report being forced to deviate from national clinical guidelines [7], this is not an administrative inconvenience. It is a patient safety crisis.
When your doctor says you need a treatment, that should be the end of the conversation; not the beginning of an appeals process.
How We’ll Know It’s Working
- Reduce administrative overhead as a share of total healthcare expenditure. Published estimates place this figure between 15% and 30% of total spending depending on scope [14], with some analyses as high as 34.2% [13]. Even at the lower bound, U.S. administrative spending annually exceeds 200% of total cardiovascular care spending and 300% of total cancer care spending [14]. We will set reduction targets once we have agreed upon a consistent measurement scope, because a target without a defined denominator is a talking point, not a commitment.
- Reduce prior authorization turnaround times to a maximum of 48 hours for all non-emergency requests, eliminating the weeks-long delays that currently force physicians to choose between treating patients and fighting paperwork.
- Restore the physician time-allocation ratio. Physicians currently spend 27.0% of their office day in direct patient contact and 49.2% on EHR and desk work [4]. We intend to move toward parity; a physician’s day should be organized around the patient, not around the billing system.
- Eliminate non-clinical waiting for hospital beds. When a physician determines that a patient needs admission, administrative and insurance pre-clearance processes should not be the bottleneck.
- Ensure that cost reductions flow to patients, not exclusively to insurer margins. Administrative savings that disappear into earnings reports have not solved the problem.
These goals describe outcomes, not mechanisms. The specific legislative and regulatory pathway is under active development and will be published separately. Where our initial approach proves wrong, we will say so plainly and revise.
Administrative overhead reduction alone does not go far enough. We are actively researching additional sources of meaningful cost reduction, including the crisis of hospital closure that is leaving entire communities without access to care, and the projected national hospital bed shortage that a 2025 UCLA analysis estimates will reach the 85% crisis-occupancy threshold by 2032 [15]. This section will be updated as that work progresses.
- Administrative overhead ratio:
- Administrative costs as a percentage of total national health expenditure, measured against the CMS National Health Expenditure Accounts baseline [10], [13], [14].
- Insurer medical loss ratios (the share of premiums spent on actual care versus administration and profit), reported quarterly under existing ACA requirements.
- Prior authorization:
- Median and 90th-percentile turnaround time for prior authorization requests, measured from submission to determination.
- Denial rate and overturn-on-appeal rate. A high overturn rate is evidence that initial denials are functioning as delay, not as clinical judgment. The current overturn rate in radiation oncology is 73% [7].
- Physician time allocation:
- Ratio of direct patient-care hours to documentation and administrative hours per physician, tracked via time-motion studies modeled on existing methodology [4]. Baseline: 27.0% direct care / 49.2% administrative [4].
- Physician burnout rates as reported in AMA surveys, used as a lagging indicator of administrative burden. Baseline: 41.9% (2025 AMA Organizational Biopsy) [16].
- Hospital bed access:
- Median time from physician admission order to patient placement in a bed, excluding periods where the delay is clinical (e.g., awaiting test results).
- Number of documented cases per quarter in which administrative or insurance pre-clearance delayed an admission that the treating physician had ordered.
- Cost pass-through:
- Average out-of-pocket healthcare spending per household, adjusted for inflation, tracked against the Bureau of Labor Statistics Consumer Expenditure Survey.
- Premium growth rate relative to administrative cost reduction; if overhead falls but premiums do not, the savings are not reaching patients.
- CMS already publishes the National Health Expenditure Accounts annually. The administrative overhead ratio should be broken out as a headline figure in that report, not buried in supplementary tables.
- The ACA’s medical loss ratio reporting requirement provides a quarterly data stream for insurer-level administrative spending. No new reporting infrastructure is needed.
- Prior authorization turnaround and denial data should be reported by all insurers that participate in federal programs (Medicare Advantage, Medicaid managed care, ACA marketplace) on a quarterly basis, with public dashboards.
- Physician time-allocation surveys should be conducted annually by HHS or by contract with an existing medical society (AMA, ACP), with results published and compared to the pre-reform baseline.
- Congressional review through the Senate HELP Committee and House Energy and Commerce Committee no less than annually for the first five years following enactment.
- Prior authorization reform can proceed independently of broader structural changes to the managed care system. Bipartisan prior authorization bills have already advanced in multiple recent Congresses.
- The 48-hour turnaround requirement can be implemented by CMS rule for federal programs without waiting for legislation covering commercial insurers.
- Hospital bed access reforms are separable from insurance-side reforms and can be pursued through hospital accreditation standards (via CMS Conditions of Participation) as well as legislation.
- Administrative overhead reduction targets and cost pass-through requirements are interdependent; one without the other allows savings to be captured by intermediaries rather than patients. These should move together.
- ERISA reform and physician time-allocation improvements are structurally linked but legislatively separable. Explicit reporting requirements should be enacted regardless of which reforms pass, to ensure the data exists.
- The right to have medical decisions made by physicians rather than insurance administrators is not a temporary policy experiment. Core protections should be permanent law.
- The 48-hour prior authorization mandate should be reviewed after five years to determine whether the timeline should be shortened further or whether prior authorization for specific categories of routine care should be eliminated entirely.
- Administrative overhead reporting requirements and public dashboards should be permanent. Transparency does not expire.
- The cost pass-through provisions should include a ten-year review to assess whether market dynamics have internalized the incentive or whether ongoing regulatory enforcement remains necessary.
- Physician time-allocation surveys should continue indefinitely as a public health workforce indicator, regardless of the status of any specific reform.
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