An Internet post about the commercialization of American health care misread history by claiming it was illegal for companies to turn a profit until President Richard Nixon signed a law that opened the floodgates.
"Did you know that before 1973 it was illegal in the US to profit off health care?" the post states. "The Health Maintenance Organization Act of 1973 passed by Nixon changed everything."
The post was flagged as part of Facebook’s efforts to combat false news and misinformation on its News Feed. (Read more about our partnership with Facebook.)
The viral post does contain a kernel of truth: The industry became more commercially driven during this era. But while health care did go from a mostly nonprofit venture to one that was more lucrative as a result of the law, it’s an overstatement to say profit-making was illegal prior to the Nixon era.
The HMO Act of 1973The definition of what an HMO is has morphed a bit over time. But essentially it’s a company that blends insurance functions and health care functions, said Daniel Polsky, a health economics professor at Johns Hopkins University.
"The HMO act of 1973 promoted the development of HMOs," Polsky said. "After the act, these types of organizations became easier to form and operate."
The early prepaid group practice plans — the prototypes for HMOs — were all nonprofit. But the 1973 legislation unleashed the development of for-profit HMOs, said Paul Starr, a sociology professor at Princeton University.
"Many of the early HMOs were subsequently bought by for-profit insurers," said Starr, who authored a Pulitzer Prize-winning book about the history of American health care. "So the industry as a whole has changed quite dramatically."
It’s worth noting the post also claims that Nixon pushed the federal HMO Act as a kickback to his political backer Edgar Kaiser.
"In 1973, Nixon did a personal favor for his friend and campaign financier, Edgar Kaiser, then president and chairman of Kaiser Permanente," the post states, adding that the company "got the first taste of federal subsidies" as a result of the law.
Our friends at Snopes noted this element of the claim — which it calls the post's "primary emotional hook" — is false.