The Washington PostDemocracy Dies in Darkness

Paul M. Ellwood Jr., a pioneer of HMOs, dies at 95

He practiced medicine for 17 years before turning to national health policy

Paul M. Ellwood Jr. in 1970, the year he coined the term “health maintenance organization.” (AP)
Placeholder while article actions load

Paul M. Ellwood Jr., a former physician who spent decades trying to overhaul the American health-care system, notably by developing and naming the health maintenance organization, an insurance model that he championed in a bid to offer better care at a lower price, died June 20 at an assisted-living center in Bellingham, Wash. He was 95.

The cause was organ failure, said his wife, Barbara Ellwood.

Trained in pediatric neurology as well as physical medicine and rehabilitation, Dr. Ellwood ran a clinic in Minneapolis before he began working on national health policy in the late 1960s. He became known as “the father of the HMO,” although the term was somewhat misleading: Large medical groups like Kaiser Permanente had effectively operated as HMOs for years, offering comprehensive health care for patients who had access to network doctors and other services in exchange for fixed annual premiums.

Yet while the fundamentals of the model had long been in place, it was Dr. Ellwood who gave the “prepaid health plan” an appealing new name and offered a sweeping vision for national reform. He coined the term HMO in a 1970 Fortune magazine article and proposed a health-care system that was guided by market forces, with groups of providers competing for patients by trying to offer better care at lower prices. Unlike in traditional health plans, the physicians would be paid based on the number of patients they treated, rather than for each procedure they performed.

Dr. Ellwood hoped that the system would create a financial incentive for doctors to keep patients out of the hospital, with a focus on their long-term health. He started pitching the idea to the White House in 1970, after being seated next to a Nixon administration official on a flight, and found a receptive audience that was eager to offer up an alternative to a national health insurance plan proposed by one of the president’s rivals, Sen. Edward M. Kennedy (D-Mass.).

Many of Dr. Ellwood’s ideas ended up in the Health Maintenance Organization Act of 1973, which required companies with 25 or more employees to offer an HMO option with their traditional insurance plans, and which provided financing to help launch new HMOs. Over the next decade or so, the rise of HMOs helped spur the development of other managed-care options, including preferred provider organizations, which have come to dominate the market.

Dr. Ellwood “took the long-standing Kaiser model and gave it a recasting that had an enormous impact,” said Michael Sparer, a health policy and management scholar at Columbia University’s Mailman School of Public Health. “He did not ‘invent’ the model,” Sparer added in an email, “but his work catalyzed an expansion of the model.”

More than 70 million Americans have enrolled in HMOs, but the plans have also sparked a backlash from critics who question whether they actually lower costs and lead to better care. While Dr. Ellwood had once envisioned a network of large nonprofit organizations, many HMOs are run for profit, fueling criticism that the groups are more interested in their investors than their patients. Complaints about a lack of “in-network” doctors have been commonplace since the 1990s, and detractors have said that the plans lead doctors to cut corners because they are paid upfront.

Savings from the plans have proved limited, according to Paul Starr, a Princeton University sociologist who served as a senior health policy adviser to the Clinton White House. “Here you had an idea that certainly had a lot of promise. There were high hopes invested in it — I shared some of those hopes,” he said in a phone interview. “It didn’t work out.”

Dr. Ellwood defended the HMO model but was also critical of the way his vision was implemented. Policymakers and consumers focused too much on the cost of coverage rather than the quality of care, he said, and the care itself was often inadequate. To promote accountability, he called for more reporting from health organizations as well as a national database on health outcomes.

“Only a portion of the dream that I had for the American health care system has been realized,” he told the New York Times in 1996. “There’s a huge piece of unfinished business.”

The first of two children, Paul Murdock Ellwood Jr. was born in San Francisco on July 16, 1926, and grew up in Oakland, Calif. His mother was a nurse, and his father was a family physician — “a medical missionary type,” as Dr. Ellwood later put it — who made house calls into his 80s.

Dr. Ellwood recalled his annoyance at having to wait in the car on Christmas Eve as his father tended to patients. Even as he went into the family business, he sought a different path in medicine. “To be an independent practitioner was never a goal,” he told the Times. “The autonomy aspect of it meant nothing to me.”

After graduating from high school, he served in the Philippines as a Navy pharmacist’s mate during World War II and enrolled at Stanford University, receiving a bachelor’s degree in 1949 and a medical degree in 1953. He did his pediatric internship at the University of Minnesota, later becoming a professor at the school and founding its pediatric neurology program.

Soon after he started his internship, Dr. Ellwood began working at the Sister Kenny Institute in Minneapolis, where he treated children with polio and, within six months, was appointed to head inpatient services. He was trying to convert it into a rehabilitation hospital in the late 1950s when he started thinking about the business of health care, realizing that as the hospital improved its rehab treatments, beds were more rapidly emptied.

“The hospital began losing money,” he said in a 2010 interview with Anthony R. Kovner, a health policy professor. “I thought, ‘There’s something perverse about the incentives in this business. The better we do clinically, the poorer we do financially.’” In time, he told the magazine Neurology Today, “I began to regard the health care system as my patient, instead of the children with neurological problems that I had been trained to treat.”

Dr. Ellwood stopped practicing medicine after 17 years and refined his HMO plan while serving as executive director of InterStudy, a health policy think tank in Minneapolis. He later shaped health policy debates through the Jackson Hole Group, a loosely organized gathering of academics, industry executives, politicians and care providers who met at his country home in Wyoming, where Dr. Ellwood was known to break the ice at gatherings by dressing attendees in ridiculous costumes.

The group developed a care approach known as “managed competition,” in which regulations were intended to work in tandem with the market to contain costs. Spearheaded by Dr. Ellwood and Stanford economist Alain C. Enthoven, the model served as the foundation for what became the Clinton administration’s health-care plan. But Dr. Ellwood and other backers distanced themselves from the plan after new regulations and tax provisions were added, and the proposal collapsed in Congress in 1994.

Dr. Ellwood’s marriage to Elizabeth Ann Schwenk ended in divorce. They had three children: David Ellwood, a former dean of Harvard University’s Kennedy School of Government, who lives in Winchester, Mass., and Winter Harbor, Maine; Cynthia Ellwood, an education instructor and former public school executive in Milwaukee; and Deborah Ellwood, who runs the Maine Community Foundation in Ellsworth.

In 2000, Dr. Ellwood married Barbara Winch, who helped him develop the Jackson Hole Foundation. In addition to his wife, of Bellingham, survivors include his three children; five grandchildren; and two great-grandchildren.

In a phone interview, his wife said that Dr. Ellwood had “probably the happiest time of his life” during the 20 years they spent in Bondurant, a small town about 30 miles south of Jackson, Wyo., where they lived on a ranch with some two dozen horses, three dogs and a cat. Dr. Ellwood skied into his 80s, she said, but increasingly spent his time going on horseback rides in the backcountry, taking to the saddle even after repeated accidents.

“He broke his neck twice, I think every rib at least once. He even broke his scapula one time, and that’s really hard to break. But he didn’t care,” she said. “I remember he went on a pack trip that lasted a couple of days. They ran into deep snow and rain and sleet and hail. It was just lousy conditions. He came back and said, ‘It was so much fun!’”

Dr. Ellwood, she explained, “was probably the most optimistic person I’ve ever met in my life. The whole world could be falling apart and somehow he would find some silver thread and hang on to that.”

Indeed, when Dr. Ellwood described his decades-long efforts to overhaul the health-care system, he often struck a tone that was optimistic, if a little wearied.

“It’s been using a thousand little drops to create a wave,” he told the Times. “I guess it’s worked, so I guess I’ll just keep doing it.”