As medical costs have escalated in recent years, a new approach to providing health care has emerged: managed care. Managed care is a system in which insurance providers control costs by closely monitoring and supervising the care that is provided to patients. Health maintenance organizations (HMOs) are the most common—and perhaps the most controversial—type of managed care system.

Members of HMOs pay a fixed monthly fee, which is usually quite low, in return for basic health care treatment at a low cost. HMO advocates contend that the organizations provide high- quality health care while containing costs. According to Alain C. Enthoven, a Stanford management professor, and Richard Kronick, a senior health policy adviser in the Clinton administration, HMOs simultaneously ensure good care and low cost by "selecting doctors carefully for quality and economy, monitoring their performance and...