In a survival economy (where substantial numbers are dying for lack of food)much health care is deemed a privilege. Certainly it doesn't make sense to spend large sums to prolong the lives of terminally ill patients when babies are starving for lack of only a few cents. In an affluent economy, though, people regard availability of virtually all effective health care as their right.It does not seem appropriate for anyone to suffer or die for lack of care when both private and public funds abound.
So for many years the health care system had one mandate from the public: Give us the best. And the best became more and more expensive. Medical advanceswere often costly: CAT (Computerized Automated Tomography) scans and MRI (Magnetic Resonance Imagery) scans used equipment costing millions. Life supportsystems kept people alive for weeks or months at huge expense after they would otherwise have died. Enough previously doomed patients recovered to make italmost impossible to abandon these hugely expensive (and usually futile) measures. As people lived longer with the aid of improved care they also required more and more help just because of advancing age.
Cost still set some limits as long as the patient paid. But as third party payment -- by insurance companies or government programs like Medicare and Medicaid--became more common, this constraint largely vanished. In the early 1980's health care costs increased as much as 15-20% a year. Doctor and hospitalfees increased astronomically. Projections showed that unless something weredone practically the whole Gross National Product (GNP) would be consumed byhealth care. That was clearly unacceptable.
Managed Care seemed to most authorities the best available answer. Each Managed Care Organization offered total health care for a predetermined monthly fee. This was supposed to accomplish three goals:
- Since each organization offered a supposedly-comparable product, there was a basis for competition.All or most of the cost is usually borne by either employers or government.Employers or government executives investigate numerous options. Then they offer one or more, all approved as cost-effective, to eligible people. Those out of line price-wise supposedly never make it past this initial screening.
- Imposing efficient utilization patterns seemed likely to save considerable money.
- On the basis of volume, managed care organizations are able to negotiate better deals than individuals could achieve.
According to Consumer Reports, by 1997 64% of the population were receiving managed care. Even those who do not belong seem to have benefitted to some extent from increased awareness of cost. Health care costs still seem to increase faster than the general inflation rate, but the differential has become relatively slight.
How Managed Care Saves Money
Our health care system evolved without planning. Hospitals were originally charitable institutions offering primitive care to the poor and homeless. Theybecame centers of technical medical service just because they were the only facilities available for bed-bound patients. Nurses, formerly looked upon as one notch beneath ordinary domestics because they were willing to get into physical contact with the ill, became respected professional people, masters oftechnically difficult patient care and administrative officers of hospital wards. Doctors who confined their work to one field of competence became prestigious and well-paid specialists. (Note that in most areas of endeavor the person who knows something about everything is the well-paid boss, the person who knows all there is to know about one narrow division is the less- well-paidtechnician.) The specialties often overlap, with certain conditions belonging in one specialty at one medical center and in another elsewhere. Generallyan administrative hodge- podge!
Although this system has many strong points, it also has notable inefficiencies. Suppose, for instance, that a patient with stomach trouble has pain in the chest rather than the abdomen (which often happens). If he goes to a heartspecialist that very expensive physician does enough very expensive tests toprove that the heart is normal before he sends the patient to the right doctor.
While this looks to the outsider like simple greed, there are other explanations. During his training, the heart specialist's department saw only patientswho had been screened by other physicians and shown to have a probable heartproblem. All the procedures he learned were based on the assumption that such screening had been done. If he follows the procedures he has learned (whichis what he's being paid for) he checks the heart very thoroughly.
Also, once the patient comes to him as a possible heart case his reputation will suffer if he fails to diagnose any heart difficulty which might be present. He simply can't afford to shoot from the hip.
So the only way to utilize a cardiologist's services efficiently is to have someone knowledgeable screen patients before he sees them. In the traditionalhealth care system this role is supposedly assigned to the "primary physician," usually a general practitioner or internist. But patients often go directly to specialists, feeling that they will get better care that way.
In Managed Care the patient almost always has to go to a "gatekeeper," usually the assigned primary physician but sometimes a nurse-practitioner, before seeing any specialist. Although this often seems an inconvenience and waste ofthe patient's time, it attacks a very major source of waste.
Even in instances where the patient really knows which specialist is right for his problem, the problem often doesn't really need expensive specialist services. You know that a poison ivy rash fits into the dermatologist's purview,but can't a G.P. or even a well-informed nurse- practitioner treat it adequately? You know that checking on the development of a healthy baby at intervals falls into the pediatrician's area of expertise, but can't less intensely trained professionals do just as well?
Managed Care organizations also scrutinize expensive procedures to be sure they are necessary. This is the area where patient desires (and sometimes needs) come into direct conflict with economic pressures. But studies have shown that about 30% of operations recommended by surgeons (whose metier is operating) are unnecessary. While the majority of these procedures would accomplish their purpose, other methods would achieve similar results without operation.For instance, one of the operations commonly classified as "unnecessary" is hysterectomy, removal of the uterus. This often seems desirable to patients (either consciously or subconsciously) as 100% conception control. So patientsoften lean toward hysterectomy for control of bleeding or other complaints which can be treated successfully in other ways. Managed Care organizations canrefuse to pay for operations of this sort.
One other way in which managed care organizations control costs is by eliminating "expensive doctors" from their provider list. "Expensive doctors" are usually those who order many more x rays, CAT scans and laboratory procedures than normal. In this computer age it is easy for the Managed Care organizationto know how many of these costly procedures each doctor has ordered and howmany patients he has treated. Eliminating the providers who over- use these facilities saves money two ways, first by getting them off the lists and second by making the remaining providers more aware of the problem.
Managed Care organizations can also identify doctors who prescribe very expensive medications, those who over-use hospital facilities, etc. In theory theycould tell how promptly each doctor diagnoses and how effectively he treatscertain specific conditions and thus get an accurate index of his skill. Suchstudies would take a great deal of skill and time, and seem seldom to be done.
Some Managed Care organizations operate their own clinics, with staff doctorsusually paid by salary instead of fee-for-service. This approach is especially effective in rural areas. It also allows cost-saving measures like using nurse-practitioners or technicians for some jobs normally done by doctors.
Finally, Managed Care represents a large enough number of members to have substantial bargaining clout. This shows up best in negotiations with hospitalsand pharmacies. A few Managed Care organizations operate their own facilities, but most contract for members' care with private or public hospitals. Theyusually do this on the basis of a flat daily rate including all hospital charges rather than the traditional base room rate with extra charges for operating room, intensive care, medications, supplies and laboratory tests. This allows them to save a great deal of money by making rules which minimize hospital stays--having patients come into the hospital very early on the morning ofsurgery, for instance, instead of arriving the previous evening.
Bargaining clout also comes into play in negotiating with pharmacies. Most Managed Care organizations provide prescription drugs as part of their service.Independent pharmacies have traditionally charged a minimum for any prescription, and about a 50% markup. Managed Care organizations usually get bids from several large drugstore chains, each of which wants this substantial chunkof business. Competition drives down the prices, usually to something like nominimum and 10% markup.
An additional factor in drug prices may be a limited pharmacopeia. Managed Care organizations often circulate a list of drugs for which they will pay to providers. Sometimes this is phrased as "Preferred" rather than "Required," but prescribing physicians are under considerable pressure to stick to the list.
Doctors are besieged with literature, advertising and personal calls by drugcompany representatives offering new drugs or combinations, many of which have little advantage over less expensive, established medications. Since the doctors themselves never pay for their prescriptions, they have often ignored the cost factor in deciding whether to use a new product.
A limited pharmacopeia keeps them from doing this. It also simplifies (and makes cheaper) the task of both hospital pharmacies and drug stores, which otherwise must keep stocks of countless drugs (often with expiration dates, leading to great waste as well as extra investment).
Bargaining clout may also effect physician expense. Fee-for-service providersusually bargain in terms of the schedule established by Medicare. This schedule defines virtually all possible services a physician can render and assigns a fee to it. Since overhead and living expenses are higher in some areas than in others, the amount Managed Care organizations pay varies from that paidby Medicare to about 150% of that rate. This is often still considerably less than the doctor's usual "private patient" fee.
Some Managed Care organizations operate clinics in which the doctors are paidby salary instead of charging fees for each service rendered. This approachis especially likely in rural areas, where it permits adequate compensation to attract physicians to remote areas.
Problems with Managed Care
When one seeks a less expensive alternative to the established way, the resulting changes are seldom improvements. Problems invariably arise.
One area which poses a true dilemma for Managed Care organizations is initialcontact procedure. When a patient needs help for an illness or injury, how qualified should the person who first evaluates the problem be?
Minor ailments and injuries are much more common than major ones, so such contacts make up a substantial proportion of care rendered. In most instances recognition of major problems is easy. But in a certain proportion it is very difficult--it takes lots of training and skill to distinguish early appendicitis from green apple stomachache, or early brain hemorrhage from tension headache.
In many Managed Care operated clinics the person you are most apt to see first with a new illness or injury is a nurse-practitioner. This person is instructed to call a physician when he or she suspects a serious condition. But thefact remains that getting prompt help for any serious illness or injury which arises depends upon its detection by a person with substantially less training than a physician.
Another problem with managed care is demand for unnecessary services. Most people tend to utilize services which cost them nothing (or for which they havealready paid) rather than services for which they have to pay. To take an extreme example:
J.P. called to complain of pain in his left little toe. The doctor asked himto take the bus to Hospital A, about eight blocks. But the bus would cost hisown money, so J.P. called an ambulance. The ambulance personnel, following established procedure, asked if he had chest pain. Being a very agreeable person J.P. said yes, so they gave him oxygen and took him to Hospital B, their assigned emergency designation. He was admitted to the Emergency Room before anyone knew he was at a hospital which his doctor didn't use. So another ambulance (also with oxygen flowing) took him to Hospital A, where x rays revealedthat he had broken the toe while too drunk to remember.
It cost the public almost $500 to get J.P. to the right hospital. The bus would have cost 50 cents, but that would have been his own money!
Most Managed Care organizations try to limit this kind or thing by includingsome form of co-payment. Co-payment also helps limit over-use of services bypatients who "make health care a hobby"--public health clinics which charge nothing find that about one patient in fifty makes more than five times the average number of visits without having any serious illness at all. Often Managed Care organizations do eliminate the co-pay in some instances, usually to encourage patients to use services which will save money in the long run, suchas visits to follow the progress of pregnancy.
Another major problem with Managed Care involves determining what care is actually necessary. Most significant in a managed care plan is the control of what is deemed by the insurer as inappropriate medical care. Many studies havedocumented the wide variation in medical practice patterns, many of which resulted in costly and sometimes inappropriate medical testing and treatments. Some estimate that up to 30 percent of all health care costs result from unnecessary medical care. Selected aspects of managed care programs that have significantly reduced health care spending include requirements for preauthorization for selected hospital medical and surgical admissions, review of lengthsof hospital stays, second surgical opinions, and requirements for outpatientsurgery and diagnostic testing.
Although HMOs and other managed care plans have been effective in reducing inappropriate and unnecessary health-care measures and procedures, there is considerable concern from many quarters that they may overstep their prerogativein this area by cutting back or eliminating certain activities that may be necessary for the patient's care; their goal in cutting costs may jeopardize patients' well-being. For example:
Polly F. was a young woman who led a very active life, including a great dealof hiking and wilderness camping. But she was plagued by backaches which sheattributed to the imbalance imposed by size D breasts. (Most people are surprised at the fact that breast reduction procedures are more common than breast augmentations.) She wanted a plastic surgeon to reduce breast size substantially, but administrators in the Managed Care organization to which she belonged felt that breast reduction is a cosmetic procedure which they need not provide.
There is no objective way of determining whether a patient is really concerned about appearance or about discomfort. Polly challenged the Managed Care organizations denial at their Appeal Committee, which still denied her claim. Ultimately she had the operation at her own expense, and her backaches disappeared.
Finally, some Managed Care organizations have misused the "expensive doctor"test to eliminate some excellent physicians from their provider list. Raw statistics showing lab costs/visit don't really tell whether those tests were appropriate. It may be true that some doctors order laboratory tests to replacethorough study of the patient's history and physical findings. But it is also true that the best doctors are very thorough, that thoroughness includes ordering all appropriate studies. Those often then make prompt diagnoses whichzero in effective treatment, cure the patients faster, and thus actually savehospital and drug costs.
Dealing with Managed Care
The chances are that you will either be covered by Managed Care at some point, or at least that you will have that option. Some facts are useful in deciding whether to enroll, and which plan might be best for you:
- Non-profitplans seem to satisfy their members more thoroughly than for-profit plans. Astudy of disenrollment by Medicare-paid Managed Care organizations revealedthese findings: The 10 programs which had the highest drop out rates were allfor-profit. Nine out of ten of the plans with the lowest drop out rate werenon-profit.
- Although you can usually get into a Managed Care plan aspart of a group without passing a medical examination, you can get into realtrouble if you are disabled by illness and then have to change plans. The most likely reason for forced disenrollment is that the Managed Care organization ceases to serve your area. This is most likely if it has only a small number of subscribers. So size and stability should enter your choice of plan.
- If you have an established relationship with a physician, be sure he ison the plan's provider list. If you haven't, use the suggestions in our article on health care systems to check out the physicians available to youin each plan.
- Be sure that the plan uses the hospital which you wantto utilize.
- Check with local Consumer Service organizations before finalizing your choice.
Finally, if you have a disagreement with your Health Maintenance organizationdon't hesitate to appeal. If your HMO says it won't pay for an operation, test or treatment, that decision is far from final. You generally have available appeal channels inside the organization itself. I denied there, your stateConsumer Service generally can intervene, usually at no cost to you. If majorexpense is involved you can sue. Don't be afraid to pursue these options, and don't just accept disenrollment as an option. You (or your employer or government) have already paid for whatever services you deserve. Collect those services before you walk.