Managed Care

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CQ Researcher

                                                                           PUBLISHED BY CONGRESSIONAL QUARTERLY INC.

Managed Care
Do health-care firms sacrifice quality to cut costs?

               ore than 50 million workers — 70 percent

               of the nation’s eligible employees — now

               have health coverage through managed

               care. The rapid rise of managed-care firms

reflects employers’ efforts to reduce their expenses for
workers’ health benefits. But consumer groups worry that

concern about costs will drive medical decisions in huge

for-profit firms. And physicians’ groups see the focus on                   I
cost as antithetical to professional ethics. The managed-                   N
                                                                                THIS ISSUE
care industry asserts that health care will improve under                           THE ISSUES ........................... 315
its cost-conscious custody. Health-care firms say they have                         BACKGROUND ..................... 324
a financial stake in intervening early and making sure
                                                                                    CHRONOLOGY ..................... 325
                                                                                    CURRENT SITUATION ........... 328
patients get better, not sicker. But seriously ill patients,
                                                                                    AT ISSUE ................................ 329
who are the most expensive gambles for cost-conscious
                                                                                    OUTLOOK ............................. 331
plans, will lose out in the process, some experts predict.
                                                                                    BIBLIOGRAPHY .................... 333
                                                                                    THE NEXT STEP .................... 334

                          CQ    April 12, 1996 • Volume 6, No. 14 • Pages 313-336

                                     Formerly Editorial Research Reports
   MANAGED CARE                                                                T

       THE ISSUES                           OUTLOOK
                                                                            CQ Researcher

                                                                                           April 12, 1996
                                                                                          Volume 6, No. 14
       • Will the trend toward              A Price to Pay?
315    managed care hurt the          331   Cost-cutting by managed-
       quality of health care?              care companies could                             Sandra Stencel
       • Are managed-care                   hurt medical research and
       plans great for healthy              people without health                          MANAGING EDITOR
       people but bad for sick              insurance.                                      Thomas J. Colin
       people?                                                                             ASSOCIATE EDITORS
       • Are HMOs reducing
       costs by cutting fat or by
                                            SIDEBARS AND                                  Sarah M. Magner
                                                                                         Richard L. Worsnop
       cutting necessary medical            GRAPHICS                                         STAFF WRITERS
       services?                                                                            Charles S. Clark
                                            Rise in Managed Care
       • Will new financial           316   Reflects Major Shift                            Mary H. Cooper
                                                                                            Craig Donegan
       incentives hurt the quality          Workers covered by
       of medical care?                                                                      Kenneth Jost
                                            managed care far outnum-
                                            ber those in traditional                      EDITORIAL ASSISTANT
       BACKGROUND                           plans.                                            Tonya Harris

                                            HMO Costs Fell in 1995
324    Birth of Managed Care          318   for First Time
                                                                                              PUBLISHED BY
                                                                                    Congressional Quarterly Inc.
       Health reformers pro-                The drop was nearly 4
       moted group health plans             percent.                                            CHAIRMAN
       as early as the 1920s.                                                               Andrew Barnes
       Rising Health Costs            325   Key events since 1929.                           VICE CHAIRMAN
327    Republican Presidents
                                                                                           Andrew P. Corty
                                            Why Demetrios Dekazos
       Richard Nixon and Ronald
       Reagan embraced HMOs
                                      326   Lost Faith in HMOs
                                                                                        EDITOR AND PUBLISHER
                                                                                               Neil Skene
       as a way to control costs.           He blames his wife’s HMO
                                            for not treating her quickly.                  EXECUTIVE EDITOR
                                                                                           Robert W. Merry
       Consumers’ Concerns
327    Some experts worry that        329   At Issue
                                            Should Congress enact
                                                                                         ASSOCIATE PUBLISHER
                                                                                           Edward S. Hauck
       cost-cutting by for-profit           legislation barring restric-
       managed-care companies               tions on communications
                                            between doctors and             Copyright 1996 Congressional Quarterly Inc., All
       has reduced the quality of                                           Rights Reserved. CQ does not convey any license,
       health care.                         patients?                       right, title or interest in any information — includ-
                                                                            ing information provided to CQ from third parties
                                            Why Christine Blodgett
       CURRENT SITUATION              330   Loves Her HMO
                                                                            — transmitted via any CQ publication or electronic
                                                                            transmission unless previously specified in writing.
                                                                            No part of any CQ publication or transmission may
                                            She says its speed and          be republished, reproduced, transmitted, down-
       Pro-Consumer Action                  concern saved her life.
328    More than half the states
                                                                            loaded or distributed by any means whether elec-
                                                                            tronic or mechanical without prior written permis-
                                                                            sion of CQ. Unauthorized reproduction or trans-
       are expected to consider             FOR FURTHER                     mission of CQ copyrighted material is a violation
       legislation this year giving                                         of federal law carrying civil fines of up to $100,000
       added protection to                  RESEARCH                        and serious criminal sanctions or imprisonment.

       managed-care patients.                                               Bibliographic records and abstracts included in
                                      333   Bibliography
                                            Selected sources used.
                                                                            The Next Step section of this publication are
                                                                            from UMI's Newspaper and Periodical Abstracts
       Focus on Quality
330    A foundation representing
                                                                            database, and are used with permission.

       major employers is             334   The Next Step
                                            Additional articles from        The CQ Researcher (ISSN 1056-2036). Formerly
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314    CQ Researcher
                                                 Managed Care                                                           BY SARAH GLAZER

THE ISSUES                                                                                        ment was appropriate or not may
                                                                                                  never be fully resolved, since the suc-
                                                                                                  cess of bone marrow transplants de-
                                                                                                  pends on each individual’s case. Nor

           hen doctors discovered                                                                 is there likely to be a ready answer to
           Nelene Fox’s breast cancer                                                             the question of how much society
           in 1991, the 38-year-old Cali-                                                         should spend for expensive treatments
fornia school teacher and mother of                                                               when there is little hope.
three children thought her best hope                                                                  The underlying principle of man-
for survival was a bone marrow trans-                                                             aged care is to keep the entire com-
plant. But Health Net, her health                                                                 munity healthy by providing preven-
maintenance organization (HMO),                                                                   tive care, such as immunizations and
labeled the procedure experimental                                                                mammograms, at little or no cost. In
and refused to pay for one.*                                                                      exchange for lower premiums,
     Fox and her husband couldn’t af-                                                               copayments and deductibles, the con-
ford the $200,000 operation, but over                                                                sumer agrees to see a limited group
the next few months she worked tire-                                                                    of physicians selected by the plan.
lessly with friends and family to raise               Fox’s brother, attorney                            The plan keeps costs down by
the money through bake sales and                      Mark Hiepler, who handled                           limiting the consumer’s access
other fund-raising events. Fox died in                the family’s lawsuit.                                 to expensive specialists and
early 1993, nine months after under-                     To many observers, how-                             procedures.
going the operation.                                  ever, performing the transplant                            Hiepler says the trade-off
     Fox’s family sued Health Net and in              against uncertain odds of success                        is a bad one for the con-
December 1993 won an $89-million                      represented all that was wrong                             sumer. ‘‘The HMOs have
judgment — the largest ever made                      with the old-style, ‘‘unmanaged’’ sys-                     seduced the public into
against an insurance company for de-                  tem of medical insurance. Cost was          not wanting to pay for anything — a
nying health benefits. (Health Net ap-                rarely a consideration in its medical       tetanus shot, a breast exam, a physical
pealed the jury’s award but settled the               decisions — even if the procedure           — $60 procedures that any of us could
case while on appeal for an undis-                    was likely to be ineffective.               afford. On the other hand, they have
closed amount.)                                          ‘‘A lot of people said there was no      all kinds of structural impediments to
     The Nelene Fox case and others                   reason to put [Fox] through the agony       deny us something else that maybe
since have resounded throughout the                   of prolonging death,’’ says Donald W.       none of us can afford.’’
medical world, raising fundamental                    Parsons, associate medical director for         ‘‘Health plans have no interest in
questions about managed care’s drive                  government relations at Kaiser              spending more money because they let
to curb expenses and the possible                     Permanente Medical Groups in Wash-          someone get good and sick,’’ retorts
effects on health-care quality. Health                ington. After all, Parsons says, Fox died   Susan Pisano, director of communica-
Net said its decisions were based on                  within months of the operation, sug-        tions at the American Association of
medical factors, but the Fox family                   gesting she was not an ideal candidate.     Health Plans (AAHP). ‘‘They have every
produced evidence that the HMO’s                         Hiepler vehemently disagrees that        reason to intervene early and make sure
managers received bonuses for keep-                   the operation merely prolonged his          patients don’t get sicker.’’ Pisano says
ing treatment expenses low. 1                         sister’s suffering. ‘‘She had eight         malpractice lawsuits are no more com-
     The same month that Health Net                   months [after the operation] when she       mon in managed care than under tra-
turned Fox down, $4.8 million was sit-                was back to being a normal person,’’        ditional insurance plans.
ting in the HMO’s transplant fund. ‘‘If               he says. ‘‘When you look at the hu-             The negative publicity over the Fox
the money isn’t used, Health Net keeps                man factors, there’s a child who will       suit prompted Health Net and other
it’’ and improves its profitability, says             remember her Mom, because she was           HMOs to authorize bone marrow
                                                      almost 4 1/2 when her Mom died. . . .       transplants more freely, Hiepler says.
                                                      We played softball together on              Since his sister’s litigation, Hiepler has
* The HMO covered bone marrow transplants but         Thanksgiving, only a month after she        handled 127 similar cases, and in all
excluded ‘‘experimental’’ procedures. The plan said
Fox’s cancer was so far advanced that the procedure   had been in the hospital.’’                 but two cases the HMOs involved
would be considered experimental in her case.            The question of whether Fox’s treat-     agreed to pay without going to court.

                                                                                                            April 12, 1996             315

 Rise in Managed Care Reflects Major Shift
 The number of workers in managed-care health plans has risen steadily in recent years, reflecting a major shift away
 from traditional indemnity plans. In 1995, workers in managed care outnumbered those in traditional plans by more
 than two to one.

           1992                      1993                            1994                            1995
          20%                      19%
                                                                  23%                              27%    29%        Managed-Care Plans
  5%                            7%                                           37%
                   52%                      48%                                                                            Health
                                                               15%                                                         maintenance
         23%                       27%                                                         14%                         organizations
                                                                       25%                               29%
                                                                                                                           service plans
 Note: Percentages do not add up to 100 because of rounding. Figures are for firms or government                           organizations
 agencies with 10 or more employees.
 Source: Foster Higgins National Survey of Employer-sponsored Health Plans, 1996.

   Hiepler sees the new willingness to      has swept the nation so rapidly. More                   costs, they said. To make a reasonable
pay as a positive outcome of the Fox        than 50 million people, or 70 percent                   income, the authors said physicians
suit. But Parsons takes another view.       of the eligible employees, belong to                    must earn bonuses for keeping down
‘‘Most HMOs, because of the Nelene          some kind of managed-care plan,                         hospitalizations, referrals to special-
Fox case, are probably allowing more        according to a major 1995 survey.* By                   ists and other costs. 2
people to [have] bone marrow trans-         comparison, fewer than half the eli-                        ‘‘Patients count on their doctor to
plants than need them.’’                    gible workers belonged in 1992.                         tell them what they need. When the
   As the nation shifts to managed             The impetus behind the managed-                      doctor is thinking, ‘I will have to close
care and changes its focus from high-       care revolution has been employers                      my doors if I give too much care,’ we
tech care for the very sick to keeping      trying to reduce their expenses for                     will have a real quality problem,’’ says
the overall population healthy, con-        workers’ health benefits. After years                   co-author Steffie Woolhandler.
troversies like the Fox case are inevi-     of increases as high as 18 percent,                         Woolhandler and David U.
table, some experts say.                    employers’ per capita health costs                      Himmelstein criticized a so-called
   ‘‘For some individuals, their quality    dropped in 1994, and only rose about                    ‘‘gag’’ clause in their contracts with
of care will suffer even if for the         2 percent in 1995. But as managed                       the managed-care company U.S.
population covered you can show that        care has spread, it has run into resent-                Healthcare. They said it prohibits
the quality of care has increased,’’        ment from doctors who see it as                         doctors in the plan from talking to
predicts William S. Custer, an econo-       antithetical to professional ethics.                    patients about the plan’s financial
mist specializing in health care at            In a recent article in The New En-                   incentives to limit care or about treat-
Georgia State University. ‘‘I think some    gland Journal of Medicine, two                          ments the plan won’t cover.
of these complaints are coming be-          Harvard doctors warned of economic                          A few days after Himmelstein criti-
cause we’re trying to cut costs,’’ he       threats from HMOs. Doctors who                          cized the policy on the ‘‘Donahue’’ show
adds. ‘‘That means hard choices are         contract with HMOs may find that the                    last November, U.S. Healthcare termi-
being made, and some people are             fixed fee they receive for each patient,                nated his contract. In February, follow-
falling on the wrong side of those          known as ‘‘capitation,’’ just covers their              ing a burst of publicity, the company
hard choices.’’                                                                                     changed its mind. That same month,
   Questions over how well managed                                                                  U.S. Healthcare decided to allow its
                                            * The survey by Foster Higgins, an employee-benefits
care actually works have taken on           consulting firm, covered firms with 10 or more          physicians to tell patients how the com-
new urgency because managed care            employees.                                              pany reimburses doctors, though not

316     CQ Researcher
the specific rates paid. 3                    HMOs as threats to their income. and the medical community are asking:
    The AAHP contends Himmelstein Under fee-for-service plans, the tradi-
and other doctors misunderstood their tional system of billing, doctors charge Will the trend toward managed
contracts’ provisions. ‘‘Physicians are an additional fee for each procedure care hurt the quality of health
encouraged to discuss health treatment or test.                                      care?
options whether they’re covered or not,’’        To counter anti-managed-care senti-    Studies comparing managed care
Pisano says. ‘‘What physicians are asked ments, the AAHP recently launched a to traditional fee-for-service find the
not to do is bring into the                                                                   quality of care about equal.
examining room their com-                                                                     A 1994 review of 16 studies
plaints about the plan or about                                                               generally found better or
their payment.’’                                                                              equal results for HMO pa-
    Organizations representing                                                                tients suffering from a wide
consumers and the chronically                                                                 range of diseases, including
ill have joined with the Ameri-                                                               congestive heart failure,
can Medical Association                                                                       colorectal cancer and diabe-
(AMA) and physician specialty                                                                 tes. These studies based their
groups to fight for legislation                                                               conclusions on clinical results
they say would provide more                                                                   such as how many patients
accountability from HMOs                                                                      died or how far a patient’s
and greater patient protec-                                                                   cancer had advanced before
tions. In January, Massachu-                                                                  it was discovered. 4
setts passed legislation forbid-                                                                  Consumer-satisfaction sur-
ding HMOs from imposing                                                                       veys tell a slightly more com-
‘‘gag rules.’’                                 ‘‘Most HMOs, because of the                    plicated story, the same re-
    Citizen Action, a 3-million-                                                              view found. HMO patients are
member consumer group, has
                                             Nelene Fox case, are probably                    less likely to be satisfied with
been lobbying in state legisla-                  allowing more people to                      the care they’re getting but
tures for laws that would re-                                                                 happier with the costs than
quire plans to disclose how                 [have] bone marrow transplants                    those in fee-for-service. In
they pay their doctors; give                                                                  short, says review co-author
patients the right to choose                           than need them.’’                      Harold S. Luft, a professor of
specialists outside the plan; and                                                             health economics at the Uni-
provide appeals for patients
                                                               — Donald W. Parsons            versity of California, San Fran-
who get turned down for ex-                              Associate medical director           cisco, consumers are willing
pensive treatments.                            Kaiser Permanente Medical Groups               to trade some quality in ser-
    ‘‘When you have huge, for-                                                                vice for lower costs.
profit managed-care companies                                                                    But critics of managed care
that are concerned about making nationwide media campaign. ‘‘I believe say the published studies tend to be
money, I don’t know how anyone could the vested interests of the old fee-for- based on the best of managed care —
think they would put the needs of service [plans] have been successful in o l d - s t y l e H M O s l i k e K a i s e r
patients ahead of making money,’’ says selling the public a bill of goods,’’ says Permanente with salaried, dedicated
Cathy Hurwit, Citizen Action’s legisla- John Ludden, senior vice president of staffs. The fastest-growing kind of
tive director. ‘‘In many cases, it’s not the medical affairs for Harvard Pilgrim managed care today is represented by
consumer buying the plan — it’s the Healthcare, a managed-care plan, and looser networks of doctors under
employer. The employer is concerned an AAHP board member. ‘‘Every spe- contract with health plans to care for
about costs rather than quality.’’            cialist knows there are too many spe- their enrollees. (See glossary, p. 320.)
    Defenders of HMOs see patient- cialists now, and there will be many                 Doctors in these plans usually care
doctor forays into state legislatures as more in the future. The trough will not for the plan’s patients for fixed or
attempts to kill a new way of practic- be as full, and more bodies will be discounted fees. Consequently, critics
ing medicine that eliminates over- seeking to feed at the trough.’’                  say, doctors in these networks are
treatment. They say their enemies are            As managed-care firms struggle with more likely to be influenced by finan-
old-style fee-for-service doctors — in- cost and quality issues, these are some cial incentives to deny care.
cluding many specialists — who view of the questions legislatures, consumers            ‘‘HMOs are a minority of managed

                                                                                                April 12, 1996           317
                                                                                          patients because consumers usually
   HMO Costs Fell in 1995 for First Time                                                  don’t know if their doctor has a contract
                                                                                          that encourages limitations on hospital-
   The average cost of HMO health-care coverage in the U.S. dropped nearly 4              ization or referrals. Generally, informa-
   percent from 1994 to 1995 — the first decline in 10 years.* The average cost of        tion in such contracts is confidential,
   traditional fee-for-service (indemnity) plans rose during the same period. The         and doctors are prohibited from sharing
   drop in HMO fees reflected lower costs for smaller employers.                          the information with patients. Further
                                                                                          complicating matters, most doctors are
                                    Medical Plan Costs                                    affiliated with a variety of plans with
                                                                                          different arrangements, some managed
             $0      $500   $1000    $1500     $2000   $2500   $3000   $3500   $4000      care and some not.
                                                                                              ‘‘This managed care thing is a big,
                                                                                          black box, and that’s to the advantage
   indemnity                                                                              of managed care,’’ says Starfield. ‘‘They
      plan                                                                                can say anything they want about it.’’
                                                                                              Most experts agree there is a huge
                                                                          Annual Cost
                                                                                          range in quality in managed care. ‘‘Man-
   Health                                                                      1994       aged care means something different in
 maintenance                                                                              every region of the country,’’ says Kevin
 organization                                                                  1995       Schulman, a professor in the clinical
                                                                                          economics research unit at Georgetown
                                                                                          University Medical Center.
   Note: The survey covered active employees in firms or government agencies with             In cities where managed care is a
   10 or more employees.                                                                  relatively new phenomenon, health
   * The drop was the first in the 10-year history of the Foster-Higgins survey.          companies are fighting for a share of
   Source: Foster Higgins National Survey of Employer-sponsored Health Plans,             the work-force market by offering the
   1996.                                                                                  lowest possible premiums to employ-
                                                                                          ers rather than superior service,
                                                                                          Schulman says. By contrast, where
                                                                                          managed care has become established,
                                                                                          plans tend to compete more on qual-
                                                                                          ity than cost, he finds. Those markets
                                                                                          ‘‘can’t cut doctors’ payments anymore
                                                                                          and all of a sudden have to deliver
                                                                                          value,’’ Schulman says.
                                                                                              Yet quality has suddenly become a
                                                                                          hot issue for managed care. Much of it
                                                                                          has been stimulated by recent horror
                                                                                          stories in which patients charge fatal
                                                                                          lack of treatment by HMOs. In Septem-
                                                                                          ber, the New York Post led off a front-
                                                                                          page series with screaming headlines
                                                                                          about a baby who died from a defective
                                                                                          heart. The mother said she was con-
                                                                                          vinced the problem would have been
                                                                                          detected had the HMO allowed her an
                                                                                          extra day in the hospital. 5
                                                                                              In January, Time magazine’s cover
care; they’re the best kind of care,’’ says     more, they’re being used to represent     pictured a gagged doctor. The story
Barbara Starfield, a professor of health        managed care, when managed care is        questioned whether patients in man-
policy and pediatrics at Johns Hopkins          something else.’’                         aged care ‘‘can still trust their doctors.’’ 6
University. ‘‘Now they’re mixed up with           Starfield says it’s hard to study the       But many health-care experts say
all the rest, which are far inferior. What’s    impact of newer financial incentives on   the anecdotes that reporters cite do

318     CQ Researcher
not represent the experiences most           doctors from diverse fields working to-       medical group, an independent prac-
people will have with managed care.          gether on a patient’s problems.               tice association (IPA) that contracted
‘‘You see the demonizing of managed             ‘‘HMOs can provide an integrated           with CIGNA HealthCare of Southern
care in the press,’’ says Helen H. Mills,    version of care for people with very          California, required her to consult
president of the Mills Group, an             complex illnesses,’’ says Ludden, con-        instead with three neurologists in the
employee-benefits consulting firm in         trasting it to the ‘‘splintered, I-can-get-   group. But Baynes maintains that none
Fairfax, Va. ‘‘They’re featuring cases       my-own-specialist’’ approach under            of the doctors were familiar with her
that test the outer limits of how plans      fee-for service. He points to Harvard         side effects from a new MS drug.
balance economics and ethics.’’              Pilgrim Healthcare’s 20-year-old pro-             CIGNA finally agreed to let Baynes
    Yet on balance, managed-care plans       gram for children with Down’s Syn-            see the outside specialist after she
have the potential to raise the quality      drome, which coordinates care by              contacted the California Department
of medical care, Mills suggests, espe-       pediatricians, cardiologists and neu-         of Corporations, which regulates
cially in small towns where doctors          rologists, as ‘‘an example of where           HMOs. In a written statement, CIGNA
practice without monitoring from             HMOs function extraordinarily well.’’         said Baynes ‘‘was at all times under
outside experts. Managed-care plans             But critics charge that newer-style        the care of highly qualified physicians
train administrative ‘‘cost cops’’ to in-    plans lack that coordination because          who had access to’’ the specialist in
sist that their doctors follow research-     they tend to be loose networks of             question through consultations.
backed medical guidelines before             doctors in private practice who don’t              Research shows that it’s important
approving a medical procedure. ‘‘By          necessarily know one another. Often,          for patients to have a long-term rela-
having this bureaucracy looking over         they are in the same plan merely by           tionship with their primary doctor.
the shoulder of doctors, forcing their       virtue of their agreement to take the         ‘‘Managed care right away interferes
continuing education, the bureaucracy        plan’s patients for a fixed or dis-           with that,’’ Starfield says, ‘‘because
is tracking the outcomes of proce-           counted fee. Primary-care physicians          managed care is under the control of
dures,’’ she says. ‘‘That’s not all bad.’’   in managed care reported that they            employers generally and subject to
    Helen Darling, manager of health-        referred patients more often to a spe-        change every year.’’
care programs for Xerox Corp., says          cialist unknown to them and that they             Every time the employer changes
managed care generally delivers bet-         spoke personally with the specialist          plan offerings, critics say, the list of
ter value for the money. A traditional       less often than doctors in fee for ser-       doctors covered by the plan is also
fee-for-service plan provided to the         vice, one study found. 7                      likely to change. This lack of continuity
family of an average Xerox employee             Delays in referrals to the right spe-      can also interfere with managed care’s
costs $12,000 a year, as opposed to          cialist can have serious consequences         basic philosophy, which encourages
$6,000 for an HMO, and the HMO               for people with complicated illnesses.        physicians to deliver preventive care.
plan is 17 percent richer in benefits,       Managed care relies on a generalist,              In dentistry, a branch of medicine
Darling says. Xerox has led the field        such as a family physician or general         that particularly stresses preventive care,
in demanding high quality in its plans.      practitioner, to act as the ‘‘gatekeeper’’    some dentists say managed care’s phi-
‘‘Our philosophy is good managed             in deciding whether a patient gets            losophy doesn’t work in the real world
care is better care overall,’’ Darling       referred to a specialist. 8                   because employers have ultimate con-
says. Traditional plans have become             ‘‘You’ve got to be sure the                trol over the choice of doctors.
so expensive for employers, she adds,        gatekeeper has enough knowledge                   ‘‘The concept of HMOs makes
that ‘‘unmanaged fee-for-service is not      and will refer quickly when needed,’’         sense,’’ says Henry Hermann, a den-
going to exist in two to three years.’’      says Martha Keys, vice president of           tist in Falls Church, Va. ‘‘If someone
    It’s not always clear whether the        the National Multiple Sclerosis Soci-         pays me a set fee to take care of this
widely publicized misjudgments made          ety. When multiple sclerosis (MS)             patient for the next 15 to 20 years, I
by managed-care doctors to limit care        patients go into worsened conditions          would give them the best care and
are due to the system of care itself or      known as ‘‘exacerbations,’’ a delay in        wouldn’t want complications.’’
are medical mistakes of the kind that        getting the right treatment can some-             But he adds, ‘‘In reality, I know I
happen in fee-for-service as well. But       times mean the difference between             won’t have that patient for 15 to 20
critics say they presage new problems        paralysis or preventing it, experts at        years’’ because employees’ plan offer-
in the rapidly changing health-care          the society say.                              ings change so often. ‘‘In the short-
market.                                         Lisa Baynes, 39, an MS patient in          term, the incentive is to do least.’’
     One of the long-heralded advantages     Mission Viejo, Calif., battled with her       Hermann no longer takes managed-
of managed care has been its ability to      HMO for a year before getting permis-         care patients, he says, because the
offer one-stop shopping with a team of       sion to see an MS specialist. Her             fees barely cover his costs and be-

                                                                                                     April 12, 1996              319

 A Managed-Care Glossary
      ee-for-Service: The traditional way of paying for           out of their private offices as part of a medical group, contract
      medical services. Doctors in private practice charge a      with a health plan for a fee or fixed amount per patient.
      fee for each service provided, and the patient’s insurer       Preferred Provider Organization (PPO): A managed-
 pays all or part of that fee.                                    care plan in which a network of doctors and hospitals
    Capitation: An arrangement in which managed-care plans        provides care at a lower cost than through traditional
 pay a fixed-fee to physicians for each plan member they          insurance. The choice is usually wider than under HMOs.
 care for. Doctors receive the fixed amount per month,               Point-of-Service (POS): A form of HMO, sometimes
 regardless of how much or how little care the plan member        called a ‘‘freedom’’ plan, which allows members to choose
 receives.                                                        services from providers outside the HMO’s network as long
    Health Maintenance Organization (HMO): An                     as the consumer is willing to pay more — typically a higher
 organization that provides health care in return for pre-set     deductible and a percentage of the cost of care.
 monthly payments. Most HMOs provide care through a                  Primary Care Physician: HMOs and managed-care plans
 network of doctors and hospitals that their members must         usually require members to choose a physician devoted to
 use in order to be covered.                                      general medical care — sometimes known as a ‘‘gatekeeper’’
    Independent Practice Association (IPA): A managed-            — who provides routine care and authorizes care by
 care plan in which individual physicians, typically practicing   specialists.

cause he can’t count on managed-care        advertise informational meetings at          to wait 20 minutes on a phone line, it
patients to stay with his practice.         Pizza Hut, thus attracting elderly           may deter a person using a pay phone
   But others find managed care a vast      people vigorous enough to drive there.       who has two children pulling on her
improvement over the old method of          Critics who think HMOs cherry pick           skirt,’’ says Woolhandler. ‘‘Or you may
picking a doctor, which relied on the       say they purposely shun sick people          have to go to a specialist who may not
anecdotes of friends and neighbors.         because they’re expensive to care for.       be near your neighborhood.’’
Managed-care companies and the                 ‘‘My summary of the evidence                 Bolstering Woolhandler’s case is a
large employers that hire them are          would be if you’re a basically healthy       government-funded study that found
more likely to investigate doctors’         person, care is probably fine in an          Medicare patients who enrolled in
credentials before accepting them into      HMO,’’ Woolhandler says. ‘‘The sicker        HMOs in 1990 were more likely to be
their plan, they say.                       and more vulnerable you are the more         healthy than those in traditional fee-
   ‘‘Before, my employees had a tele-       likely quality problems are to surface.      for-service plans. However, since that
phone book,’’ says benefits consultant      Pap smears and cholesterol tests are         study there has been a dramatic in-
Mills. ‘‘Now they have a directory of       cheap. If they can keep you enrolled         crease in Medicare HMO enrollment,
hospitals and physicians who have           with that, they’re delighted to have         which rose by almost 1 million people
been pretty carefully screened.’’           you. It’s chronically sick people they       from 1990 to 1994. 11 Today’s HMOs
                                            don’t want, and the data suggest they        may have a more representative cross-
Are managed-care plans great                do a lousy job’’ with them.                  section of the elderly population,
for healthy people but bad for                 Woolhandler cites studies showing         suggests Teresa Fama, deputy director
sick people?                                that HMO treatment results are worse         of the Robert Wood Johnson
   Critics say managed-care plans have      for vulnerable groups, such as the           Foundation’s National Program Office
healthier populations than a traditional    elderly and the poor. 9                      for Chronic Care Initiatives in HMOs.
health insurance plan, such as Blue            In the authoritative Rand Health             In fact, studies have been equally
Cross, because they market to people        Insurance Experiment conducted in            divided on the question of whether
who have few health worries and like        the 1970s, patients were randomly            HMOs cherry pick. A recent study by
the idea of low premiums and free visits.   assigned to an HMO or fee-for-service        Fama of consumers under age 65 with
   In ‘‘cherry picking,’’ as such target-   plan. On balance, patients fared about       private insurance found equal num-
ing is known, an HMO might seek out         equally. But low-income, medically           bers of chronically ill patients in HMOs
a computer company that employs             high-risk patients had a greater chance      and traditional plans. 12
healthy men in their 30s and offer a        of dying in an HMO’s care. 10                   Fama thinks it may be harder for
lower premium than the competing               One explanation for the disparity is      HMOs to pick and choose among
Blue Cross plan. In the elderly market      that high-risk people may be daunted         employees these days as they pen-
served by Medicare, a company might         by an HMO’s bureaucracy. ‘‘If you have       etrate an increasing share of the

320     CQ Researcher
market. ‘‘They can’t go to an employer       for-service, even though managed-care       plans, HMOs admit fewer patients to the
and say we only want people who run          patients got more of their treatment        hospital, get them out sooner and use
three miles a day,’’ she says. ‘‘They        from a generalist. 14                       fewer expensive procedures and tests. 15
have to take the whole group.’’                 By relying heavily on a primary-care        The result, many analysts say, has
    The question of how well HMOs            physician as an overall health-care co-     been to drive down the cost of health-
care for the chronically ill is hotly        ordinator, HMOs may give more com-          insurance premiums. For the first time
contested. Organizations representing        prehensive care to someone with a           in 10 years, the average cost of HMO
chronically ill patients with diseases       disease that crosses several specialties.   coverage declined last year (by 3.8
like MS, asthma and arthritis                                                                     percent) while fee-for-service
charge that their members are                                                                     premiums continued to rise. 16
more likely to have trouble                                                                           But while health economists
seeing specialists familiar with                                                                  hail the cutback in services as
their diseases. Many of these                                                                     an advance, patients and critics
groups have joined with phy-                                                                      of managed care have raised
sician specialists in the Pa-                                                                     alarums about whether it con-
tient Access to Specialty Care                                                                    stitutes inferior care.
Coalition to demand that pa-                                                                          The trend toward reduced
tients be allowed to see a                                                                        hospital stays should be ‘‘wel-
specialist of their choosing                                                                      comed by the public as an
outside an HMO’s network.                                                                         advance in patient care,’’ wrote
    According to a recent sur-                                                                    Gifford Boyce-Smith, medical
vey by the Harvard School of                                                                      director of CIGNA HealthCare
Public Health, sick managed-                ‘‘My summary of the evidence                          of Northern California, in a
care enrollees report more                                                                        recent op-ed article. 17 High-
problems getting in to see a                 would be if you’re a basically                       technology medical innova-
specialist than their fee-for-                                                                    tions and more preventive care
service counterparts. Man-
                                                 healthy person, care is                          permit HMOs like CIGNA to
aged-care patients reported                 probably fine in an HMO. The                          send patients home sooner
longer average waits to see a                                                                     because they get better faster,
specialist (17 days vs. 12                    sicker and more vulnerable                          according to Boyce-Smith.
days). They were also more                                                                            Ten years ago, for example,
likely to report incorrect care             you are the more likely quality                       gallbladder surgery required
by their general physician (12                                                                    hospitalization for at least a
percent vs. 5 percent) and by                  problems are to surface.’’                         week. Today, patients can be
a specialist they saw (10 per-                           — Steffie Woolhandler                    home in a day or two follow-
cent vs. 3 percent). 13                                                                           ing laparoscopic surgery,
    But when researchers have                   Associate professor of medicine                   which permits doctors to
looked at how chronically ill                           Harvard Medical School                    make a much smaller inci-
patients fair from a health                                                                       sion, operating with the aid of
standpoint, managed care and fee-for-                                                             a tiny TV camera.
service have an equal track record,          ‘‘Someone who has diabetes doesn’t             In addition, hospitals can be an
according to Fama. Alan L. Hillman,          only have diabetes; he has other prob-      unhealthful place to recuperate. Five
director of the Center for Health Policy     lems,’’ says Fama, noting that diabetics    out of every 100 hospitalized people
at the University of Pennsylvania, goes      are prone to kidney and heart trouble       pick up an infection in the hospital,
even further. ‘‘In the few clinical situ-    as well. ‘‘One of the dangers of relying    noted Boyce-Smith.
ations that have been studied, man-          too much on specialists is a lot of other      But people who work in hospitals
aged care comes out better,’’ he says.       things get neglected.’’                     say they often feel uncomfortable with
    It’s true HMOs rely more heavily on                                                  the pressure put on them to discharge
generalists than specialists, says Fama,     Are HMOs reducing costs by                  patients as quickly as possible. Man-
but that may constitute an improve-          cutting fat or by cutting neces-            aged-care plans increasingly demand
ment. A recent study found that dia-         sary medical services?                      that medical procedures once done in
betes and hypertension patients fared          Numerous studies have shown that          the hospital be done in a less expen-
equally well in managed care and fee-        compared with traditional insurance         sive setting like home, or that the

                                                                                                   April 12, 1996            321
patient return for outpatient visits.        prise to doctors, who complain bit-          see that Kaiser, which has been set-
    While the insurer may be right           terly about the forms they have to fill      ting the standard in our state — and
about the specific procedure, it often       out for managed-care firms. Some             probably the nation — is taking these
means the nurse and the doctor don’t         hospitals, like Georgetown, even have        measures,’’ said Jeanne Finberg of
get the opportunity to help the patient      personnel devoted to dealing with            Consumers Union. 22
resolve other medical and psychologi-        managed-care staffers who question              But Kaiser said it was simply fol-
cal issues, says Kathleen Mitchell,          medical expenses.                            lowing the advice of the American
director of medical nursing at                   From 1968 to 1993, administrative        College of Obstetricians and Gyne-
Georgetown University Medical Cen-           staff grew from 18 percent to 27 per-        cologists. Its revised guidelines say
ter. She’s especially concerned about        cent of the overall health-care work         that a woman whose Pap smear is
the trend of releasing new mothers           force. During the same period, doc-          normal for three years does not ben-
and their babies after just one day.         tors and nurses shrank from 51 per-          efit by having smears more frequently
    ‘‘We’ve had plenty of patients here      cent of the work force to 43 percent. 19     than every two to three years.
who felt unready to go home within               ‘‘The switch to [for-profit] managed        Southern California Kaiser, which
that 24-hour [maternity stay] but left       care is substituting a lot of administra-    adopted the guidelines first, used the
because that’s what their insurer            tive work for hands-on care,’’ says          money it had saved from cutting back
mandated,’’ Mitchell says. ‘‘Nursing         Woolhandler. ‘‘We’re seeing patients         on the exams to reach women in the
staff have agonized that the individual      receive less nursing care from physi-        plan who might never have gotten
would not have gotten information            cians and others.’’                          Pap smears before, particularly lower
about breast feeding, skin care for the          But advocates for corporate man-         income, less-educated women. ‘‘The
baby, diet, etc.’’                           aged care say a certain amount of            survival rate from cervical cancer is
    There’s no research evidence that        bureaucracy is necessary to reap the         better because we’re reaching more
shortened hospital stays are worse for       reduced costs and procedures for which       women,’’ Parsons reports. Many plans
the health of mothers and newborns. In       managed care has been praised. In fact,      send Pap smear reminders to mem-
fact, says Kaiser’s Parsons, when women      according to Rand economist Glenn            bers on their birthdays.
were staying in the hospital routinely       Melnick, having administrators occupy           The controversy illustrates the in-
for five days, ‘‘We had women getting        27 percent of the work force ‘‘might be      herent conflict in managed care be-
blood clots and urinary infections. We       the right mix for consumers, in terms of     tween doing what’s best for the com-
discovered less is better.’’                 creating administrative efficiency.’’ 20     munity as a whole and doing what’s
    ‘‘It may not show up in a mortality          Hurwit of Citizen Action points to       best for the individual, says Georgia
statistic,’’ Woolhandler concedes, ‘‘but     a California Medical Association sur-        State economist Custer. ‘‘I guarantee
when the patient is at home vomiting,        vey showing that some managed-care           you there’s going to be a cancer
in pain or unable to get to the toilet,      plans take more than 25 cents of each        undiscovered that would have been
it’s a real quality of life issue.’’         premium dollar for administration and        discovered had you done it every
    Past studies have shown that as          profit. 21 ‘‘There are a lot of plans that   year,’’ he says. ‘‘It’s clearly a bad health
HMOs like Kaiser decreased hospital          are ripping consumers off,’’ she says.       result. But isn’t society better off
days, they substituted increased outpa-      ‘‘Before you start limiting consumer         spending the money elsewhere?’’
tient care. But judging from a recent        choice and cutting back on benefits,
study, some California doctors’ groups       let’s talk about getting rid of the fat      Will new financial incentives
that contract with HMOs to take over         and getting more of those dollars back       hurt the quality of medical
patients’ medical care for a fixed fee are   to medical care.’’ Citizen Action sup-       care?
cutting back on both kinds of care. 18       ports legislation to require HMOs to            Under the fee-for-service system,
    ‘‘One explanation is they’re not giv-    spend at least 85 percent of the pre-        doctors have an incentive to provide
ing enough care,’’ says Woolhandler,         mium dollar on medical care.                 more procedures because they get
who acknowledges they could also                   When California consumers dis-         paid for each one, economists have
have a healthier-than-average group          covered that Northern California Kai-        long argued.
of patients.                                 ser was cutting back on annual, rou-            Managed-care advocates point to a
    A new study co-authored by               tine Pap smears to detect cervical           recent example reported in The Wall
Woolhandler shows managed care has           cancer in women, there was an out-           Street Journal: a rash of unneeded
boosted the number of people hired           cry. Some press reports suggested            skull surgeries performed on babies
to push paper while reducing the             Kaiser was streamlining under pres-          misdiagnosed with a rare brain con-
number who directly care for patients.       sure to be cost-competitive with other       dition. A few babies died during the
The paper-pushing comes as no sur-           managed-care plans. ‘‘It is very sad to      surgery, and some were permanently

322      CQ Researcher
disabled. 23                               ous’’ to permit such wide variations in              But newer types of incentives em-
   ‘‘If I go to a surgeon who wants to medical practice when ‘‘there is no ployed by managed-care firms have
do an operation on a baby with a evidence . . . that more expenditure drawn fire. Under the capitation sys-
funny head, he gets an $8,000 fee,’’ leads to better health.’’ 25                            tem, doctors earn a fixed monthly fee
says Parsons, a surgeon. ‘‘Let me go            ‘‘There have always been financial for each patient they sign up to care
to a managed-care surgeon without a incentives in medicine,’’ says Hillman. for no matter how much or how little
financial stake.’’                         ‘‘It’s just the incentives in the past have care they give that patient.
   In the 1980s, Dartmouth College been perverse because they reward                             In November 1995, California at-
epidemiologist John E. Wennberg doctors and hospitals for doing more. torney Hiepler won a $3 million jury
found that doctors in Boston were In the more-you-do-the-more-you-get- verdict against two doctors in a case
much more likely to hospital-                                                                         where he essentially put the
ize patients for common con-                                                                          capitation system on trial. The
ditions like pneumonia than                                                                           doctors were paid a fixed
were doctors in New Haven,                                                                            monthly fee per patient and
Conn., who treated these con-                                                                         were responsible for the first
ditions outside the hospital. It                                                                      $5,000 of care on each pa-
turned out that Boston had                                                                            tient, including referrals, tests
many more hospital beds per                                                                           and some hospitalization.
capita than New Haven.                                                                                   The case concerned a 34-
   Most economists thought                                                                            year-old woman who died of
the findings indicated that                                                                           colon cancer in April 1994.

                                                                                                 Ventura County Star/Helena Pacquarella
medical decisions were often                                                                          Joyce Ching had visited the
driven by economics. Physi-                                                                           doctors at her plan complain-
cians would come up with                                                                              ing of rectal bleeding and
additional tests and proce-                                                                           pelvic pain. But it took 11
dures to fill empty hospital                                                                          weeks and repeated requests
beds and sparsely filled wait-                                                                        before the doctors sent her to
ing rooms — and to pad their                                                                          a specialist, who diagnosed
incomes.                                                                                              her cancer immediately. By
   The studies also helped to                                                                         that time, the chances of
explain why the United States                                                                         curing her cancer had
spent more of its national in-                                                                        dwindled. She died 20
come on health care than              Attorney Mark Hiepler (left, holding 5-year-old Justin          months later.
other industrialized nations           Ching), won a $3 million malpractice settlement for               In the Ching case, Hiepler
                                    Dave Ching (right), in the 1994 death of his wife, Joyce.
but had citizens who were no        She had complained to doctors at her California HMO of            blames the form of payment.
healthier. To employers suf-         rectal bleeding, but it took 11 weeks before they sent her       ‘‘There’s an incentive not to
fering under the burden of                 to a specialist, who diagnosed her with colon              treat, never to send to the
                                          cancer immediately. She died 20 months later.
skyrocketing health premi-                                                                            emergency room; it comes out
ums, the studies seemed to point the paid situation, that’s a very important of the doctor’s budget,’’ Hiepler says. ‘‘
way to cuts that could reduce costs — contributor to way too many surgical The doctor makes more money if he
by cutting out unnecessary services — interventions for things like hysterecto- doesn’t see you, doesn’t treat you,
without hurting people’s health.           mies and Caesarean sections.’’                    doesn’t refer you.’’
   In a new report published by the             Managed care has tried to modify                Woolhandler and Himmelstein con-
American Hospital Association, and more recently to reverse these tended that the base capitation payment
Wennberg again concluded that the incentives. Under the early models, they receive from their HMO barely
supply of physicians and hospital beds such as the one still employed by covers office overhead. They charged
has driven demand for hospital care. Kaiser, physicians are paid a salary, that physicians must earn their income
The report also found that rates for presumably removing the financial from a collection of bonuses and pen-
common medical procedures, such as impetus to pile on additionally billed alties that essentially reward them for
mastectomies, can vary as much as 33- tests and procedures. Kaiser doctors limiting care and punish them for ex-
fold from one community to another. 24 also receive a bonus at the end of the ceeding certain targets for controlling
   At a press conference releasing the year if the plan as a whole reduced hospital use and medical procedures.
report, Wennberg called it ‘‘danger- expensive procedures and tests.                            For example, for each dollar of doc-

                                                                                                                                          April 12, 1996   323
tor-recommended emergency-room              has joined with patient groups to argue     guidelines providing that only sur-
care, the plan penalizes the doctor up      that these arrangements should be           geons with previous Wilms Tumor
to 50 cents. A physician with 1,500 of      made public.                                experience should perform surgery for
the plan’s patients might take home             Even some advocates of managed          Wilms. Instead the plan referred the
more than $150,000 from bonuses and         care argue that the patient should          Christies to general surgeons partici-
incentives — or nearly nothing. 26          know what deal the doctor has cut           pating in the plan, none with Wilms
   ‘‘If your hospital days and patient      with the HMO. ‘‘As a patient, I have        Tumor experience.
tests are too high, you’ll go out of        every right to know the strength of the         The plan refused to pay for Carley’s
business,’’ says Woolhandler. ‘‘If you      incentives that a doctor has who has        surgery by a Wilms specialist the fam-
have a lot of sick patients, it’s impos-    my life in his hands,’’ says Uwe            ily found at Stanford, prompting the
sible to meet the targets.’’                Reinhardt, a professor of political         California Department of Corporations
   Large managed-care companies,            economy at Princeton University.            to fine the HMO $500,000.
including U.S. Healthcare, say their            Representatives of managed-care             ‘‘People need to know what the
financial incentives also reward high-      firms say this kind of information is       plan covers before they get sick,’’ says
quality care, based on patient-satisfac-    already often available from state          Nancy Dickey, a family physician in
tion ratings and monitoring of patient’s    agencies. Laws to require additional        College Station, Texas, who chairs the
health results. A doctor who has a          disclosure would constitute govern-         AMA Board of Trustees. ‘‘We’re not
much lower-than-usual rate of refer-        ment ‘‘micromanaging,’’ says Karen          asking that we legislate out incen-
rals may also be subject to review and      Ignagni, president of the AAHP. ‘‘We        tives. Patients should know what the
possible penalties in some plans.           don’t think government should be            incentives are so they can decide
   Hillman, who has conducted nu-           writing contracts between doctor and        whether they’re comfortable or not
merous studies of such incentives,          patient,’’ she says. But consumers          with them.’’
thinks they can improve the quality of      point out that even if some informa-            The National Committee for Qual-
health care. ‘‘Financial incentives im-     tion is on file at state agencies, it is    ity Assurance (NCQA), which accred-
prove quality of care by reminding the      not easily accessible to them.              its managed-care organizations, says it
physician to think twice about invad-           Some doctors interpret their HMO        has only found one contract that
ing a patient’s body,’’ he says. ‘‘In the   contracts to say doctors can’t tell         explicitly prevents doctors from dis-
gray situations, I’d rather have the        patients about treatments or doctors        cussing treatments not covered by the
doctor say, ‘I’m not going to chop          that may not be covered by the plan         plan. But NCQA President Margaret E.
your leg off right now. Let’s see how       (see p. 328).                               O’Kane says a more common clause
oral antibiotics work, and then we’ll           In January, the AMA’s Council on        — in perhaps a quarter of accredited
make a decision.’ ’’                        Ethical and Judicial Affairs passed a       plans — prohibits physicians from
   But some doctors feel the pendu-         resolution declaring such ‘‘gag’’           discussing the plan’s method of pay-
lum has swung too far in the direction      clauses an unethical interference in        ing. ‘‘We think that’s a problem,’’ said
of reduced care under managed care’s        the physician-patient relationship and      O’Kane. ‘‘We think we will make some
regime. Daniel P. Sulmasy, a general        calling for legislation to prohibit them.   policy about this.’’
internist and associate director of the     The AMA urged physicians to con-
Center for Clinical Bioethics at            tinue providing patients with informa-
Georgetown, argues that under capi-         tion regarding treatment alternatives
tation, he not only gets penalized for
ordering ‘‘inappropriate’’ medical tests
but also for tests that are necessary.
                                            ‘‘regardless of the provisions or limi-
                                            tations of the plan.’’ 27
                                                HMOs say the clauses are aimed
   ‘‘It used to be that to change medi-     primarily at preserving the confiden-
cal practice, you had to prove it was       tiality of business arrangements. But
medically safe,’’ Sulmasy fumes. ‘‘Man-     the AMA points to cases that raise              Birth of Managed Care
aged care says, ‘Prove to me that it’s      troubling questions about the influ-
unsafe.’ The burden is now on society       ence of financial incentives and
to prove that the cut in care won’t hurt
     Financial arrangements with doc-
                                            gag clauses.
                                                Harry and Katherine Christie’s 9-
                                            year-old daughter, Carley, was diag-
                                                                                        T   he idea of managed care has been
                                                                                            around at least since the 1920s, but
                                                                                        it was not until the 1980s that the idea
tors, such as capitation and bonuses,       nosed with Wilms Tumor, a rare kid-         caught on among employers as a way
are usually considered proprietary by       ney cancer. Their plan did not advise       to control spiraling health costs.
managed-care companies. The AMA             them of National Cancer Institute                                  Continued on p. 327

324      CQ Researcher
                                                                         transplant. (The amount is re-
                 1940s 1980s Managed to
1920s to promote delivers medical servicescare
Health reformers
                                                                         duced in a subsequent, undis-
                                                                         closed settlement.)
prepaid group-health plans,          patients at a lower cost than
which provide preventive             traditional medicine without        1994
health care for a pre-set            hurting patient health, studies     Cost of health benefits falls for
monthly fee through salaried         find. In the late 1980s, infla-     the first time in recent history.
physicians. Urged by the             tion in health-premium costs
medical profession, states bar       explodes, increasing employ-        Nov. 28, 1995
group plans.                         ers’ interest in managed care.      Harvard doctor David U.
                                                                         Himmelstein, appearing on the
1929                                 1981                                “Donahue” TV show, attacks an
The first cooperative health plan    Political economist Harold Luft     HMO he works for, U.S.
is established in Elk City, Okla.,   publishes study finding patients    Healthcare, for rewarding doctors
by local doctor Michael Shadid.      in HMOs are hospitalized less but   who deny care.
                                     more likely to see a physician
1934                                 and get preventive care than        Dec. 1, 1995
In a veiled statement of opposi-     those with conventional health      U.S. Healthcare terminates its
tion to prepaid plans, the Ameri-    insurance.                          contract with Himmelstein.
can Medical Association (AMA)
decrees that patients should have    1982                                Jan. 19, 1996
free choice of physicians, and       Under President Ronald Reagan,      Massachusetts enacts nation’s first
there should be no restrictions      Medicare patients for the first     ban on “gag” clauses in contracts
on treatment.                        time are offered the option of      between HMOs and doctors, such
                                     signing up for an HMO.              as the one criticized by
1942                                                                     Himmelstein.
Industrialist Henry J. Kaiser sets   1988
up two prepaid health plans on       Employers’ health benefit costs     Jan. 30, 1996
the West Coast, known as             rise 18.6 percent.                  Survey by Foster Higgins finds
Permanente Foundations, forerun-                                         health benefit costs rose only 2.1
ners of one of the largest health                    •                   percent in 1995, suggesting health
maintenance organizations                                                costs are finally leveling out.
(HMOs) in the nation.

                                     1990s           Employers’
                                     health benefit costs drop for
                                                                         February 1996
                                                                         U.S. Healthcare rehires
                                     the first time in recent history    Himmelstein and modifies its
                                     as managed care sweeps the          “gag” rule, allowing doctors to
1970s           In an effort to
control skyrocketing hospital
                                     insurance market. But consum-
                                     ers question whether quality
                                                                         tell patients about the incentives
                                                                         they receive from the HMO.
costs, the federal government        is being sacrificed.
encourages HMOs — health                                                 Feb. 27, 1996
plans that will “maintain            1993                                Bipartisan bill is introduced in
health” rather than profit           Managed-care plans cover a          Congress barring HMO gag rules.
from sickness.                       majority of covered employees
                                     for the first time in history,      April 1, 1996
1973                                 according to benefits consultant    Aetna Life & Casualty Co. an-
President Richard Nixon signs the    Foster Higgins.                     nounces it will acquire U.S.
Health Maintenance Organization                                          Healthcare to create the nation’s
Act requiring businesses with        December 1993                       largest managed-care firm, serv-
more than 25 employees to offer      Family of breast cancer victim      ing 23 million people.
at least one HMO as an alterna-      Nelene Fox wins $89 million
tive to conventional insurance.      verdict against her HMO for
                                     denying Fox a bone marrow

                                                                                  April 12, 1996          325

Why Demetrios Dekazos Lost Faith in HMOs
      void a health maintenance organization as if your Collins arrived at the hospital, it was too late, he says.
      life depended on it, advises Demetrios Dekazos. For              ‘‘She was robbed of time,’’ says Cummings. ‘‘One of the
      proof, he points to what happened to his wife.               problems with HMOs is doctors have 10-minute windows to
   It was on a Friday in September 1991, when Senate aide see patients,’’ he says of her initial examination by the HMO’s
Vicky G. Collins, 32, suddenly collapsed over her computer doctor. ‘‘If you’re healthy, it’s fine, but if you have an emergency
on Capitol Hill. Dekazos, then her fiancé, rushed over from situation you need more than a lick and a promise.’’
his office in the Senate parking facility, where he is a               ‘‘It points out problems in how managed-care companies
manager.                                                           try to approach these problems,’’ says Michael T. Rapp,
   A Senate nurse examined Collins and                                                    chairman of the Emergency Medicine
suggested she go straight to the hospital.                                                Department at Arlington Hospital, where
But her HMO would not authorize                                                           Collins was taken. ‘‘They first will try to
emergency room treatment. 1                                                               evaluate something over the phone
   The HMO doctor who examined                                                            instead of letting patients use their own
Collins in his office that Friday told her                                                best judgment as to whether they need
she had a pinched nerve. He gave her                                                      to seek emergency care.’’
some anti-inflammatories and sent her                                                        Collins sued the HMO. Under the
home to rest for a couple of days.                                                        conditions of a settlement reached last
   Over the weekend, Collins’ symptoms                                                    year, Collins and her lawyer cannot reveal
worsened, according to her Arlington, Va.,                                                the HMO or the amount of the settlement.
attorney, Mark D. Cummings. Collins was                                                   However, Collins was adamant that she
dizzy and having difficulty walking. The                                                  be allowed to ‘‘tell her story to make sure
numbness she had felt on one side of                                                      other people did not fall into this trap,’’
her face on Friday was spreading to her                                                   Dekazos says.
limbs. At certain times she didn’t                                                           In fact, she wants to testify in favor of
recognize Dekazos.                                                                        legislation proposed by Rep. Benjamin L.
   Alarmed, Dekazos called the HMO                                                        Cardin, D-Md., requiring insurance
again on Sunday. The person he finally                                                    companies to pay for emergency care even
reached told him to call back on Monday                                                   if the patient’s symptoms later proved
and make an appointment during the                                                        groundless. The managed-care industry
                                              Demetrios Dekazos and Vicky Collins,
workweek. Finally, in desperation, he                   before her stroke.                generally opposes such requirements.
called 911 and had Vicky taken to a                                                          If Collins had received emergency care
nearby hospital.                                                                          early in the weekend, her husband is
   That Sunday, within a few hours of arriving at the hospital, convinced, she would not have suffered such a severe stroke.
Collins went into a coma. The emergency room doctor But how could he have known that at the time? he asks.
informed Dekazos that a massive stroke had completely ‘‘Vicky was not the expert, I’m not the expert,’’ Dekazos says.
blocked the artery to her brain stem.                              ‘‘We are not here to play the medical role. That’s what you
   Today, Collins suffers from ‘‘locked-in’’ syndrome. She hire the insurance company and the doctor to do.’’
can understand everything that occurs around her but cannot            He believes that HMOs are preoccupied with the bottom
speak. Her brain receives signals but cannot send signals line and that ‘‘managed money care’’ is driving their medical
back down to her limbs to move them. At first, her eyes decisions. ‘‘HMOs know we all want to save some money,
remained locked open, and she was unable to move. Now so they pick up the cost of your eyeglasses and other small
she can move her head and arms a bit but cannot grasp a things in life, and it makes us feel so warm all over. But
pencil for writing. She is confined to a wheelchair.               when you have your cardiac arrest, your cancer, your stroke,
   As her husband recites the alphabet, Collins communicates which are costly items, you want good, prompt medical
by blinking or nodding at the letters that spell what she treatment — you don’t want to sit there and fight for your
wishes to say. She also has a special computer, equipped medical treatment.’’
with a camera, which allows her to ‘‘type’’ by resting her
eyes on letters of a keyboard displayed on her video screen.
   Had Collins been given a blood thinner or undergone
vascular surgery on Friday or Saturday, the severity of the           HMOs developed pre-authorization policies because people were
                                                                   running to emergency rooms for non-emergencies and racking up huge
stroke could have been diminished, according to expert bills. Many HMOs still require pre-authorization. For background, see
witnesses Cummings says he contacted. But by the time ‘‘Emergency Medicine,’’ The CQ Researcher, Jan. 5, 1996, pp. 1-24.

326    CQ Researcher
Continued from p. 324                                                                  vice plans were subject to some kind
    Beginning in the 1920s, socially             Rising Health Costs                   of ‘‘utilization review,’’ where insur-
conscious health reformers promoted                                                    ers scrutinized doctors’ procedures
prepaid group-health plans, in which
a modest annual fee would cover each
family’s preventive and sick care.
                                             I  n the 1970s, skyrocketing hospital
                                                costs caught the attention of gov-
                                             ernment. Two Republican presidents
                                                                                       and fees, up from 41 percent in 1987. 32
                                                                                          Yet managed-care fees continued
                                                                                       to rise in the late 1980s, though less
Growing out of the rural, populist           embraced HMOs as a way to control         than fee-for-service costs, raising ques-
movement, the first cooperative health       costs. In 1973, Richard Nixon signed      tions among experts as to whether
plan was established in 1929 in Elk          the Health Maintenance Organization       they were cutting back sufficiently on
City, Okla., by a local doctor. The          Act, requiring businesses with more       unnecessary, expensive procedures.
early cooperatives emphasized group          than 25 employees to offer at least       Studies by Dartmouth’s Wennberg and
practice, preventive medicine and con-       one HMO as an alternative to conven-      others suggested that still more could
sumer participation.                         tional insurance. Ronald Reagan gave      be cut. These studies showed widely
    A number of other such coopera-          Medicare patients the option of sign-     varying rates of surgical procedures
tives sprouted in the 1930s and ’40s         ing up for an HMO in 1982.                throughout the U.S. for the same
but didn’t take hold. ‘‘The medical              In the late 1970s, managed-care       condition without necessarily benefit-
profession was unremittingly hostile,’’      organizations composed of loose net-      ing the patients.
sociologist Paul Starr observed, and         works of doctors began to proliferate.       In the 1990s, managed care turned
‘‘succeeded in convincing most states            By the early 1980s, research was      the corner. According to a survey by
to pass restrictive laws that effectively    starting to show that managed care        Foster Higgins, it went from insuring
barred consumer-controlled plans             could reduce health costs without         a minority of covered workers in 1992
from operating.’’ 28 As late as the          hurting patients. In perhaps the most     to almost three-quarters in 1995. After
1970s, more than 30 states had such          scientific study comparing HMOs to        years of steady increases, the cost of
restrictions.                                fee-for-service, the Rand Corporation’s   employee health-care benefits actu-
    During World War II, health insur-       Health Insurance Experiment in Se-        ally fell in 1994 for the first time.
ance emerged as an employee health           attle, conducted from 1976 to 1980,
benefit. Such benefits were exempted         found cost savings of 28 percent in
from wage controls and provided a            prepaid practices without hurting
way for employers to attract workers         overall patient health. 30 But some
in a tight labor market. After World         vulnerable groups, such as the poor,        Consumers’ Concerns
War II, the number of Americans              fared less well (see p. 320).
with some form of health insurance
increased dramatically through
the 1980s.
                                                   U.S. health costs continued to
                                             surge at alarming rates through the
                                             1980s, however. On average, premi-
                                                                                       B   ut as managed care was being
                                                                                           hailed for cutting costs, some con-
                                                                                       sumers expressed concern that it was
    But the insurers acted as ‘‘shills for   ums rose about 15 percent annually        cutting muscle instead of fat. ‘‘HMOs
doctors and hospitals,’’ agreeing to         during the early 1980s and in 1988        are totally and purely a question of
pay whatever fee was charged until           rose more than 18 percent. In fact,       economics and how much money you
the 1980s, wrote former Health, Edu-         Americans spent more per capita on        can make,’’ former Sen. Howard
cation and Welfare Secretary Joseph          health than other industrialized coun-    Metzenbaum, D-Ohio, chairman of the
A. Califano Jr. Nonprofit Blue Cross         tries but had higher rates of infant      Consumer Federation of America, said
and Blue Shield organizations and            mortality and lower life expectancy.      last year. 33
commercial insurers pushed up pre-               During the 1980s, HMOs prolifer-         The rapid rise over the past 15
miums ‘‘with abandon,’’ he noted, to         ated in a cutthroat environment. To       years of for-profit managed-care com-
pass on increased charges from doc-          attract and keep members, HMOs            panies worries consumer advocates
tors. 29                                     were forced to hold down fees at the      like Metzenbaum. In the earliest days
     Also in the 1960s, unions made          same time they were facing increas-       of managed care, virtually all enroll-
health benefits a key demand in col-         ing costs. Some went bankrupt. By         ments were in not-for-profit organiza-
lective-bargaining negotiations. Many        1986, 75 percent of HMOs faced            tions like Kaiser Permanente. As of
experts believed that because so many        business losses. 31                       January 1995, for-profit companies
workers could visit the doctor without           Traditional insurance plans started   accounted for 58 percent of HMO
ever seeing a bill, they helped drive        to feel the competitive pressure to cut   members, compared with only 12
up demand for health services and,           costs, too. By 1990, 95 percent of        percent in 1981. 34
ultimately, health spending.                 employees in traditional fee-for-ser-        Once, most of those consumers

                                                                                                 April 12, 1996            327
would have been covered by for-profit       managed-care plans, cutting out the          covering some of its key provisions.
traditional insurance plans, says Mark      managed-care company as middleman.               This year, as part of a package of
D. Smith, executive vice president of       The Federal Trade Commission plans to        six bills, the AMA is lobbying for a ban
the Kaiser Family Foundation. Fur-          issue regulations this summer relaxing       to abolish ‘‘gag clauses’’ in managed-
thermore, distinctions between for-         its antitrust rules to make it easier for    care contracts. Such clauses prohibit
profits and not-for-profits tend to blur    doctors to create such ventures. 37 Such     doctors from discussing with patients
in the medical world. Research finds        operations might reduce pressure on          treatments that may not be covered by
little difference in the performance of     doctors to satisfy the profit needs of       the plan, the AMA says.
for-profit and not-for-profit hospitals,    giant companies, but some consumer               On Jan. 19, 1996, Massachusetts be-
for example, Smith notes. Profit mar-       advocates and regulators fear it will        came the first state to prohibit gag
gins among for-profit and nonprofit         simply shift the cost-cutting pressures to   clauses. Last year, Maryland went fur-
HMOs are also similar, according to         doctors themselves, who lack sufficient      ther than most other states in prohibiting
Stephen Wiggins, CEO of Oxford              capital to take on the risk of paying for    insurers outright from paying physicians
Health Plans, a for-profit company.         extremely sick patients.                     bonuses that ‘‘deter the delivery of medi-
    A recent investigation by The New                                                    cally appropriate care to an enrollee.’’
York Times found that the Health In-
surance Plan of Greater New York
                                            CURRENT                                          The managed-care industry has
                                                                                         charged that most of this legislation is
(HIP), a not-for-profit HMO, has a far
worse record than two for-profit com-
petitors in the state when it comes to
delays in paying its members’ medical
                                            SITUATION                                    really ‘‘doctor protection’’ aimed at
                                                                                         destroying managed care. Most pa-
                                                                                         tients-rights bills would ‘‘eviscerate the
                                                                                         choice that is made available to con-
bills. But the investigation also pointed                                                sumers and prevent them from taking
out serious deficiencies in the regula-                                                  advantage of the cost savings in man-
tion of HMOs, regardless of whether             Pro-Consumer Initiatives                 aged-care plans,’’ says Richard Coorsh,
they are for-profit. For example, there                                                  a spokesman for the Health Insurance
is no New York state law requiring                                                       Association of America.
prompt payment from HMOs. In con-
trast, regular insurers must pay claims
or offer an explanation for a delay in
                                            P   atient groups, medical specialists
                                                and the AMA have joined forces to
                                            push for legislation to protect patients
                                                                                             Requiring managed-care plans to
                                                                                         let consumers see a doctor outside the
                                                                                         plan, Coorsh says, would raise
15 days or face penalties. 35               in managed care. So far, they have had       everyone’s premiums, because plans
    Yet another development worrying        the most impact in state legislatures.       would lose a prime tool for control-
consumers has been a trend toward               A number of ‘‘patient protection         ling costs — limiting the panel of
mergers of HMOs, hospitals and insur-       acts’’ generally would require plans to      doctors to those who agree to deliver
ance companies, threatening a managed-      disclose to patients any financial ar-       medical care at a discount.
care monopoly. In the latest such merger,   rangements with doctors that might               Because of a preemption clause in
Aetna Life & Casualty Co., a traditional    limit their treatment and to provide         federal law, most of this state legislation
insurance company, announced plans          grievance procedures for patients            won’t affect a growing segment of health
this month to buy U.S. Healthcare Inc., a   denied treatment. Some of the legis-         plans known as self-insured plans. Most
for-profit managed-care company. The        lation also would permit consumers to        large corporations self-insure by setting
merger would create the nation’s big-       see a specialist outside their plan’s        aside their own reserves of money to
gest medical company. Most observers        network for an additional charge, an         cover employee health benefits and
expect the new company to shift its         option known as ‘‘point of service.’’        paying insurers only to administer and
emphasis from traditional health insur-     More than half of the states are ex-         screen claims. Self-insured plans are
ance to managed care. Patients who have     pected to consider versions of this          exempt from state legislation under the
resisted joining managed-care plans so      legislation this year.                       federal Employee Retirement Income
far will be under increased pressure to         Last year, over 25 states considered     Security Act. However, since many self-
do so, observed Consumers Union ex-         such legislation and seven states —          insured employers contract with big
ecutive Gene Kimmelman, because “very       Arizona, California, Maryland, Oregon,       insurance companies, those health plans
soon there may be very little else that     Mississippi, Minnesota and Virginia —        might extend state-mandated consumer
you can get.” 36                            passed some version of it, according         protections to their self-insured mem-
    Challenging the domination of these     to the AMA. In Texas, Republican Gov.        bers as well, Hurwit suggests.
giant companies is a new hybrid —           George W. Bush vetoed a patient-                 Some patient activists have urged a
doctors who band together to offer          protection bill but ordered regulations                               Continued on p. 330

328     CQ Researcher
                                               At Issue:
Should Congress enact legislation barring restrictions on communi-
cations between doctors and patients?
      REP. GREG GANSKE, R-IOWA                                            AMERICAN ASSOCIATION OF HEALTH PLANS

              yes no
      FROM STATEMENT ISSUED FEB. 26, 1996                                 FROM STATEMENT ISSUED MARCH 12, 1996

t     here is nothing more central to the doctor-patient
      relationship than trust. Patients and their families rely
      on doctors to fully inform them about the course of a
disease and the various ways it can be treated. They deserve
                                                                    a         AHP is committed to unrestricted communication
                                                                              between physicians and their patients about diagno-
                                                                              sis, treatment and other information affecting the
                                                                    patients’ care. We do not believe [however] that regulating
to know the risks and benefits and costs and chances of             the terms of contractual arrangements between providers
success of the treatments that will be inflicted on their own       and health plans is the way to ensure that patients receive
bodies or their loved ones. And they don’t want information         the information they need about their care, nor is it the way
withheld because an HMO won’t allow it.                             to ensure that their physicians are acting in their best
   Unfortunately, that essential doctor-patient trust is being      interests in the provision of care. . . .
undermined by some health plans that attempt to limit the               Open communication between physicians and patients about
content of discussions between patients and providers.              health status, treatment, coverage, benefits and health-plan
Physicians are increasingly signing contracts with insurance        practices is strongly supported by network-based health plans.
companies that contain restrictive clauses preventing the           Due to the emphasis on prevention and early treatment that is
physician from using sound medical judgment and                     fundamental to organized systems of care, physician efforts to
undermin[ing] the essential notion of informed consent.             ensure the full participation of patients in decisions affecting
   Sometimes, these contacts explicitly seek to limit the           their care are encouraged, and it is in the plan’s and the
information a doctor can provide to a patient. The contract         physician’s interest, as well as the patient’s, for patients to be
between providers and the Ohio Permanente Medical Group,            directly involved in their care and to be well-informed.
for example, contains the following prohibition: “Do not                Proposed legislation, the goal of which is to prohibit contract
discuss proposed treatment with Kaiser Permanente mem-              clauses that restrict physician-patient communication, has been
bers prior to receiving authorization.”                             drafted too broadly and would restrict contractual provisions that
   How can we expect patients to make informed decisions            govern the physician-health plan business relationship.
about their own health if doctors can only inform them of               For example, anti-disparagement clauses are not intended
options that the plan is willing to pay for?                        to restrict physician-patient communication but to require
   Other examples are more subtle. Some plans place a               that physicians discuss criticisms of the health plan with the
“general disparagement” clause in their contracts. One              organization, the party in a position to address their prob-
ChoiceCare plan included the following clause in [its]              lems, rather than with the members. It is inappropriate to
contracts: “Physician shall take no action nor make any             bring these issues into the examining room where the focus
communication which undermines or could undermine the               should be only on the patient’s care.
confidence of enrollees, potential enrollees, their employees,          Similarly, contractual provisions that are designed to
plan sponsors or the public in ChoiceCare or in the quality         protect proprietary information are commonplace in many
of care which ChoiceCare enrollees receive.”                        professional and business agreements. Respect for the
   The danger of this clause is just as significant as the          confidentiality of proprietary information is a generally
example from the Ohio Permanente Medical Group. Patients            accepted standard of professional conduct.
rely on their physician to tell them which doctors or hospitals         While information concerning the types of compensation
are better than others. But in plans with general disparagement     arrangements between managed-care organizations and
clauses, a doctor could not tell a patient that seven of the last   physicians generally would not be proprietary, the specific
11 patients he referred to the plan’s heart surgeon have died!      amounts and terms of a particular compensation arrange-
That is precisely the sort of information doctors should give to    ment generally would be proprietary from the perspective of
patients and is precisely the kind of communication that            both the plan and the physician. This is particularly true
“general disparagement” clauses prevent. . . .                      when physicians may have contracts with several plans, and
   Whether explicit in a contract or communicated to doctors        all parties are likely to value confidentiality concerning the
orally, [restrictions on communications between doctors and         nature and amount of the compensation.
patients] deny patients access to critical information and make a       Creation of statutory rules governing health plan-physician
farce out of the notion of informed consent.                        contract provisions is not the best way to foster unrestricted
   While I understand the importance of the free market,            physician-patient communication about patient care.
Congress must protect patients who are unaware that some
doctors are no longer able to communicate their best judgment.

                                                                                                     April 12, 1996              329

 Why Christine Blodgett Loves Her HMO
        very year, Christine Blodgett got a mammogram from Blodgett, crediting the HMO’s system of ‘‘capitation’’
        her fee-for-service physician. And every year, for four payments to the doctors who handle its patients. Under
        years, he told the Huntington Beach, Calif., nurse that capitation, the doctors are paid a fixed monthly fee per
 a spot on the mammogram needed watching, but was nothing patient no matter how much or how little care they provide.
 to worry about.                                                        ‘‘Had they not treated me, and instead watched and waited
    Not until Blodgett switched to a health maintenance another year and another year,’’ says Blodgett, ‘‘I would have
 organization (HMO) in 1993 did she discover that the spot gotten to the point where it had spread and perhaps I would
 was breast cancer.                                                                         have needed a bone marrow transplant’’
    To Blodgett, her HMO’s speed,                                                           — a risky operation that can cost up to
 efficiency and concern saved her life —                                                    $200,000. Blodgett says she never paid
 in marked contrast to her experience                                                       more than a $5 copayment in the course
 with the private doctor. As soon as she                                                    of her treatment.
 signed up, the HMO required her to get                                                        By contrast, she says, her previous
 a new mammogram. A week later,                                                             doctor, who billed separately for each
 Blodgett was informed that her mammo-                                                      service, had little financial incentive
 gram warranted follow-up. That same                                                        to provide preventive services. ‘‘They
 day, Blodgett’s HMO doctor referred her                                                    want you when you’re sick,’’ Blodgett
 to a surgeon, whose biopsy revealed                                                        says of traditional health insurance.
 the cancer.                                                                                ‘‘Managed care is interested in keeping
    ‘‘I had been living with it undetected                                                  you well.’’
 for four or five years,’’ says Blodgett,                                                      Blodgett is keenly aware of several
 53. She had switched her insurance to                                                      lawsuits against HMOs that refused to
 PacifiCare of California, a for-profit HMO                                                 pay for bone marrow transplants for
 in Cypress, Calif., when she went to                                                       women with breast cancer (see p. 315).
 work for the company as a case                                                             She objects to giving people expensive
 manager. She underwent a mastectomy                                                        treatments when there’s only a small
 and describes her HMO doctors as                                                           chance of survival.
 ‘‘wonderful.’’                                                                                ‘‘If I knew that my chances of having
    Currently employed as a project                      Christine Blodgett                 the bone marrow transplant work were
 manager for PacifiCare, Blodgett isn’t                                                     slim, I’d go out and get my life in
 sure why her original doctor didn’t                                                        order and enjoy my kids. I don’t think
 detect her breast cancer. But she’s convinced her cancer would I’d like to spend my last days being so sick,’’ Blodgett says.
 have been discovered earlier if she had been in an HMO.            ‘‘I think we all have the responsibility to handle our resources
    ‘‘In managed care, the doctors stand to win financially if appropriately. You wouldn’t write a big check for a car you
 they treat you in a timely manner and completely,’’ says know is a lemon.’’

Continued from p. 328                           Sen. Bill Bradley, D-N.J., is expected
shift in focus to the federal level to       to offer a floor amendment allowing             Focus on Quality
overcome the weakness of state law.          new mothers to remain in the hospital
On Feb. 27, Reps. Greg Ganske, R-
Iowa, and Edward J. Markey, D-Mass.,
introduced a bill to prohibit gag clauses.
                                             for at least 48 hours after a normal
                                             birth and 96 hours after a Caesarean
                                             section. Bradley says some insurers
                                                                                          Q    uality has become the buzz word
                                                                                               in managed care in the past year,
                                                                                          driven largely by interest from large
(See ‘‘At Issue,’’ p. 329.)                  routinely move new mothers out of            employers. Now that managed-care
   Patient advocates acknowledge             the hospital in 12 hours. 38                 plans are controlling costs, plans will
they have little hope of seeing action          Four states enacted mandated ma-          have to start competing on how good
on their initiatives in this Congress.       ternity stays in 1995: Maryland, Mas-        a job they do, some employers say.
However, there could be congres-             sachusetts, New Jersey and North             But they face a dearth of information.
sional action on a related matter —          Carolina. Maternity-stay bills have             ‘‘We still don’t know if the current
managed care’s limits on maternity           been filed in at least 33 states this        health-care system is producing better
stays in hospitals.                          year.                                        quality’’ than the old fee-for-service

330       CQ Researcher
system, says David Lansky, president
of the Foundation for Accountability
in Portland, Ore., which represents
some of the nation’s largest private           American Association of Health Plans, 1129 20th St. N.W., Suite 600,
employers, including American Ex-              Washington, D.C. 20036-3403; (202) 778-3200. The AAHP, recently formed by
press and AT&T. Last summer, the               the merger of Group Health Association and the American Managed Care
                                               and Review Association, represents 1,000 managed-care plans nationwide.
group said it would develop a frame-
work for measuring how well health             American Medical Association, 515 North State St., Chicago, Ill. 60610-
plans treat their patients. The group          4378; (312) 464-5000. This mainstream doctors’ organization supports
                                               “patient protection” controls on managed-care plans, including the right of
also will gather data on the results of        doctors to tell patients about treatments not covered by their plan.
medical treatment for major illnesses. 39
     Currently, the closest thing to a Good    Citizen Action, 1730 Rhode Island Ave. N.W., Suite 403 A, Washington, D.C.
                                               20036; (202) 775-1580. This consumer group lobbies for regulation of managed-
Housekeeping Seal of Approval is ac-           care plans and has produced a “Managed Care Consumers’ Bill of Rights.”
creditation by the NCQA, which investi-
gates the credentials of each plan’s phy-      National Committee for Quality Assurance, 2000 L St. N.W., Suite 500,
                                               Washington, D.C. 20036; (202) 955-3500. The NCQA is the major accrediting
sicians and whether the plan’s medical         body for managed-care plans. It is developing a “report card” for consumers
guidelines track current medical knowl-        on the quality of health plans.
edge. About 14 percent of the plans it
reviews are rejected outright. But most
employers are not using NCQA accredi-         mammograms, because you can cal-            say, searching for waste in the health-
tation to decide which plans to sign up,      culate how many women should have           care system with a double-barrelled
surveys suggest. 40                           mammograms,’’ she says. ‘‘If you’re         shotgun.
     That may be because NCQA has so          looking at how effectively they treat          But there’s a price to be paid for a
far investigated only about half the          heart disease, it’s hard to know who        leaner, meaner system. In the days when
managed-care companies eligible for           in the population is at risk.’’             doctors could charge whatever they
accreditation. Or it may be that price           According to NCQA, a report card on      liked, they padded the bill and could
is still the most important element for       performance is years away. Eventually       take care of the uninsured poor by
market success. ‘‘Let’s be perfectly          managed care, with its large companies      shifting the cost to paying customers.
frank. We still are driven predomi-           and ability to collect massive amounts         ‘‘In this new world, where the
nantly by the cost,’’ says Mary Jane          of data, should do a better job of rating   bounty hunters say, ‘We are not pay-
England, president of the Washington          quality than the old system, advocates      ing,’ doctors and hospitals sooner or
Business Group on Health, a non-              say. The old system never attempted to      later will not have the cushion to treat
profit organization whose member-             measure quality systematically, they        the uninsured,’’ Reinhardt says. ‘‘Those
ship includes the nation’s major em-          assert, although the threat of malprac-     people are the innocent bystanders
ployers. ‘‘When the cost is the same,         tice litigation, as today, acted like a     who will get hurt by all this.’’
the tie-breaker would be quality.’’           superego over doctors’ performance.            Another casualty of the bounty
     Several large employers under               ‘‘Managed care properly done in an       hunters, some experts believe, will be
NCQA’s lead have been collecting more         accountable health plan . . . that can      medical research at teaching hospi-
detailed information on plans. The            keep track of the health care given to      tals, which has traditionally been sub-
Health Plan Employer Data and Infor-          an entire population just has to be         sidized by patient bills.
mation Set can tell an employer what          better,’’ says economist Reinhardt.            ‘‘The growth of managed-health
percent of a plan’s enrollees have re-                                                    care is threatening the survival of our
ceived immunizations and mammo-                                                           academic medical centers,’’ Steven A.
graphy screenings, for example.
     Critics say this scorecard measures
the area in which managed care al-
                                              OUTLOOK                                     Schroeder, president of the Robert
                                                                                          Wood Johnson Foundation, warned
                                                                                          last year. Managed-care companies,
ready does well — prevention. It                                                          with whom teaching hospitals are now
doesn’t tell the consumer whether the                                                     competing for patients, don’t have to
plan will do a good job of taking care          A Price to Pay?                           pay for research and education, he
of a serious illness like cancer.                                                         pointed out. 41
     NCQA President O’Kane responds:                                                         But America’s role in pioneering
‘‘It’s much easier to calculate how
well a plan did in giving women               M   anaged-care companies are like
                                                  bounty hunters, Reinhardt likes to
                                                                                          medical technology for the rest of the
                                                                                          world ended up being costly,

                                                                                                   April 12, 1996            331
Reinhardt says. ‘‘The average middle-                Care Plan Performance Since 1980: A Literature         23
                                                                                                               Bob Ortega, ‘‘Some Physicians do Unneces-
class American is unhappy because                    Analysis,’’ Journal of the American Medical As-        sary Surgery on Heads of Infants,’’ The Wall
                                                     sociation, May 18, 1994, pp. 1512-1519.                Street Journal, Feb. 23, 1996, p. A1.
his take-home pay is not going up. It                5                                                      24
                                                        William Sherman, ‘‘What They Didn’t Know                John E. Wennberg, The Dartmouth Atlas of
all went into health care,’’ he says,
                                                     About HMOs May Have Killed This Baby,’’ New            Health Care, American Hospital Association,
noting that health benefits in the 1980s             York Post, Sept. 18, 1995.                             Jan. 11, 1996.
ate up compensation that could have                  6
                                                        Erik Larson, ‘‘The Soul of an HMO,’’ Time,          25
                                                                                                               American Hospital Association press release,
gone into wage increases.                            Jan. 22, 1996, pp. 44-52.                              ‘‘New Report Questions Geographic Disparity
   Most experts think managed care is                7
                                                        Cited in John M. Eisenberg, ‘‘Economics,’’          in U.S. Surgery Rates, Numbers of Doctors,
here to stay because the economic                    Journal of the American Medical Association,           Hospitals,’’ Jan. 29, 1996.
                                                     June 7, 1995, pp. 1670-1.                                 Woolhandler and Himmelstein, op. cit., p. 1706.
pressures on employers became too                    8                                                      27
                                                        For background, see ‘‘Primary Care,’’ The CQ            AMA press release, ‘‘AMA Calls on Managed
great. The shift to managed care is,
                                                     Researcher, March 17, 1995, pp. 217-240.               Care Providers to Cancel Gag Clauses and Submit
Kaiser’s Smith says, ‘‘a historically                9
                                                        Cited in Steffie Woolhandler and David U.           Contracts for Ethical Review,’’ Jan. 23, 1996.
settled question.’’                                  Himmelstein, Profits from Pain: The Case for           28
                                                                                                                 Paul Starr, The Social Transformation of
   Indeed, Aetna’s plan to acquire                   Single Payer Reform; The National Health Pro-          American Medicine (1982), p. 302.
U.S. Healthcare underscores the rise                 gram Chartbook and Slideshow (1996), Center            29
                                                                                                               Joseph A. Califano Jr., Radical Surgery (1994),
of HMOs and other managed-care                       for National Health Program Studies, Harvard           p. 42.
                                                     Medical School.                                           Cited in Paul Starr, The Logic of Health Care
plans and the decline of traditional                 10
                                                          Joseph P. Newhouse et al., Free for All?          Reform (1992), p. 38.
health insurance.                                                                                           31
                                                     Lessons From the RAND Health Insurance Ex-                See ‘‘The Failure to Contain Medical Costs,’’
   But once managed care has cut out                 periment (1993).                                       Editorial Research Reports, Oct. 14, 1988, pp.
the easy things — unnecessary proce-                 11
                                                         Teresa Fama et al.,‘‘Do HMOs Care for the          510-523.
dures like Caesareans for example —                  Chronically Ill?’’ Health Watch, spring 1995,          32
                                                                                                                Paul Fronstin, ‘‘The Effectiveness of Health
it will be faced with difficult trade-offs           pp. 234-243.                                           Care Cost Management Strategies: A Review of
like denying a bone marrow trans-                        Ibid. The study was based on national data         the Evidence,’’ Employee Benefit Research In-
                                                     from 1992.                                             stitute Issue Brief, October 1994, p. 6.
plant to a dying woman.                              13                                                     33
                                                         ‘‘Harvard Study Says Ill and Disabled Have            ‘‘Marcus Welby Goes to Wall Street,’’ Henry
   ‘‘Controversies like this are going
                                                     Problems with Managed Care,’’ Medicine and             J. Kaiser Foundation Symposium, Dec. 13, 1995
to be with us for a long time as we                  Health, July 3, 1995, p. 3.                            (videotape).
transition from this pay-for-everything              14
                                                          Sheldon Greenfield, ‘‘Outcomes of Patients        34
                                                                                                               News release, Henry J. Kaiser Family Foun-
system,’’ economist Custer predicts. A               with Hypertension and Non-insulin-dependent            dation, ‘‘Mixed Message from the Public on
treatment like a bone marrow trans-                  Diabetes Mellitus Treated by Different Systems         For-Profit Health Care,’’ Dec. 13, 1995.
plant ‘‘may not be effective, but it may             and Specialties,’’ Journal of the American Medi-          Esther B. Fein and Elisabeth Rosenthal, ‘‘Delays
                                                     cal Association, Nov. 8, 1995, pp. 1436-1444.          by HMOs Leaving Patients Haunted by Bills,’’ The
also be some cancer victim’s last                    15
                                                         Miller and Luft, op. cit., p. 1512.                New York Times, April 1, 1996, p. A1.
hope,’’ he says. ‘‘If someone’s going                16                                                     36
                                                         Foster Higgins press release, ‘‘Health Benefit        Ron Winslow and Leslie Scism, “Aetna Agrees
to constrain costs, they’re also going               Costs Rose 2.1 percent in 1995,’’ Jan. 30, 1996.       to Acquire U.S. Healthcare,” The Wall Street
to have to say no.’’                                 17
                                                         Gifford Boyce-Smith, ‘‘Getting out of the Hospi-   Journal, April 2, 1996, pp. A2, A6.
                                                     tal,’’ Los Angeles Daily News, Oct. 3, 1995.               Robert Pear, “Doctors May Get Leeway to
  Sarah Glazer is a Washington                       18
                                                         J.C. Robinson et al., ‘‘The Growth of Medical      Rival Large Companies,” The New York Times,
writer who specializes in health                     Groups Paid through Capitation in California,’’        April 8, 1996, p. A1.
                                                     The New England Journal of Medicine, Dec. 21,             Steve Langdon, ‘‘Push for Insurance Changes
and social-policy issues.
                                                     1995, pp. 1684-1687.                                   Moving to Front Burner,’’ Congressional Quar-
                                                         David U. Himmelstein et al., ‘‘Who Admin-          terly Weekly Report, March 9, 1996, p. 620. The
                                                     isters? Who Cares? Medical Administrative and          amendment is expected to be offered to a bill
    Notes                                            Clinical Employment in the United States and           introduced by Sen. Nancy Landon Kassebaum, R-
                                                     Canada,’’ American Journal of Public Health,           Kan., and Edward M. Kennedy, D-Mass., requir-
  See Michael A. Hiltzik et al, ‘‘A Mixed Diag-      February 1996, pp. 172-178.                            ing group-health insurance plans to cover all
nosis for HMOs,’’ Los Angeles Times, Aug. 27,             David Segal, ‘‘Managed Care Generates a           employees regardless of their medical history.
1995, p. A1.                                         Paperwork Explosion,’’ The Washington Post,                Holcomb B. Noble, ‘‘Quality is Focus for
    Steffie Woolhandler and David U.                 Feb. 15, 1996, p. D1.                                  Health Plans,’’ The New York Times, Aug. 3,
Himmelstein, ‘‘Extreme Risk — The New Cor-               California Medical Association, Knox-Keene         1995, p. 7.
porate Proposition for Physicians,’’ The New         Health Plan Expenditures Summary, 1994-5,                 See David Segal, ‘‘HMOs: How Much, Not How
England Journal of Medicine, Dec. 21, 1995,          February 1996.                                         Well,’’ The Washington Post, Jan. 9, 1996, p. F1.
                                                     22                                                     41
pp. 1706-1707.                                           Quoted in Sabin Russell, ‘‘Kaiser Trims Care           Steven A.Schroeder, ‘‘Point of View; Facing
   ‘‘USHC Drops ‘Gag Order’ from Physician           for Well Women,’’ San Francisco Chronicle,             the Grizzly: Can Academic Medicine Beat the
Contract,’’ Managed Healthcare Market Report,        Nov. 2, 1995, p. A1. For background, see               Competition?’’ The Chronicle of Higher Educa-
Feb. 15, 1996.                                       ‘‘Women’s Health Issues,’’ The CQ Researcher,          tion, Nov. 10, 1995, p. A52.
  Robert H. Miller and Harold S. Luft, ‘‘ Managed-   May 13, 1994, pp. 409-432.

332       CQ Researcher
                                        Selected Sources Used

Books                                                          series concluded that HMOs ‘‘withhold some services
                                                               from sicker patients solely because of high cost.’’
Califano, Joseph A., Radical Surgery, Times Books,
1994.                                                          Larson, Erik, ‘‘The Soul of an HMO,’’ Time, Jan. 22,
  Califano, who served as secretary of Health, Education       1996, pp. 45-52.
and Welfare under President Jimmy Carter, takes a thoughtful    This is a detailed look at the case of Christy deMeurers
look at how managed care is changing the human side of         and the charge that her HMO pressured doctors to deny
medicine.                                                      her a bone marrow transplant because of the expense.

Starr, Paul, The Social Transformation of American             ‘‘Managing to Care,’’ The Economist, Sept. 23, 1995,
Medicine, Basic Books, 1982.                                   pp. 70-75.
 This Pulitzer Prize-winning history traces the rise of          This article looks at the threat to medical research as
group-health practices and their battles with organized        managed care forces teaching hospitals to tighten their
medicine to survive.                                           belts.

Starr, Paul, The Logic of Health Care Reform, Whittle          Segal, David, ‘‘HMOs: How Much, Not How Well,’’ The
Direct Books, 1992.                                            Washington Post, Jan. 19, 1996, p. F1.
 Though written as a brief for health reform under               Segal concludes that the rating accorded to an HMO
Clinton, this short book presents a good summary of the        through accreditation is not yet having a major influence
major problems and arguments that led to the rise of           on how employers pick plans.
managed care.
                                                               Reports and Studies
                                                               Employee Benefit Research Institute, Issue Brief: The
Brink, Susan, ‘‘How Your HMO Could Hurt You,’’ U.S.            Effectiveness of Health Care Cost Management Strat-
News & World Report, Jan. 15, 1996, pp. 62-64.                 egies: A Review of the Evidence, October 1994.
 Brink examines managed care’s financial incentives to           Managed care does reduce costs, this review of recent
reduce procedures and referrals and the effect on medical      studies concludes. Included is a useful history of health-
care.                                                          care cost inflation.

Fein, Esther B., and Elisabeth Rosenthal, “Delays by           Employee Benefit Research Institute, Issue Brief:
H.M.O. Leaving Patients Haunted by Bills,” The New             Measuring the Quality of Health Care, March 1995.
York Times, April 1, 1996, p. A1.                               While ‘‘great strides’’ have been made in measuring the
 New York’s biggest HMO holds back money for huge              quality of managed-care plans, this review of recent
medical bills, forcing its patients to fight off collection    efforts says, most employers are not paying attention to
agencies, this Times investigation finds in an article         quality ratings in deciding which plan to purchase.
pointing up the lack of regulation governing managed
care companies.                                                Foster Higgins, National Survey of Employer-Spon-
                                                               sored Health Plans, 1995.
Freudenheim, Milt, “Managed Care Empires in the                 Foster Higgins, a benefits consultant, reports on the
Making,” The New York Times, April 2, 1996, p. D1.             growing trend among employers to adopt managed-care
  The trend toward consolidation of managed-care com-          plans in their benefit packages.
panies, of which the Aetna-U.S. Healthcare merger is the
latest, is portrayed as a way to negotiate lower prices with   Wennberg, John E. et al., The Dartmouth Atlas of
medical suppliers and woo employers with low-cost              Health Care, Jan. 11, 1996, American Hospital Asso-
health benefits.                                               ciation.
                                                                Ten years after an earlier study that helped prod the
Hiltzik, Michael A., and David R. Olmos, ‘‘Do HMOs             move to managed care, Wennberg again finds that physi-
Ration Their Health Care?’’ Los Angeles Times, Aug.            cians in some areas of the country are far more likely to
27, 1995, p. A1.                                               perform expensive surgery than in other areas, but with
 This is the first of a five-part series probing HMOs. The     no better results.

                                                                                            April 12, 1996          333
                                The Next Step
                   Additional information from UMI's Newspaper
                          & Periodical Abstracts database

Managed Care — Cost and Quality                                 Knog, Dolores, “Managed care,” Boston Globe, March
                                                                20, 1995, p. 25.
Bass, Alison, “Focusing on managed care,” Boston                 Knog discusses the growing concern that HMOs, pres-
Globe, Dec. 21, 1995, p. 32.                                    sured by competition and demands to keep costs down,
  More than half of the nation’s managed-care plans tie the     may sometimes deny procedures or referrals simply to
income of physicians to the amount of care they provide,        save money, which has resulted in litigation, is discussed.
paying bonuses for keeping costs down or penalizing
them if they spend more than a set amount on patient care,      Knox, Richard A., “Health costs rise despite managed
according to a study commissioned by Congress.                  care, study finds,” Boston Globe, Oct. 7, 1993, p. 1.
                                                                  A new federal analysis of Massachusetts health spending
Brussee, Frederic C., “Managed care means shared respon-        finds that states where “managed care” has made the most
sibility,” St. Louis Post-Dispatch, Jan. 29, 1996, p. B7.       inroads have experienced nearly the same rates of medical
  Brussee asserts that managed care is about people work-       inflation as the nation as a whole.
ing together to provide more affordable access to ever
higher quality health care.                                     Lipson, Benjamin, “Managed-care plans often ignore
                                                                home care services for seniors,” Boston Globe, June 8,
DeBakey, Michael E., and William G. Anlyan, “Man-               1995, p. 44.
aged care puts us all at risk,” Houston Chronicle, June          Lipson assesses how effective managed-care health plans
18, 1995, p. C1.                                                are for seniors who need home health care.
 Anlyan and DeBakey comment that HMOs force physi-
cians to put the cost of medical care ahead of the patient’s    Miller, Andy, “Managed care’s effect on mentally ill uncer-
well-being.                                                     tain,” Atlanta Journal Constitution, Nov. 12, 1995, p. R1.
                                                                  In an interview, Rosalynn Carter, who is hosting a
Etzioni, Amitai, “One fuming physician: Want a lesson           symposium at the Carter Center on managed care and
in managed care? Take my wife’s practice — Please,”             mental health, discusses managed care, HMOs and other
The Washington Post, Sept. 17, 1995, p. C3.                     topics relating to the care of the mentally ill.
 Etzioni criticizes the trend toward using HMOs, com-
menting that HMOs are incompatible with a free, con-            Olmos, David R., “Some doctors head to Idaho to es-
sumer-driven society.                                           cape managed care,” Los Angeles Times, Aug. 29, 1995,
                                                                p. A11.
Foreman, Judy, “Managed-care cost-cutting may imperil            About a dozen California doctors have relocated to
teaching hospitals,” Boston Globe, Nov. 17, 1994, p. 26.        Idaho, at least in part to escape practices that were
  With no national health-care reform, the 120 top aca-         crumbling under bombardment by HMOs. There are no
demic medical centers in the nation face an increasingly        HMOs in the Orofino area of Idaho, although several big
perilous future because of cost-cutting pressure from           employers are making noise about bringing them there.
managed-care plans, according to reports in The New
England Journal of Medicine.                                    Paris, Steven, and Richard Vernick, “Good managed
                                                                care means good health care,” Boston Globe, Nov. 21,
Gabuzda, Thomas G., “The ethical conflict in managed            1995, p. 13.
care,” The Wall Street Journal, Oct. 3, 1994, p. A21.            Vernick and Paris, both primary-care physicians who
  Gabuzda responds to the Sept. 6, 1994, Page 1 article on      have been treating patients under managed-care arrange-
the positive and negative aspects of HMOs in general and        ments, comment that the case against managed care rests
U.S. Healthcare Inc. in particular. Gabuzda says that not all   on a central fallacy: that under managed care doctors have
HMO activities are bad, nor should there be the elimina-        a financial incentive to undertreat their patients.
tion of the concept of health insurance, but there is a need
to develop a health-care system that unequivocally puts         Parsons, Christi, “Lawmakers vow to take on managed
the patient first.                                              care,” Chicago Tribune, Jan. 8, 1996, C2.
                                                                  A group of women in the Illinois General Assembly has
Knight, Al, “What happens if managers mismanage                 promised to explain managed care in a comprehensive
Managed Care?” Denver Post, Oct. 22, 1995, p. D1.               proposal to regulate matters from emergency room coverage
 Knight comments on the disadvantages of HMOs.                  to hospital stays for mothers and their newborns. Because

334     CQ Researcher
state and federal proposals to regulate HMOs pit the power-    of Medicaid recipients and, in turn, costs.
ful political forces of business and physicians against each
other, any changes in the law face a difficult road.           Winslow, Ron, “Medical upheaval: Welfare recipients
                                                               are a hot commodity in managed care now,” The Wall
Salerno, Steve, “Pricing health care: High price of man-       Street Journal, April 12, 1995, p. A1.
aged care,” The Wall Street Journal, Jan. 18, 1994, p. A16.     Long outcasts of the nation’s health-care system, welfare
 Salerno says a close look at the Kaiser Permanente            recipients have become a hot commodity as state govern-
Foundation Health Plan, which covers a sixth of the            ments, battered by soaring Medicaid budgets, rush to
nation’s 40 million HMO subscribers, raises concerns           move the recipients into managed-care programs where
about the medical and ethical underpinnings of managed         HMOs see those eligible for Medicaid as a major source for
care, a cornerstone of the Clinton health plan and several     enrollment growth — and of profits.
reform alternatives.
                                                               Medicaid/Medicare and Managed Care
Stein, Charles, “Doctors learn about managed care,”
Boston Globe, Aug. 23, 1995, p. 85.                            Abramowitz, Michael, “Glendening opts for HMOs:
 Harris Berman, the president of Tufts Associated Health       Medicaid plan puts patients in managed care,” The
Plan, a major health maintenance organization based in         Washington Post, Jan. 12, 1996, B1.
Waltham, Mass., said the health plan would put up $1.8           Most Medicaid recipients in Maryland would be required
million to create the Tufts Managed Care Institute, a          to enroll in managed-care organizations that tightly con-
nonprofit center that will train medical students and          trol expenses, under an overhaul of the state’s health
doctors in the ways of managed care.                           insurance program for the poor and disabled announced
                                                               by the administration of Gov. Parris N. Glendening.
Stocker, Michael A, “The ticket to better managed care,”
The New York Times, Oct. 28, 1995, p. A21.                     Fisher, Ian, “New York acts to curb fraud in managed care
 Stocker discusses steps that must be taken to improve the     for the poor,” The New York Times, June 24, 1995, p. A1.
services of HMOs under a managed-care system in New York.        Due to a sharp rise in complaints about fraudulent sales
                                                               tactics, New York state and New York City officials
Wood, Charles T., “Managed care is not health care,”           announced on June 23, 1995, that in the city, they would
Boston Globe, Sept. 5, 1995, p. 15.                            no longer allow HMOs to enroll new members directly —
 Wood comments on the “managed-care juggernaut” and            a practice several other states have banned because of the
how it rewards physicians for not giving services as health-   potential for abuse. Officials are seeking a degree of
care expenses increase to a crisis point.                      objectivity by training city workers who will sit down with
                                                               Medicaid recipients and enroll them.
Managed Care and States
                                                               “Managed care at regional hospital,” St. Louis Post-
Abramowitz, Michael, and Amy Goldstein, “Md. hopes             Dispatch, Sept. 4, 1995, p. C6.
to curb Medicaid with managed care,” The Washington             An editorial comments that with the launch of the state-
Post, June 2, 1995, p. C1.                                     administered managed-care program, Missouri began a
 With the specter of federal cutbacks looming over health      promising new chapter in medical treatment for the poor
funding for the poor, Maryland officials began work on a       and needy in the St. Louis area, under which Medicaid
plan to shave the escalating costs of the state Medicaid       recipients will receive their health care through HMOs.
program by requiring recipients to enroll in HMOs and
other prepaid managed-care health plans.                       “Managed care can help curb Medicare costs,” USA
                                                               Today, Feb. 8, 1995, p. A10.
Havemann, Judith, “HMOs, doctors battle in state leg-            An editorial points to the advantages of the managed -care
islatures over managed care limits,” The Washington            HMO option for older Americans eligible for Medicare, and
Post, Aug. 22, 1995, p. A4.                                    says that in the absence of national health reform, managed
  The economic shootout between doctors and insurance          care is the future of health care for all Americans; it may be
companies in state legislatures over managed-care limits is    the answer to holding down health-care costs.
                                                               McIlrath, Sharon, “Democrats’ bill offers Medicare
Paik, Felicia, “HMO competition heats up as states pick        managed care safeguards,” American Medical News,
managed care to save on Medicaid,” The Wall Street             June 12, 1995, p. 6.
Journal, June 13, 1994, p. B5.                                   A group of key Democrats has countered the GOP bill to
  As states continue to search for ways to slash budgets,      control Medicare costs through managed care with legislation
local governments are turning to HMOs to manage the care       intended to assure that quality of care is not lost in the process.

                                                                                                 April 12, 1996             335
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