ENG 123 SNHU Out of Network Risks for Doctors Persuasive Essay

Overview

In this course, you will write a persuasive essay. Creating a writing plan is a major step in the process of writing your persuasive essay. A good writing plan will help you form your argument, determine your audience, pick evidence to support your key points, and organize the structure of your essay.

Directions

Use this writing plan to gather your thoughts and determine your strategy for writing your persuasive essay. This process will allow you to develop a potential structure for effectively communicating and supporting your claim. Additionally, this plan will help keep your thought processes on track when you begin writing and revising your essay.

Specifically, you must address the following rubric criteria:

Writing Plan

Describe the argument to be addressed in your persuasive essay. Explain how the argument relates to your major, the major you are considering pursuing, or your field of work.Ensure that your topic is debatable. Are you able to see at least two perspectives to this argument?Identify the potential challenges you may encounter in supporting your argument with a specific audience.First, state the audience you will be writing to.Then address the challenges of supporting your argument with this audience.

Provide a brief description of at least two sources that support the key points of your argument.First, list the authors and the titles of each source. These sources may be books or articles you identified in a previous assignment.Then provide a brief description of how each may reinforce your argument.

Explain how your instructor’s feedback on previous assignments has influenced your progress moving forward.What changes did you make to your writing plan after receiving this feedback?If you did not make changes, how did the feedback reinforce the direction of your essay? CQ Researcher
Managed Care
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Author: Sarah Glazer
Pub. Date: 1996
Product: CQ Researcher
DOI: https://doi.org/10.4135/cqresrre19960412
Topics: Health Insurance and Managed Care, Health
Access Date: November 11, 2023
Publishing Company: CQ Press
City: Thousand Oaks
© 1996 CQ Press All Rights Reserved.
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© CQ Press 1996
Introduction
More 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 cost as antithetical to professional ethics. The managed-care industry asserts that health care will improve under its cost-conscious custody.
Health-care firms say they have a financial stake in intervening early and making sure patients get better, not
sicker. But seriously ill patients, who are the most expensive gambles for cost-conscious plans, will lose out
in the process, some experts predict.
Overview
When doctors discovered Nelene Fox’s breast cancer in 1991, the 38-year-old California school teacher and
mother of three children thought her best hope for survival was a bone marrow transplant. But Health Net, her
health maintenance organization (HMO), labeled the procedure experimental and refused to pay for one.*
*
Fox and her husband couldn’t afford the $200,000 operation, but over the next few months she worked tirelessly with friends and family to raise the money through bake sales and other fund-raising events. Fox died
in early 1993, nine months after undergoing the operation.
Fox’s family sued Health Net and in December 1993 won an $89- million judgment – the largest ever made
against an insurance company for denying health benefits. (Health Net appealed the jury’s award but settled
the case while on appeal for an undisclosed amount.)
The Nelene Fox case and others since have resounded throughout the medical world, raising fundamental
questions about managed care’s drive to curb expenses and the possible effects on health-care quality.
Health Net said its decisions were based on medical factors, but the Fox family produced evidence that the
HMO’s managers received bonuses for keeping treatment expenses low. 1
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The same month that Health Net turned Fox down, $4.8 million was sitting in the HMO’s transplant fund. “If
the money isn’t used, Health Net keeps it” and improves its profitability, says Fox’s brother, attorney Mark
Hiepler, who handled the family’s lawsuit.
To many observers, however, performing the transplant against uncertain odds of success represented all
that was wrong with the old- style, “unmanaged” system of medical insurance. Cost was rarely a consideration in its medical decisions – even if the procedure was likely to be ineffective.
“A lot of people said there was no reason to put [Fox] through the agony of prolonging death,” says Donald
W. Parsons, associate medical director for government relations at Kaiser Permanente Medical Groups in
Washington. After all, Parsons says, Fox died within months of the operation, suggesting she was not an ideal
candidate.
Hiepler vehemently disagrees that the operation merely prolonged his sister’s suffering. “She had eight
months [after the operation] when she was back to being a normal person,” he says. “When you look at the
human factors, there’s a child who will remember her Mom, because she was almost 4 1/2 when her Mom
died. . . . We played softball together on Thanksgiving, only a month after she had been in the hospital.”
The question of whether Fox’s treatment was appropriate or not may never be fully resolved, since the success of bone marrow transplants depends on each individual’s case. Nor is there likely to be a ready answer
to the question of how much society should spend for expensive treatments when there is little hope.
The underlying principle of managed care is to keep the entire community healthy by providing preventive
care, such as immunizations and mammograms, at little or no cost. In exchange for lower premiums, copayments and deductibles, the consumer agrees to see a limited group of physicians selected by the plan. The
plan keeps costs down by limiting the consumer’s access to expensive specialists and procedures.
Hiepler says the trade-off is a bad one for the consumer. “The HMOs have seduced the public into not wanting
to pay for anything – a tetanus shot, a breast exam, a physical – $60 procedures that any of us could afford.
On the other hand, they have all kinds of structural impediments to deny us something else that maybe none
of us can afford.”
“Health plans have no interest in spending more money because they let someone get good and sick,” retorts
Susan Pisano, director of communications at the (AAHP). “They have every reason to intervene early and
make sure patients don’t get sicker.” Pisano says malpractice lawsuits are no more common in managed care
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than under traditional insurance plans.
The negative publicity over the Fox suit prompted Health Net and other HMOs to authorize bone marrow
transplants more freely, Hiepler says. Since his sister’s litigation, Hiepler has handled 127 similar cases, and
in all but two cases the HMOs involved agreed to pay without going to court.
Hiepler sees the new willingness to pay as a positive outcome of the Fox suit. But Parsons takes another
view. “Most HMOs, because of the Nelene Fox case, are probably allowing more people to [have] bone marrow transplants than need them.”
As the nation shifts to managed care and changes its focus from high-tech care for the very sick to keeping
the overall population healthy, controversies like the Fox case are inevitable, some experts say.
“For some individuals, their quality of care will suffer even if for the population covered you can show that the
quality of care has increased,” predicts William S. Custer, an economist specializing in health care at Georgia
State University. “I think some of these complaints are coming because we’re trying to cut costs,” he adds.
“That means hard choices are being made, and some people are falling on the wrong side of those hard
choices.”
Questions over how well managed care actually works have taken on new urgency because managed care
has swept the nation so rapidly. More than 50 million people, or 70 percent of the eligible employees, belong
to some kind of managed-care plan, according to a major 1995 survey.* By comparison, fewer than half the
eligible workers belonged in 1992. *
The impetus behind the managed-care revolution has been employers trying to reduce their expenses for
workers’ health benefits. After years of increases as high as 18 percent, employers’ per capita health costs
dropped in 1994, and only rose about 2 percent in 1995. But as managed care has spread, it has run into
resentment from doctors who see it as antithetical to professional ethics.
In a recent article in The New England Journal of Medicine, two Harvard doctors warned of economic threats
from HMOs. Doctors who contract with HMOs may find that the fixed fee they receive for each patient, known
as “capitation,” just covers their costs, they said. To make a reasonable income, the authors said physicians
must earn bonuses for keeping down hospitalizations, referrals to specialists and other costs. 2
“Patients count on their doctor to tell them what they need. When the doctor is thinking, ‘I will have to close
my doors if I give too much care,’ we will have a real quality problem,” says co-author Steffie Woolhandler.
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Woolhandler and David U. Himmelstein criticized a so-called “gag” clause in their contracts with the managedcare company U.S. Healthcare. They said it prohibits doctors in the plan from talking to patients about the
plan’s financial incentives to limit care or about treatments the plan won’t cover.
A few days after Himmelstein criticized the policy on the “Donahue” show last November, U.S. Healthcare
terminated his contract. In February, following a burst of publicity, the company changed its mind. That same
month, U.S. Healthcare decided to allow its physicians to tell patients how the company reimburses doctors,
though not the specific rates paid. 3
The AAHP contends Himmelstein and other doctors misunderstood their contracts’ provisions. “Physicians
are encouraged to discuss health treatment options whether they’re covered or not,” Pisano says. “What
physicians are asked not to do is bring into the examining room their complaints about the plan or about their
payment.”
Organizations representing consumers and the chronically ill have joined with the American Medical Association (AMA) and physician specialty groups to fight for legislation they say would provide more accountability
from HMOs and greater patient protections. In January, Massachusetts passed legislation forbidding HMOs
from imposing “gag rules.”
Citizen Action, a 3-million-member consumer group, has been lobbying in state legislatures for laws that
would require plans to disclose how they pay their doctors; give patients the right to choose specialists outside
the plan; and provide appeals for patients who get turned down for expensive treatments.
“When you have huge, for-profit managed-care companies that are concerned about making money, I don’t
know how anyone could think they would put the needs of patients ahead of making money,” says Cathy
Hurwit, Citizen Action’s legislative director. “In many cases, it’s not the consumer buying the plan – it’s the
employer. The employer is concerned about costs rather than quality.”
Defenders of HMOs see patient-doctor forays into state legislatures as attempts to kill a new way of practicing
medicine that eliminates over-treatment. They say their enemies are old-style fee- for-service doctors – including many specialists – who view HMOs as threats to their income. Under fee-for-service plans, the traditional
system of billing, doctors charge an additional fee for each procedure or test.
To counter anti-managed-care sentiments, the AAHP recently launched a nationwide media campaign. “I believe the vested interests of the old fee-for-service [plans] have been successful in selling the public a bill of
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goods,” says John Ludden, senior vice president of medical affairs for Harvard Pilgrim Healthcare, a managed-care plan, and an AAHP board member. “Every specialist knows there are too many specialists now,
and there will be many more in the future. The trough will not be as full, and more bodies will be seeking to
feed at the trough.”
As managed-care firms struggle with cost and quality issues, these are some of the questions legislatures,
consumers and the medical community are asking:
Will the trend toward managed care hurt the quality of health care?
Studies comparing managed care to traditional fee-for-service find the quality of care about equal. A 1994
review of 16 studies generally found better or equal results for HMO patients suffering from a wide range of
diseases, including congestive heart failure, colorectal cancer and diabetes. These studies based their conclusions on clinical results such as how many patients died or how far a patient’s cancer had advanced before
it was discovered. 4
Consumer-satisfaction surveys tell a slightly more complicated story, the same review found. HMO patients
are less likely to be satisfied with the care they’re getting but happier with the costs than those in fee-forservice. In short, says review co-author Harold S. Luft, a professor of health economics at the University of
California, San Francisco, consumers are willing to trade some quality in service for lower costs.
But critics of managed care say the published studies tend to be based on the best of managed care – oldstyle HMOs like Kaiser Permanente with salaried, dedicated staffs. The fastest-growing kind of managed care
today is represented by looser networks of doctors under contract with health plans to care for their enrollees.
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Doctors in these plans usually care for the plan’s patients for fixed or discounted fees. Consequently, critics
say, doctors in these networks are more likely to be influenced by financial incentives to deny care.
“HMOs are a minority of managed care; they’re the best kind of care,” says Barbara Starfield, a professor of
health policy and pediatrics at Johns Hopkins University. “Now they’re mixed up with all the rest, which are far
inferior. What’s more, they’re being used to represent managed care, when managed care is something else.”
Starfield says it’s hard to study the impact of newer financial incentives on patients because consumers usually don’t know if their doctor has a contract that encourages limitations on hospitalization or referrals. Generally, information in such contracts is confidential, and doctors are prohibited from sharing the information
with patients. Further complicating matters, most doctors are affiliated with a variety of plans with different
arrangements, some managed care and some not.
“This managed care thing is a big, black box, and that’s to the advantage of managed care,” says Starfield.
“They can say anything they want about it.”
Most experts agree there is a huge range in quality in managed care. “Managed care means something different in every region of the country,” says Kevin Schulman, a professor in the clinical economics research
unit at Georgetown University Medical Center.
In cities where managed care is a relatively new phenomenon, health companies are fighting for a share of
the work-force market by offering the lowest possible premiums to employers rather than superior service,
Schulman says. By contrast, where managed care has become established, plans tend to compete more on
quality 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 September, 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 convinced the problem would have been detected had the HMO allowed her an extra day in the
hospital. 5
In January, Time magazine’s cover pictured a gagged doctor. The story questioned whether patients in managed care “can still trust their doctors.” 6
But many health-care experts say the anecdotes that reporters cite do not represent the experiences most
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people will have with managed care. “You see the demonizing of managed care in the press,” says Helen
H. Mills, president of the Mills Group, an employee-benefits consulting firm in Fairfax, Va. “They’re featuring
cases that test the outer limits of how plans balance economics and ethics.”
Yet on balance, managed-care plans have the potential to raise the quality of medical care, Mills suggests, especially in small towns where doctors practice without monitoring from outside experts. Managed-care plans
train administrative “cost cops” to insist that their doctors follow research-backed medical guidelines before
approving a medical procedure. “By having this bureaucracy looking over the shoulder of doctors, forcing their
continuing education, the bureaucracy is tracking the outcomes of procedures,” she says. “That’s not all bad.”
Helen Darling, manager of health-care programs for Xerox Corp., says managed care generally delivers better value for the money. A traditional fee-for-service plan provided to the family of an average Xerox employee
costs $12,000 a year, as opposed to $6,000 for an HMO, and the HMO plan is 17 percent richer in benefits,
Darling says. Xerox has led the field in demanding high quality in its plans. “Our philosophy is good managed
care is better care overall,” Darling says. Traditional plans have become so expensive for employers, she
adds, that “unmanaged fee-for-service is not going to exist in two to three years.”
It’s not always clear whether the widely publicized misjudgments made by managed-care doctors to limit care
are due to the system of care itself or are medical mistakes of the kind that happen in fee- for-service as well.
But critics say they presage new problems in the rapidly changing health-care market.
One of the long-heralded advantages of managed care has been its ability to offer one-stop shopping with a
team of doctors from diverse fields working together on a patient’s problems.
“HMOs can provide an integrated version of care for people with very complex illnesses,” says Ludden, contrasting it to the “splintered, I-can-get-my-own-specialist” approach under fee-for service. He points to Harvard Pilgrim Healthcare’s 20-year-old program for children with Down’s Syndrome, which coordinates care by
pediatricians, cardiologists and neurologists, as “an example of where HMOs function extraordinarily well.”
But critics charge that newer-style plans lack that coordination because they tend to be loose networks of
doctors in private practice who don’t necessarily know one another. Often, they are in the same plan merely
by virtue of their agreement to take the plan’s patients for a fixed or discounted fee. Primary-care physicians
in managed care reported that they referred patients more often to a specialist unknown to them and that they
spoke personally with the specialist less often than doctors in fee for service, one study found. 7
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Delays in referrals to the right specialist can have serious consequences for people with complicated illnesses. Managed care relies on a generalist, such as a family physician or general practitioner, to act as the “gatekeeper” in deciding whether a patient gets referred to a specialist. 8
“You’ve got to be sure the gatekeeper has enough knowledge and will refer quickly when needed,” says
Martha Keys, vice president of the . When multiple sclerosis (MS) patients go into worsened conditions known
as “exacerbations,” a DeLay in getting the right treatment can sometimes mean the difference between paralysis or preventing it, experts at the society say.
Lisa Baynes, 39, an MS patient in Mission Viejo, Calif., battled with her HMO for a year before getting permission to see an MS specialist. Her medical group, an independent practice association (IPA) that contracted
with CIGNA HealthCare of Southern California, required her to consult instead with three neurologists in the
group. But Baynes maintains that none of the doctors were familiar with her side effects from a new MS drug.
CIGNA finally agreed to let Baynes see the outside specialist after she contacted the California Department
of Corporations, which regulates HMOs. In a written statement, CIGNA said Baynes “was at all times under
the care of highly qualified physicians who had access to” the specialist in question through consultations.
Research shows that it’s important for patients to have a long- term relationship with their primary doctor.
“Managed care right away interferes with that,” Starfield says, “because managed care is under the control of
employers generally and subject to change every year.”
Every time the employer changes plan offerings, critics say, the list of doctors covered by the plan is also likely
to change. This lack of continuity can also interfere with managed care’s basic philosophy, which encourages
physicians to deliver preventive care.
In dentistry, a branch of medicine that particularly stresses preventive care, some dentists say managed
care’s philosophy doesn’t work in the real world because employers have ultimate control over the choice of
doctors.
“The concept of HMOs makes sense,” says Henry Hermann, a dentist in Falls Church, Va. “If someone pays
me a set fee to take care of this patient for the next 15 to 20 years, I would give them the best care and
wouldn’t want complications.”
But he adds, “In reality, I know I won’t have that patient for 15 to 20 years” because employees’ plan offerings
change so often. “In the short-term, the incentive is to do least.” Hermann no longer takes managed-care
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patients, he says, because the fees barely cover his costs and because he can’t count on managed-care patients to stay with his practice.
But others find managed care a vast improvement over the old method of picking a doctor, which relied on
the anecdotes of friends and neighbors. Managed-care companies and the large employers that hire them
are more likely to investigate doctors’ credentials before accepting them into their plan, they say.
“Before, my employees had a telephone book,” says benefits consultant Mills. “Now they have a directory of
hospitals and physicians who have been pretty carefully screened.”
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Are managed-care plans great for healthy people but bad for sick people?
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Critics say managed-care plans have healthier populations than a traditional health insurance plan, such as
Blue Cross, because they market to people who have few health worries and like the idea of low premiums
and free visits.
In “cherry picking,” as such targeting is known, an HMO might seek out a computer company that employs
healthy men in their 30s and offer a lower premium than the competing Blue Cross plan. In the elderly market
served by Medicare, a company might advertise informational meetings at Pizza Hut, thus attracting elderly
people vigorous enough to drive there. Critics who think HMOs cherry pick say they purposely shun sick people because they’re expensive to care for.
“My summary of the evidence would be if you’re a basically healthy person, care is probably fine in an HMO,”
Woolhandler says. “The sicker and more vulnerable you are the more likely quality problems are to surface.
Pap smears and cholesterol tests are cheap. If they can keep you enrolled with that, they’re delighted to have
you. It’s chronically sick people they don’t want, and the data suggest they do a lousy job” with them.
Woolhandler cites studies showing that HMO treatment results are worse for vulnerable groups, such as the
elderly and the poor. 9
In the authoritative Rand Health Insurance Experiment conducted in the 1970s, patients were randomly assigned to an HMO or fee-for- service plan. On balance, patients fared about equally. But low- income, medically high-risk patients had a greater chance of dying in an HMO’s care. 10
One explanation for the disparity is that high-risk people may be daunted by an HMO’s bureaucracy. “If you
have to wait 20 minutes on a phone line, it may deter a person using a pay phone who has two children
pulling on her skirt,” says Woolhandler. “Or you may have to go to a specialist who may not be near your
neighborhood.”
Bolstering Woolhandler’s case is a government-funded study that found Medicare patients who enrolled in
HMOs in 1990 were more likely to be healthy than those in traditional fee-for-service plans. However, since
that study there has been a dramatic increase in Medicare HMO enrollment, which rose by almost 1 million
people from 1990 to 1994. 11 Today’s HMOs may have a more representative cross- section of the elderly
population, suggests Teresa Fama, deputy director of the Robert Wood Johnson Foundation’s National Program Office for Chronic Care Initiatives in HMOs.
In fact, studies have been equally divided on the question of whether HMOs cherry pick. A recent study by
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Fama of consumers under age 65 with private insurance found equal numbers of chronically ill patients in
HMOs and traditional plans. 12
Fama thinks it may be harder for HMOs to pick and choose among employees these days as they penetrate
an increasing share of the market. “They can’t go to an employer and say we only want people who run three
miles a day,” she says. “They have to take the whole group.”
The question of how well HMOs care for the chronically ill is hotly contested. Organizations representing
chronically ill patients with diseases like MS, asthma and arthritis charge that their members are more likely
to have trouble seeing specialists familiar with their diseases. Many of these groups have joined with physician specialists in the Patient Access to Specialty Care Coalition to demand that patients be allowed to see a
specialist of their choosing outside an HMO’s network.
According to a recent survey by the Harvard School of Public Health, sick managed-care enrollees report
more problems getting in to see a specialist than their fee-for-service counterparts. Managed-care patients
reported longer average waits to see a specialist (17 days vs. 12 days). They were also more likely to report
incorrect care by their general physician (12 percent vs. 5 percent) and by a specialist they saw (10 percent
vs. 3 percent). 13
But when researchers have looked at how chronically ill patients fair from a health standpoint, managed care
and fee-for-service have an equal track record, according to Fama. Alan L. Hillman, director of the Center
for Health Policy at the University of Pennsylvania, goes even further. “In the few clinical situations that have
been studied, managed care comes out better,” he says.
It’s true HMOs rely more heavily on generalists than specialists, says Fama, but that may constitute an improvement. A recent study found that diabetes and hypertension patients fared equally well in managed care
and fee-for-service, even though managed-care patients got more of their treatment from a generalist. 14
By relying heavily on a primary-care physician as an overall health-care coordinator, HMOs may give more
comprehensive care to someone with a disease that crosses several specialties. “Someone who has diabetes
doesn’t only have diabetes; he has other problems,” says Fama, noting that diabetics are prone to kidney
and heart trouble as well. “One of the dangers of relying too much on specialists is a lot of other things get
neglected.”
Are HMOs reducing costs by cutting fat or by cutting necessary medical services?
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Numerous studies have shown that compared with traditional insurance plans, HMOs admit fewer patients to
the hospital, get them out sooner and use fewer expensive procedures and tests. 15
The result, many analysts say, has been to drive down the cost of health-insurance premiums. For the first
time in 10 years, the average cost of HMO coverage declined last year (by 3.8 percent) while fee- for-service
premiums continued to rise. 16
But while health economists hail the cutback in services as an advance, patients and critics of managed care
have raised alarums about whether it constitutes inferior care.
The trend toward reduced hospital stays should be “welcomed by the public as an advance in patient care,”
wrote Gifford Boyce-Smith, medical director of CIGNA HealthCare of Northern California, in a recent op-ed
article. 17 High-technology medical innovations and more preventive care permit HMOs like CIGNA to send
patients home sooner because they get better faster, according to Boyce-Smith.
Ten years ago, for example, gallbladder surgery required hospitalization for at least a week. Today, patients
can be home in a day or two following laparoscopic surgery, which permits doctors to make a much smaller
incision, operating with the aid of a tiny TV camera.
In addition, hospitals can be an unhealthful place to recuperate. Five out of every 100 hospitalized people
pick up an infection in the hospital, noted Boyce-Smith.
But people who work in hospitals say they often feel uncomfortable with the pressure put on them to discharge
patients as quickly as possible. Managed-care plans increasingly demand that medical procedures once done
in the hospital be done in a less expensive setting like home, or that the patient return for outpatient visits.
While the insurer may be right about the specific procedure, it often means the nurse and the doctor don’t get
the opportunity to help the patient resolve other medical and psychological issues, says Kathleen Mitchell,
director of medical nursing at Georgetown University Medical Center. She’s especially concerned about the
trend of releasing new mothers and their babies after just one day.
“We’ve had plenty of patients here who felt unready to go home within that 24-hour [maternity stay] but left
because that’s what their insurer mandated,” Mitchell says. “Nursing staff have agonized that the individual
would not have gotten information about breast feeding, skin care for the baby, diet, etc.”
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borns. In fact, says Kaiser’s Parsons, when women were staying in the hospital routinely for five days, “We
had women getting blood clots and urinary infections. We discovered less is better.”
“It may not show up in a mortality statistic,” Woolhandler concedes, “but when the patient is at home vomiting,
in pain or unable to get to the toilet, it’s a real quality of life issue.”
Past studies have shown that as HMOs like Kaiser decreased hospital days, they substituted increased outpatient care. But judging from a recent study, some California doctors’ groups that contract with HMOs to take
over patients’ medical care for a fixed fee are cutting back on both kinds of care. 18
“One explanation is they’re not giving enough care,” says Woolhandler, who acknowledges they could also
have a healthier-than- average group of patients.
A new study co-authored by Woolhandler shows managed care has boosted the number of people hired to
push paper while reducing the number who directly care for patients. The paper-pushing comes as no surprise to doctors, who complain bitterly about the forms they have to fill out for managed-care firms. Some
hospitals, like Georgetown, even have personnel devoted to dealing with managed-care staffers who question medical expenses.
From 1968 to 1993, administrative staff grew from 18 percent to 27 percent of the overall health-care work
force. During the same period, doctors and nurses shrank from 51 percent of the work force to 43 percent. 19
“The switch to [for-profit] managed care is substituting a lot of administrative work for hands-on care,” says
Woolhandler. “We’re seeing patients receive less nursing care from physicians and others.”
But advocates for corporate managed care say a certain amount of bureaucracy is necessary to reap the
reduced costs and procedures for which managed care has been praised. In fact, according to Rand economist Glenn Melnick, having administrators occupy 27 percent of the work force “might be the right mix for
consumers, in terms of creating administrative efficiency.” 20
Hurwit of Citizen Action points to a California Medical Association survey showing that some managed-care
plans take more than 25 cents of each premium dollar for administration and profit. 21 “There are a lot of
plans that are ripping consumers off,” she says. “Before you start limiting consumer choice and cutting back
on benefits, let’s talk about getting rid of the fat and getting more of those dollars back to medical care.” Citizen Action supports legislation to require HMOs to spend at least 85 percent of the premium dollar on medical
care.
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When California consumers discovered that Northern California Kaiser was cutting back on annual, routine
Pap smears to detect cervical cancer in women, there was an outcry. Some press reports suggested Kaiser
was streamlining under pressure to be cost- competitive with other managed-care plans. “It is very sad to see
that Kaiser, which has been setting the standard in our state – and probably the nation – is taking these measures,” said Jeanne Finberg of Consumers Union. 22
But Kaiser said it was simply following the advice of the . Its revised guidelines say that a woman whose Pap
smear is normal for three years does not benefit by having smears more frequently than every two to three
years.
Southern California Kaiser, which adopted the guidelines first, used the money it had saved from cutting back
on the exams to reach women in the plan who might never have gotten Pap smears before, particularly lower
income, less-educated women. “The survival rate from cervical cancer is better because we’re reaching more
women,” Parsons reports. Many plans send Pap smear reminders to members on their birthdays.
The controversy illustrates the inherent conflict in managed care between doing what’s best for the community
as a whole and doing what’s best for the individual, says Georgia State economist Custer. “I guarantee you
there’s going to be a cancer undiscovered that would have been discovered had you done it every year,” he
says. “It’s clearly a bad health result. But isn’t society better off spending the money elsewhere?”
Will new financial incentives hurt the quality of medical care?
Under the fee-for-service system, doctors have an incentive to provide more procedures because they get
paid for each one, economists have long argued.
Managed-care advocates point to a recent example reported in The Wall Street Journal: a rash of unneeded
skull surgeries performed on babies misdiagnosed with a rare brain condition. A few babies died during the
surgery, and some were permanently disabled. 23
“If I go to a surgeon who wants to do an operation on a baby with a funny head, he gets an $8,000 fee,” says
Parsons, a surgeon. “Let me go to a managed-care surgeon without a financial stake.”
In the 1980s, Dartmouth College epidemiologist John E. Wennberg found that doctors in Boston were much
more likely to hospitalize patients for common conditions like pneumonia than were doctors in New Haven,
Conn., who treated these conditions outside the hospital. It turned out that Boston had many more hospital
beds per capita than New Haven.
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Most economists thought the findings indicated that medical decisions were often driven by economics. Physicians would come up with additional tests and procedures to fill empty hospital beds and sparsely filled waiting rooms – and to pad their incomes.
The studies also helped to explain why the United States spent more of its national income on health care
than other industrialized nations but had citizens who were no healthier. To employers suffering under the
burden of skyrocketing health premiums, the studies seemed to point the way to cuts that could reduce costs
– by cutting out unnecessary services – without hurting people’s health.
In a new report published by the , Wennberg again concluded that the supply of physicians and hospital beds
has driven demand for hospital care. The report also found that rates for common medical procedures, such
as mastectomies, can vary as much as 33-fold from one community to another. 24
At a press conference releasing the report, Wennberg called it “dangerous” to permit such wide variations in
medical practice when “there is no evidence . . . that more expenditure leads to better health.” 25
“There have always been financial incentives in medicine,” says Hillman. “It’s just the incentives in the past
have been perverse because they reward doctors and hospitals for doing more. In the more- you-do-themore-you-get-paid situation, that’s a very important contributor to way too many surgical interventions for
things like hysterectomies and Caesarean sections.”
Managed care has tried to modify and more recently to reverse these incentives. Under the early models,
such as the one still employed by Kaiser, physicians are paid a salary, presumably removing the financial impetus to pile on additionally billed tests and procedures. Kaiser doctors also receive a bonus at the end of the
year if the plan as a whole reduced expensive procedures and tests.
But newer types of incentives employed by managed-care firms have drawn fire. Under the capitation system,
doctors earn a fixed monthly fee for each patient they sign up to care for no matter how much or how little
care they give that patient.
In November 1995, California attorney Hiepler won a $3 million jury verdict against two doctors in a case
where he essentially put the capitation system on trial. The doctors were paid a fixed monthly fee per patient
and were responsible for the first $5,000 of care on each patient, including referrals, tests and some hospitalization.
The case concerned a 34-year-old woman who died of colon cancer in April 1994. Joyce Ching had visited
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the doctors at her plan complaining of rectal bleeding and pelvic pain. But it took 11 weeks and repeated requests before the doctors sent her to a specialist, who diagnosed her cancer immediately. By that time, the
chances of curing her cancer had dwindled. She died 20 months later.
In the Ching case, Hiepler blames the form of payment. “There’s an incentive not to treat, never to send to
the emergency room; it comes out of the doctor’s budget,” Hiepler says. “ The doctor makes more money if
he doesn’t see you, doesn’t treat you, doesn’t refer you.”
Woolhandler and Himmelstein contended that the base capitation payment they receive from their HMO barely covers office overhead. They charged that physicians must earn their income from a collection of bonuses
and penalties that essentially reward them for limiting care and punish them for exceeding certain targets for
controlling hospital use and medical procedures.
For example, for each dollar of doctor-recommended emergency-room care, the plan penalizes the doctor up
to 50 cents. A physician with 1,500 of the plan’s patients might take home more than $150,000 from bonuses
and incentives – or nearly nothing. 26
“If your hospital days and patient tests are too high, you’ll go out of business,” says Woolhandler. “If you have
a lot of sick patients, it’s impossible to meet the targets.”
Large managed-care companies, including U.S. Healthcare, say their financial incentives also reward highquality care, based on patient- satisfaction ratings and monitoring of patient’s health results. A doctor who has
a much lower-than-usual rate of referrals may also be subject to review and possible penalties in some plans.
But some doctors feel the pendulum has swung too far in the direction of reduced care under managed care’s
regime. Daniel P. Sulmasy, a general internist and associate director of the Center for Clinical Bioethics at
Georgetown, argues that under capitation, he not only gets penalized for ordering “inappropriate” medical
tests but also for tests that are necessary.
“It used to be that to change medical practice, you had to prove it was medically safe,” Sulmasy fumes. “Managed care says, ‘Prove to me that it’s unsafe.’ The burden is now on society to prove that the cut in care won’t
hurt someone.”
Financial arrangements with doctors, such as capitation and bonuses, are usually considered proprietary by
managed-care companies. The AMA has joined with patient groups to argue that these arrangements should
be made public.
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Even some advocates of managed care argue that the patient should know what deal the doctor has cut with
the HMO. “As a patient, I have every right to know the strength of the incentives that a doctor has who has
my life in his hands,” says Uwe Reinhardt, a professor of political economy at Princeton University.
Representatives of managed-care firms say this kind of information is already often available from state agencies. Laws to require additional disclosure would constitute government “micromanaging,” says Karen Ignagni, president of the AAHP. “We don’t think government should be writing contracts between doctor and patient,” she says. But consumers point out that even if some information is on file at state agencies, it is not
easily accessible to them.
Some doctors interpret their HMO contracts to say doctors can’t tell patients about treatments or doctors that
may not be covered by the plan.
In January, the AMA’s Council on Ethical and Judicial Affairs passed a resolution declaring such “gag” clauses
an unethical interference in the physician-patient relationship and calling for legislation to prohibit them. The
AMA urged physicians to continue providing patients with information regarding treatment alternatives “regardless of the provisions or limitations of the plan.” 27
HMOs say the clauses are aimed primarily at preserving the confidentiality of business arrangements. But the
AMA points to cases that raise troubling questions about the influence of financial incentives and gag clauses.
Harry and Katherine Christie’s 9-year-old daughter, Carley, was diagnosed with Wilms Tumor, a rare kidney
cancer. Their plan did not advise them of guidelines providing that only surgeons with previous Wilms Tumor
experience should perform surgery for Wilms. Instead the plan referred the Christies to general surgeons participating in the plan, none with Wilms Tumor experience.
The plan refused to pay for Carley’s surgery by a Wilms specialist the family found at Stanford, prompting the
California Department of Corporations to fine the HMO $500,000.
“People need to know what the plan covers before they get sick,” says Nancy Dickey, a family physician in
College Station, Texas, who chairs the AMA Board of Trustees. “We’re not asking that we legislate out incentives. Patients should know what the incentives are so they can decide whether they’re comfortable or not
with them.”
The National Committee for Quality Assurance (NCQA), which accredits managed-care organizations, says
it has only found one contract that explicitly prevents doctors from discussing treatments not covered by the
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plan. But NCQA President Margaret E. O’Kane says a more common clause – in perhaps a quarter of accredited plans – prohibits physicians from discussing the plan’s method of paying. “We think that’s a problem,” said
O’Kane. “We think we will make some policy about this.”
Notes
* The HMO covered bone marrow transplants but excluded“ experimental” procedures. The
plan said Fox’s cancer was so far advanced that the procedure would be considered experimental in her case.
* The survey by Foster Higgins, an employee-benefits consulting firm, covered firms with 10
or more employees.
Background
The idea of managed care has been around at least since the 1920s, but it was not until the 1980s that the
idea caught on among employers as a way to control spiraling health costs.
Beginning in the 1920s, socially conscious health reformers promoted prepaid group-health plans, in which
a modest annual fee would cover each family’s preventive and sick care. Growing out of the rural, populist
movement, the first cooperative health plan was established in 1929 in Elk City, Okla., by a local doctor. The
early cooperatives emphasized group practice, preventive medicine and consumer participation.
A number of other such cooperatives sprouted in the 1930s and ’40s but didn’t take hold. “The medical profession was unremittingly hostile,” sociologist Paul Starr observed, and “succeeded in convincing most states
to pass restrictive laws that effectively barred consumer-controlled plans from operating.” 28 As late as the
1970s, more than 30 states had such restrictions.
During World War II, health insurance emerged as an employee health benefit. Such benefits were exempted
from wage controls and provided a way for employers to attract workers in a tight labor market. After World
War II, the number of Americans with some form of health insurance increased dramatically through the
1980s.
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But the insurers acted as “shills for doctors and hospitals,” agreeing to pay whatever fee was charged until
the 1980s, wrote former Health, Education and Welfare Secretary Joseph A. Califano Jr. Nonprofit Blue Cross
and Blue Shield organizations and commercial insurers pushed up premiums “with abandon,” he noted, to
pass on increased charges from doctors. 29
Also in the 1960s, unions made health benefits a key demand in collective-bargaining negotiations. Many
experts believed that because so many workers could visit the doctor without ever seeing a bill, they helped
drive up demand for health services and, ultimately, health spending.
Rising Health Costs
In the 1970s, skyrocketing hospital costs caught the attention of government. Two Republican presidents embraced HMOs as a way to control costs. In 1973, Richard Nixon signed the Health Maintenance Organization
Act, requiring businesses with more than 25 employees to offer at least one HMO as an alternative to conventional insurance. Ronald Reagan gave Medicare patients the option of signing up for an HMO in 1982.
In the late 1970s, managed-care organizations composed of loose networks of doctors began to proliferate.
By the early 1980s, research was starting to show that managed care could reduce health costs without hurting patients. In perhaps the most scientific study comparing HMOs to fee-for-service, the ‘s Health Insurance
Experiment in Seattle, conducted from 1976 to 1980, found cost savings of 28 percent in prepaid practices
without hurting overall patient health. 30 But some vulnerable groups, such as the poor, fared less well.
U.S. health costs continued to surge at alarming rates through the 1980s, however. On average, premiums
rose about 15 percent annually during the early 1980s and in 1988 rose more than 18 percent. In fact, Americans spent more per capita on health than other industrialized countries but had higher rates of infant mortality and lower life expectancy.
During the 1980s, HMOs proliferated in a cutthroat environment. To attract and keep members, HMOs were
forced to hold down fees at the same time they were facing increasing costs. Some went bankrupt. By 1986,
75 percent of HMOs faced business losses. 31
Traditional insurance plans started to feel the competitive pressure to cut costs, too. By 1990, 95 percent of
employees in traditional fee-for-service plans were subject to some kind of “utilization review,” where insurers
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scrutinized doctors’ procedures and fees, up from 41 percent in 1987. 32
Yet managed-care fees continued to rise in the late 1980s, though less than fee-for-service costs, raising
questions among experts as to whether they were cutting back sufficiently on unnecessary, expensive procedures. Studies by Dartmouth’s Wennberg and others suggested that still more could be cut. These studies
showed widely varying rates of surgical procedures throughout the U.S. for the same condition without necessarily benefiting the patients.
In the 1990s, managed care turned the corner. According to a survey by Foster Higgins, it went from insuring
a minority of covered workers in 1992 to almost three-quarters in 1995. After years of steady increases, the
cost of employee health-care benefits actually fell in 1994 for the first time.
Consumers’ Concerns
But as managed care was being hailed for cutting costs, some consumers expressed concern that it was cutting muscle instead of fat. “HMOs are totally and purely a question of economics and how much money you
can make,” former Sen. Howard Metzenbaum, D-Ohio, chairman of the , said last year. 33
The rapid rise over the past 15 years of for-profit managed-care companies worries consumer advocates like
Metzenbaum. In the earliest days of managed care, virtually all enrollments were in not-for-profit organizations like Kaiser Permanente. As of January 1995, for-profit companies accounted for 58 percent of HMO
members, compared with only 12 percent in 1981. 34
Once, most of those consumers would have been covered by for- profit traditional insurance plans, says Mark
D. Smith, executive vice president of the Kaiser Family Foundation. Furthermore, distinctions between forprofits and not-for-profits tend to blur in the medical world. Research finds little difference in the performance
of for- profit and not-for-profit hospitals, for example, Smith notes. Profit margins among for-profit and nonprofit HMOs are also similar, according to Stephen Wiggins, CEO of Oxford Health Plans, a for-profit company.
A recent investigation by The New York Times found that the Health Insurance Plan of Greater New York
(HIP), a not-for-profit HMO, has a far worse record than two for-profit competitors in the state when it comes
to delays in paying its members’ medical bills. But the investigation also pointed out serious deficiencies in
the regulation of HMOs, regardless of whether they are for-profit. For example, there is no New York state law
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requiring prompt payment from HMOs. In contrast, regular insurers must pay claims or offer an explanation
for a delay in 15 days or face penalties. 35
Yet another development worrying consumers has been a trend toward mergers of HMOs, hospitals and insurance companies, threatening a managed-care monopoly. In the latest such merger, Aetna Life & Casualty
Co., a traditional insurance company, announced plans this month to buy U.S. Healthcare Inc., a for-profit managed-care company. The merger would create the nation’s biggest medical company. Most observers
expect the new company to shift its emphasis from traditional health insurance to managed care. Patients
who have resisted joining managed-care plans so far will be under increased pressure to do so, observed
Consumers Union executive Gene Kimmelman, because “very soon there may be very little else that you can
get.” 36
Challenging the domination of these giant companies is a new hybrid – doctors who band together to offer
managed-care plans, cutting out the managed-care company as middleman. The plans to issue regulations
this summer relaxing its antitrust rules to make it easier for doctors to create such ventures. 37 Such operations might reduce pressure on doctors to satisfy the profit needs of giant companies, but some consumer
advocates and regulators fear it will simply shift the cost-cutting pressures to doctors themselves, who lack
sufficient capital to take on the risk of paying for extremely sick patients.
Chronology
1920s to 1940s
1929
The first cooperative health plan is established in Elk City, Okla., by local doctor Michael
Shadid.
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1934
In a veiled statement of opposition to prepaid plans, the American Medical Association
(AMA) decrees that patients should have free choice of physicians, and there should be
no restrictions on treatment.
1942
Industrialist Henry J. Kaiser sets up two prepaid health plans on the West Coast, known
as Permanente Foundations, forerunners of one of the largest health maintenance organizations (HMOs) in the nation.
1970s
In an effort to control skyrocketing hospital costs, the federal government encourages HMOs health plans that will “maintain health” rather than profit from sickness.
1973
President Richard Nixon signs the Health Maintenance Organization Act requiring businesses with more than 25 employees to offer at least one HMO as an alternative to conventional insurance.
1980s
Managed care delivers medical services to patients at a lower cost than traditional medicine
without hurting patient health, studies find. In the late 1980s, inflation in health-premium costs
explodes, increasing employers’ interest in managed care.
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1981
Political economist Harold Luft publishes study finding patients in HMOs are hospitalized
less but more likely to see a physician and get preventive care than those with conventional health insurance.
1982
Under President Ronald Reagan, Medicare patients for the first time are offered the option of signing up for an HMO.
1988
Employers’ health benefit costs rise 18.6 percent.
1990s
Employers’ health benefit costs drop for the first time in recent history as managed care sweeps
the insurance market. But consumers question whether quality is being sacrificed.
1993
Managed-care plans cover a majority of covered employees for the first time in history,
according to benefits consultant Foster Higgins.
December 1993
Family of breast cancer victim Nelene Fox wins $89 million verdict against her HMO for
denying Fox a bone marrow transplant. (The amount is reduced in a subsequent, undis-
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closed settlement.)
1994
Cost of health benefits falls for the first time in recent history.
Nov. 28, 1995
Harvard doctor David U. Himmelstein, appearing on the “Donahue” TV show, attacks an
HMO he works for, U.S. Healthcare, for rewarding doctors who deny care.
Dec. 1, 1995
U.S. Healthcare terminates its contract with Himmelstein.
Jan. 19, 1996
Massachusetts enacts nation’s first ban on “gag” clauses in contracts between HMOs
and doctors, such as the one criticized by Himmelstein.
Jan. 30, 1996
Survey by Foster Higgins finds health benefit costs rose only 2.1 percent in 1995, suggesting health costs are finally leveling out.
February 1996
U.S. Healthcare rehires Himmelstein and modifies its “gag” rule, allowing doctors to tell
patients about the incentives they receive from the HMO.
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Feb. 27, 1996
Bipartisan bill is introduced in Congress barring HMO gag rules.
April 1, 1996
Aetna Life Casualty Co. announces it will acquire U.S. Healthcare to create the nation’s
largest managed-care firm, serving 23 million people.
Current Situation
Patient groups, medical specialists and the AMA have joined forces to push for legislation to protect patients
in managed care. So far, they have had the most impact in state legislatures.
A number of “patient protection acts” generally would require plans to disclose to patients any financial
arrangements with doctors that might limit their treatment and to provide grievance procedures for patients
denied treatment. Some of the legislation also would permit consumers to see a specialist outside their plan’s
network for an additional charge, an option known as “point of service.” More than half of the states are expected to consider versions of this legislation this year.
Last year, over 25 states considered such legislation and seven states – Arizona, California, Maryland, Oregon, Mississippi, Minnesota and Virginia – passed some version of it, according to the AMA. In Texas, Republican Gov. George W. Bush vetoed a patient-protection bill but ordered regulations covering some of its key
provisions.
This year, as part of a package of six bills, the AMA is lobbying for a ban to abolish “gag clauses” in managedcare contracts. Such clauses prohibit doctors from discussing with patients treatments that may not be covered by the plan, the AMA says.
On Jan. 19, 1996, Massachusetts became the first state to prohibit gag clauses. Last year, Maryland went
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further than most other states in prohibiting insurers outright from paying physicians bonuses that “deter the
delivery of medically appropriate care to an enrollee.”
The managed-care industry has charged that most of this legislation is really “doctor protection” aimed at destroying managed care. Most patients-rights bills would “eviscerate the choice that is made available to consumers and prevent them from taking advantage of the cost savings in managed-care plans,” says Richard
Coorsh, a spokesman for the .
Requiring managed-care plans to let consumers see a doctor outside the plan, Coorsh says, would raise
everyone’s premiums, because plans would lose a prime tool for controlling costs – limiting the panel of doctors to those who agree to deliver medical care at a discount.
Because of a preemption clause in federal law, most of this state legislation won’t affect a growing segment
of health plans known as self-insured plans. Most large corporations self-insure by setting aside their own reserves of money to cover employee health benefits and paying insurers only to administer and screen claims.
Self-insured plans are exempt from state legislation under the federal Employee Retirement Income Security
Act. However, since many self-insured employers contract with big insurance companies, those health plans
might extend state-mandated consumer protections to their self-insured members as well, Hurwit suggests.
Some patient activists have urged a shift in focus to the federal level to overcome the weakness of state law.
On Feb. 27, Reps. Greg Ganske, R-Iowa, and Edward J. Markey, D-Mass., introduced a bill to prohibit gag
clauses. (See “At Issue”).
Patient advocates acknowledge they have little hope of seeing action on their initiatives in this Congress.
However, there could be congressional action on a related matter – managed care’s limits on maternity stays
in hospitals.
Sen. Bill Bradley, D-N.J., is expected to offer a floor amendment allowing new mothers to remain in the hospital for at least 48 hours after a normal birth and 96 hours after a Caesarean section. Bradley says some
insurers routinely move new mothers out of the hospital in 12 hours. 38
Four states enacted mandated maternity stays in 1995: Maryland, Massachusetts, New Jersey and North
Carolina. Maternity-stay bills have been filed in at least 33 states this year.
Focus on Quality
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Quality has become the buzz word in managed care in the past year, driven largely by interest from large employers. Now that managed-care plans are controlling costs, plans will have to start competing on how good
a job they do, some employers say. But they face a dearth of information.
“We still don’t know if the current health-care system is producing better quality” than the old fee-for-service
system, says David Lansky, president of the Foundation for Accountability in Portland, Ore., which represents
some of the nation’s largest private employers, including American Express and AT&T. Last summer, the
group said it would develop a framework for measuring how well health plans treat their patients. The group
also will gather data on the results of medical treatment for major illnesses. 39
Currently, the closest thing to a Good Housekeeping Seal of Approval is accreditation by the NCQA, which
investigates the credentials of each plan’s physicians and whether the plan’s medical guidelines track current
medical knowledge. About 14 percent of the plans it reviews are rejected outright. But most employers are
not using NCQA accreditation to decide which plans to sign up, surveys suggest. 40
That may be because NCQA has so far investigated only about half the managed-care companies eligible for
accreditation. Or it may be that price is still the most important element for market success. “Let’s be perfectly
frank. We still are driven predominantly by the cost,” says Mary Jane England, president of the , a nonprofit
organization whose membership includes the nation’s major employers. “When the cost is the same, the tiebreaker would be quality.”
Several large employers under NCQA’s lead have been collecting more detailed information on plans. The
Health Plan Employer Data and Information Set can tell an employer what percent of a plan’s enrollees have
received immunizations and mammography screenings, for example.
Critics say this scorecard measures the area in which managed care already does well – prevention. It doesn’t
tell the consumer whether the plan will do a good job of taking care of a serious illness like cancer.
NCQA President O’Kane responds: “It’s much easier to calculate how well a plan did in giving women mammograms, because you can calculate how many women should have mammograms,” she says. “If you’re
looking at how effectively they treat heart disease, it’s hard to know who in the population is at risk.”
According to NCQA, a report card on performance is years away. Eventually managed care, with its large
companies and ability to collect massive amounts of data, should do a better job of rating quality than the
old system, advocates say. The old system never attempted to measure quality systematically, they assert,
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although the threat of malpractice litigation, as today, acted like a superego over doctors’ performance.
“Managed care properly done in an accountable health plan . . . that can keep track of the health care given
to an entire population just has to be better,” says economist Reinhardt.
Short Features
A Managed-Care Glossary
Fee-for-Service: The traditional way of paying for medical services. Doctors in private practice charge a fee
for each service provided, and the patient’s insurer pays all or part of that fee.
Capitation: An arrangement in which managed-care plans pay a fixed-fee to physicians for each plan member they care for. Doctors receive the fixed amount per month, regardless of how much or how little care
the plan member receives.
Health Maintenance Organization (HMO): An organization that provides health care in return for pre-set
monthly payments. Most HMOs provide care through a network of doctors and hospitals that their members must use in order to be covered.
Independent Practice Association (IPA): A managed-care plan in which individual physicians, typically practicing out of their private offices as part of a medical group, contract with a health plan for a fee or fixed
amount per patient.
Preferred Provider Organization (PPO): A managed-care plan in which a network of doctors and hospitals
provides care at a lower cost than through traditional insurance. The choice is usually wider than under
HMOs.
Point-of-Service (POS): A form of HMO, sometimes called a “freedom” plan, which allows members to
choose services from providers outside the HMO’s network as long as the consumer is willing to pay more
– typically a higher deductible and a percentage of the cost of care.
Primary Care Physician: HMOs and managed-care plans usually require members to choose a physician
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devoted to general medical care – sometimes known as a “gatekeeper” – who provides routine care and
authorizes care by specialists.
Why Demetrios Dekazos Lost Faith in HMOs
Avoid a health maintenance organization as if your life depended on it, advises Demetrios Dekazos. For
proof, he points to what happened to his wife.
It was on a Friday in September 1991, when Senate aide Vicky G. Collins, 32, suddenly collapsed over
her computer on Capitol Hill. Dekazos, then her fiance, rushed over from his office in the Senate parking
facility, where he is a manager.
A Senate nurse examined Collins and suggested she go straight to the hospital. But her HMO would not
authorize emergency room treatment. 1.2
The HMO doctor who examined Collins in his office that Friday told her she had a pinched nerve. He gave
her some anti-inflammatories and sent her home to rest for a couple of days.
Over the weekend, Collins’ symptoms worsened, according to her Arlington, Va., attorney, Mark D. Cummings. Collins was dizzy and having difficulty walking. The numbness she had felt on one side of her face
on Friday was spreading to her limbs. At certain times she didn’t recognize Dekazos.
Alarmed, Dekazos called the HMO again on Sunday. The person he finally reached told him to call back
on Monday and make an appointment during the workweek. Finally, in desperation, he called 911 and had
Vicky taken to a nearby hospital.
That Sunday, within a few hours of arriving at the hospital, Collins went into a coma. The emergency room
doctor informed Dekazos that a massive stroke had completely blocked the artery to her brain stem.
Today, Collins suffers from “locked-in” syndrome. She can understand everything that occurs around her
but cannot speak. Her brain receives signals but cannot send signals back down to her limbs to move
them. At first, her eyes remained locked open, and she was unable to move. Now she can move her head
and arms a bit but cannot grasp a pencil for writing. She is confined to a wheelchair.
As her husband recites the alphabet, Collins communicates by blinking or nodding at the letters that spell
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what she wishes to say. She also has a special computer, equipped 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 stroke could have been diminished, according to expert witnesses Cummings says he contacted.
But by the time Collins arrived at the hospital, it was too late, he says.
“She was robbed of time,” says Cummings. “One of the problems with HMOs is doctors have 10-minute
windows to see patients,” he says of her initial examination by the HMO’s doctor. “If you’re healthy, it’s fine,
but if you have an emergency situation you need more than a lick and a promise.”
“It points out problems in how managed-care companies try to approach these problems,” says Michael T.
Rapp, chairman of the Emergency Medicine Department at Arlington Hospital, where Collins was taken.
“They first will try to evaluate something over the phone instead of letting patients use their own best judgment as to whether they need to seek emergency care.”
Collins sued the HMO. Under the conditions of a settlement reached last year, Collins and her lawyer cannot reveal the HMO or the amount of the settlement. However, Collins was adamant that she be allowed to
“tell her story to make sure other people did not fall into this trap,” Dekazos says.
In fact, she wants to testify in favor of legislation proposed by Rep. Benjamin L. Cardin, D-Md., requiring
insurance companies to pay for emergency care even if the patient’s symptoms later proved groundless.
The managed-care industry generally opposes such requirements.
If Collins had received emergency care early in the weekend, her husband is convinced, she would not
have suffered such a severe stroke. But how could he have known that at the time? he asks. “Vicky was
not the expert, I’m not the expert,” Dekazos says. “We are not here to play the medical role. That’s what
you hire the insurance company and the doctor to do.”
He believes that HMOs are preoccupied with the bottom line and that “managed money care” is driving
their medical decisions. “HMOs know we all want to save some money, so they pick up the cost of your
eyeglasses and other small things in life, and it makes us feel so warm all over. But when you have your
cardiac arrest, your cancer, your stroke, which are costly items, you want good, prompt medical treatment
– you don’t want to sit there and fight for your medical treatment.”
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1.2.
“>HMOs developed pre-authorization policies because people were running to emergency rooms for nonemergencies and racking up huge bills. Many HMOs still require pre-authorization. For background, see
“Emergency Medicine,” The CQ Researcher, Jan. 5, 1996, pp. 1-24.
Why Christine Blodgett Loves Her HMO
Every year, Christine Blodgett got a mammogram from her fee-for-service physician. And every year, for
four years, he told the Huntington Beach, Calif., nurse that a spot on the mammogram needed watching,
but was nothing to worry about.
Not until Blodgett switched to a health maintenance organization (HMO) in 1993 did she discover that the
spot was breast cancer.
To Blodgett, her HMO’s speed, efficiency and concern saved her life – in marked contrast to her experience
with the private doctor. As soon as she signed up, the HMO required her to get a new mammogram. A
week later, Blodgett was informed that her mammogram warranted follow-up. That same day, Blodgett’s
HMO doctor referred her to a surgeon, whose biopsy revealed the cancer.
“I had been living with it undetected for four or five years,” says Blodgett, 53. She had switched her insurance to PacifiCare of California, a for-profit HMO in Cypress, Calif., when she went to work for the company
as a case manager. She underwent a mastectomy and describes her HMO doctors as “wonderful.”
Currently employed as a project manager for PacifiCare, Blodgett isn’t sure why her original doctor didn’t
detect her breast cancer. But she’s convinced her cancer would have been discovered earlier if she had
been in an HMO.
“In managed care, the doctors stand to win financially if they treat you in a timely manner and completely,”
says Blodgett, crediting the HMO’s system of “capitation” payments to the doctors who handle its patients.
Under capitation, the doctors are paid a fixed monthly fee per patient no matter how much or how little care
they provide.
“Had they not treated me, and instead watched and waited another year and another year,” says Blodgett,
“I would have gotten to the point where it had spread and perhaps I would have needed a bone marrow
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transplant” – a risky operation that can cost up to $200,000. Blodgett says she never paid more than a $5
copayment in the course of her treatment.
By contrast, she says, her previous doctor, who billed separately for each service, had little financial incentive to provide preventive services. “They want you when you’re sick,” Blodgett says of traditional health
insurance. “Managed care is interested in keeping you well.”
Blodgett is keenly aware of several lawsuits against HMOs that refused to pay for bone marrow transplants
for women with breast cancer. She objects to giving people expensive treatments when there’s only a small
chance of survival.
“If I knew that my chances of having the bone marrow transplant work were slim, I’d go out and get my life
in order and enjoy my kids. I don’t think I’d like to spend my last days being so sick,” Blodgett says. “I think
we all have the responsibility to handle our resources appropriately. You wouldn’t write a big check for a
car you know is a lemon.”
Pro/Con
Should Congress enact legislation barring restrictions on communications between doctors and patients?
Pro
Greg Ganske
R-Iowa. From Statement issued Feb. 26, 1996
There 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 to know the risks and benefits and costs and chances of success of the treatments that will be inflicted on their own bodies or their loved ones. And they don’t want information withheld because an HMO
won’t allow it.
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Unfortunately, that essential doctor-patient trust is being undermined by some health plans that attempt to
limit the content of discussions between patients and providers. Physicians are increasingly signing contracts with insurance companies that contain restrictive clauses preventing the physician from using sound
medical judgment and undermin[ing] the essential notion of informed consent.
Sometimes, these contacts explicitly seek to limit the information a doctor can provide to a patient. The
contract between providers and the Ohio Permanente Medical Group, for example, contains the following
prohibition: “Do not discuss proposed treatment with Kaiser Permanente members prior to receiving authorization.”
How can we expect patients to make informed decisions about their own health if doctors can only inform
them of options that the plan is willing to pay for?
Other examples are more subtle. Some plans place a “general disparagement” clause in their contracts.
One ChoiceCare plan included the following clause in [its] contracts: “Physician shall take no action nor
make any communication which undermines or could undermine the confidence of enrollees, potential enrollees, their employees, plan sponsors or the public in ChoiceCare or in the quality of care which ChoiceCare enrollees receive.”
The danger of this clause is just as significant as the example from the Ohio Permanente Medical Group.
Patients rely on their physician to tell them which doctors or hospitals are better than others. But in plans
with general disparagement clauses, a doctor could not tell a patient that seven of the last 11 patients he
referred to the plan’s heart surgeon have died! That is precisely the sort of information doctors should give
to patients and is precisely the kind of communication that “general disparagement” clauses prevent. . . .
Whether explicit in a contract or communicated to doctors orally, [restrictions on communications between
doctors and patients] deny patients access to critical information and make a farce out of the notion of informed consent.
While I understand the importance of the free market, Congress must protect patients who are unaware
that some doctors are no longer able to communicate their best judgment.
Con
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American Association of Health Plans
From Statement Issued March 12, 1996.
AAHP is committed to unrestricted communication between physicians and their patients about diagnosis,
treatment and other information affecting the patients’ care. We do not believe [however] that regulating the
terms of contractual arrangements between providers and health plans is the way to ensure that patients
receive the information they need about their care, nor is it the way to ensure that their physicians are acting in their best interests in the provision of care. . . .
Open communication between physicians and patients about health status, treatment, coverage, benefits
and health-plan practices is strongly supported by network-based health plans. Due to the emphasis on
prevention and early treatment that is fundamental to organized systems of care, physician efforts to ensure the full participation of patients in decisions affecting their care are encouraged, and it is in the plan’s
and the physician’s interest, as well as the patient’s, for patients to be directly involved in their care and to
be well-informed.
Proposed legislation, the goal of which is to prohibit contract clauses that restrict physician-patient communication, has been drafted too broadly and would restrict contractual provisions that govern the physicianhealth plan business relationship.
For example, anti-disparagement clauses are not intended to restrict physician-patient communication but
to require that physicians discuss criticisms of the health plan with the organization, the party in a position
to address their problems, rather than with the members. It is inappropriate to bring these issues into the
examining room where the focus should be only on the patient’s care.
Similarly, contractual provisions that are designed to protect proprietary information are commonplace in
many professional and business agreements. Respect for the confidentiality of proprietary information is a
generally accepted standard of professional conduct.
While information concerning the types of compensation arrangements between managed-care organizations and physicians generally would not be proprietary, the specific amounts and terms of a particular
compensation arrangement generally would be proprietary from the perspective of both the plan and the
physician. This is particularly true when physicians may have contracts with several plans, and all parties
are likely to value confidentiality concerning the nature and amount of the compensation.
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Creation of statutory rules governing health plan-physician contract provisions is not the best way to foster
unrestricted physician-patient communication about patient care.
Outlook
Managed-care companies are like bounty hunters, Reinhardt likes to say, searching for waste in the healthcare system with a double- barrelled shotgun.
But there’s a price to be paid for a leaner, meaner system. In the days when doctors could charge whatever
they liked, they padded the bill and could take care of the uninsured poor by shifting the cost to paying customers.
“In this new world, where the bounty hunters say, ‘We are not paying,’ doctors and hospitals sooner or later
will not have the cushion to treat the uninsured,” Reinhardt says. “Those people are the innocent bystanders
who will get hurt by all this.”
Another casualty of the bounty hunters, some experts believe, will be medical research at teaching hospitals,
which has traditionally been subsidized by patient bills.
“The growth of managed-health care is threatening the survival of our academic medical centers,” Steven A.
Schroeder, president of the Robert Wood Johnson Foundation, warned last year. Managed-care companies,
with whom teaching hospitals are now competing for patients, don’t have to pay for research and education,
he pointed out. 41
But America’s role in pioneering medical technology for the rest of the world ended up being costly, Reinhardt
says. “The average middle-class American is unhappy because his take-home pay is not going up. It all went
into health care,” he says, noting that health benefits in the 1980s ate up compensation that could have gone
into wage increases.
Most experts think managed care is here to stay because the economic pressures on employers became too
great. The shift to managed care is, Kaiser’s Smith says, “a historically settled question.”
Indeed, Aetna’s plan to acquire U.S. Healthcare underscores the rise of HMOs and other managed-care plans
and the decline of traditional health insurance.
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But once managed care has cut out the easy things – unnecessary procedures like Caesareans for example
– it will be faced with difficult trade-offs like denying a bone marrow transplant to a dying woman.
“Controversies like this are going to be with us for a long time as we transition from this pay-for-everything
system,” economist Custer predicts. A treatment like a bone marrow transplant “may not be effective, but it
may also be some cancer victim’s last hope,” he says. “If someone’s going to constrain costs, they’re also
going to have to say no.”
Sarah Glazer is a Washington writer who specializes in health and social-policy issues.
Bibliography
Books
Califano, Joseph A., Radical Surgery, Times Books, 1994. Califano, who served as secretary of Health, Education and Welfare under President Jimmy Carter, takes a thoughtful look at how managed care is changing
the human side of medicine.
Starr, Paul, The Social Transformation of American Medicine, Basic Books, 1982. This Pulitzer Prize-winning
history traces the rise of group- health practices and their battles with organized medicine to survive.
Starr, Paul, The Logic of Health Care Reform, Whittle Direct Books, 1992. Though written as a brief for health
reform under Clinton, this short book presents a good summary of the major problems and arguments that
led to the rise of managed care.
Articles
Brink, Susan, “How Your HMO Could Hurt You,” U.S. News World Report, Jan.15,1996, 6264. Brink examines
managed care’s financial incentives to reduce procedures and referrals and the effect on medical care.
ElisabethRosenthal, “Delays by H.M.O. Leaving Patients Haunted by Bills,” The New York Times, April1,1996,
A1. New York’s biggest HMO holds back money for huge medical bills, forcing its patients to fight off collection
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agencies, this Times investigation finds in an article pointing up the lack of regulation governing managed
care companies.
Freudenheim, Milt, “Managed Care Empires in the Making,” The New York Times, April2,1996, D1. The trend
toward consolidation of managed-care companies, of which the Aetna-U.S. Healthcare merger is the latest, is
portrayed as a way to negotiate lower prices with medical suppliers and woo employers with low-cost health
benefits.
David R.Olmos, “Do HMOs Ration Their Health Care?” Los Angeles Times, Aug.27,1995, A1. This is the first
of a five-part series probing HMOs. The series concluded that HMOs “withhold some services from sicker
patients solely because of high cost.”
Larson, Erik, “The Soul of an HMO,” Time, Jan.22,1996, 45 52. This is a detailed look at the case of Christy
deMeurers and the charge that her HMO pressured doctors to deny her a bone marrow transplant because
of the expense.
“Managing to Care,” The Economist, Sept.23,1995, 7075. This article looks at the threat to medical research
as managed care forces teaching hospitals to tighten their belts.
Segal, David, “HMOs: How Much, Not How Well,” The Washington Post, Jan.19,1996, F1. Segal concludes
that the rating accorded to an HMO through accreditation is not yet having a major influence on how employers pick plans.
Reports and Studies
Institute, Employee Benefit Research, Issue Brief: The Effectiveness of Health Care Cost Management
Strategies: A Review of the Evidence, October1994. Managed care does reduce costs, this review of recent
studies concludes. Included is a useful history of health-care cost inflation.
Institute, Employee Benefit Research, Issue Brief: Measuring the Quality of Health Care, March1995. While
“great strides” have been made in measuring the quality of managed-care plans, this review of recent efforts
says, most employers are not paying attention to quality ratings in deciding which plan to purchase.
Higgins, Foster, National Survey of Employer-Sponsored Health Plans, 1995. Foster Higgins, a benefits con-
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sultant, reports on the growing trend among employers to adopt managed-care plans in their benefit packages.
Wennberg, John E., The Dartmouth Atlas of Health Care, , Jan.11,1996. Ten years after an earlier study that
helped prod the move to managed care, Wennberg again finds that physicians in some areas of the country
are far more likely to perform expensive surgery than in other areas, but with no better results.
The Next Step
Periodical Abstracts Database (for further research)
Managed Care – Cost and Quality
Bass, Alison, “Focusing on managed care,” Boston Globe, Dec.21,1995, 32. More than half of the nation’s
managed-care plans tie the income of physicians to the amount of care they provide, paying bonuses for
keeping costs down or penalizing them if they spend more than a set amount on patient care, according to a
study commissioned by Congress.
Brussee, Frederic C., “Managed care means shared responsibility,” St. Louis Post-Dispatch, Jan.29,1996, B7.
Brussee asserts that managed care is about people working together to provide more affordable access to
ever higher quality health care.
William G.Anlyan, “Managed care puts us all at risk,” Houston Chronicle, June18,1995, C1. Anlyan and DeBakey comment that HMOs force physicians to put the cost of medical care ahead of the patient’s well-being.
Etzioni, Amitai, “One fuming physician: Want a lesson in managed care? Take my wife’s practice – Please,”
The Washington Post, Sept.17,1995, C3. Etzioni criticizes the trend toward using HMOs, commenting that
HMOs are incompatible with a free, consumer-driven society.
Foreman, Judy, “Managed-care cost-cutting may imperil teaching hospitals,” Boston Globe, Nov.17,1994, 26.
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With no national health-care reform, the 120 top academic medical centers in the nation face an increasingly
perilous future because of cost-cutting pressure from managed-care plans, according to reports in The New
England Journal of Medicine.
Gabuzda, Thomas G., “The ethical conflict in managed care,” The Wall Street Journal, Oct.3,1994, A21.
Gabuzda responds to the Sept. 6, 1994, Page 1 article on the positive and negative aspects of HMOs in general and U.S. Healthcare Inc. in particular. Gabuzda says that not all HMO activities are bad, nor should there
be the elimination of the concept of health insurance, but there is a need to develop a health-care system that
unequivocally puts the patient first.
Knight, Al, “What happens if managers mismanage Managed Care?” Denver Post, Oct.22,1995, D1. Knight
comments on the disadvantages of HMOs.
Knog, Dolores, “Managed care,” Boston Globe, March20,1995, 25. Knog discusses the growing concern that
HMOs, pressured by competition and demands to keep costs down, may sometimes deny procedures or referrals simply to save money, which has resulted in litigation, is discussed.
Knox, Richard A., “Health costs rise despite managed care, study finds,” Boston Globe, Oct.7,1993, 1. A new
federal analysis of Massachusetts health spending finds that states where “managed care” has made the
most inroads have experienced nearly the same rates of medical inflation as the nation as a whole.
Lipson, Benjamin, “Managed-care plans often ignore home care services for seniors,” Boston Globe,
June8,1995, 44. Lipson assesses how effective managed-care health plans are for seniors who need home
health care.
Miller, Andy, “Managed care’s effect on mentally ill uncertain,” Atlanta Journal Constitution, Nov.12,1995, R1.
In an interview, Rosalynn Carter, who is hosting a symposium at the Carter Center on managed care and
mental health, discusses managed care, HMOs and other topics relating to the care of the mentally ill.
Olmos, David R., “Some doctors head to Idaho to escape managed care,” Los Angeles Times, Aug.29,1995,
A11. About a dozen California doctors have relocated to Idaho, at least in part to escape practices that were
crumbling under bombardment by HMOs. There are no HMOs in the Orofino area of Idaho, although several
big employers are making noise about bringing them there.
RichardVernick, “Good managed care means good health care,” Boston Globe, Nov.21,1995, 13. Vernick
and Paris, both primary-care physicians who have been treating patients under managed-care arrangements,
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comment that the case against managed care rests on a central fallacy: that under managed care doctors
have a financial incentive to undertreat their patients.
Parsons, Christi, “Lawmakers vow to take on managed care,” Chicago Tribune, Jan.8,1996, C2. A group of
women in the Illinois General Assembly has promised to explain managed care in a comprehensive proposal
to regulate matters from emergency room coverage to hospital stays for mothers and their newborns. Because state and federal proposals to regulate HMOs pit the powerful political forces of business and physicians against each other, any changes in the law face a difficult road.
Salerno, Steve, “Pricing health care: High price of managed care,” The Wall Street Journal, Jan.18,1994, A16.
Salerno says a close look at the Kaiser Permanente Foundation Health Plan, which covers a sixth of the nation’s 40 million HMO subscribers, raises concerns about the medical and ethical underpinnings of managed
care, a cornerstone of the Clinton health plan and several reform alternatives.
Stein, Charles, “Doctors learn about managed care,” Boston Globe, Aug.23,1995, 85. Harris Berman, the
president of Tufts Associated Health Plan, a major health maintenance organization based in Waltham,
Mass., said the health plan would put up $1.8 million to create the Tufts Managed Care Institute, a nonprofit
center that will train medical students and doctors in the ways of managed care.
Stocker, Michael A., “The ticket to better managed care,” The New York Times, Oct.28,1995, A21. Stocker
discusses steps that must be taken to improve the services of HMOs under a managed-care system in New
York.
Wood, Charles T., “Managed care is not health care,” Boston Globe, Sept.5,1995, 15. Wood comments on the
“managed-care juggernaut” and how it rewards physicians for not giving services as health-care expenses
increase to a crisis point.
Managed Care and States
AmyGoldstein, “Md. hopes to curb Medicaid with managed care,” The Washington Post, June2,1995, C1.
With the specter of federal cutbacks looming over health funding for the poor, Maryland officials began work
on a plan to shave the escalating costs of the state Medicaid program by requiring recipients to enroll in HMOs
and other prepaid managed-care health plans.
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Havemann, Judith, “HMOs, doctors battle in state legislatures over managed care limits,” The Washington
Post, Aug.22,1995, A4. The economic shootout between doctors and insurance companies in state legislatures over managed-care limits is discussed.
Paik, Felicia, “HMO competition heats up as states pick managed care to save on Medicaid,” The Wall Street
Journal, June13,1994, B5. As states continue to search for ways to slash budgets, local governments are
turning to HMOs to manage the care of Medicaid recipients and, in turn, costs.
Winslow, Ron, “Medical upheaval: Welfare recipients are a hot commodity in managed care now,” The Wall
Street Journal, April12,1995, A1. Long outcasts of the nation’s health-care system, welfare recipients have
become a hot commodity as state governments, battered by soaring Medicaid budgets, rush to move the
recipients into managed-care programs where HMOs see those eligible for Medicaid as a major source for
enrollment growth – and of profits.
Medicaid/Medicare and Managed Care
Abramowitz, Michael, “Glendening opts for HMOs: Medicaid plan puts patients in managed care,” The Washington Post, Jan.12,1996B1. Most Medicaid recipients in Maryland would be required to enroll in managedcare organizations that tightly control expenses, under an overhaul of the state’s health insurance program
for the poor and disabled announced by the administration of Gov. Parris N. Glendening.
Fisher, Ian, “New York acts to curb fraud in managed care for the poor,” The New York Times, June24,1995,
A1. Due to a sharp rise in complaints about fraudulent sales tactics, New York state and New York City officials
announced on June 23, 1995, that in the city, they would no longer allow HMOs to enroll new members directly – a practice several other states have banned because of the potential for abuse. Officials are seeking
a degree of objectivity by training city workers who will sit down with Medicaid recipients and enroll them.
“Managed care at regional hospital,” St. Louis Post-Dispatch, Sept.4,1995, C6. An editorial comments that
with the launch of the state-administered managed-care program, Missouri began a promising new chapter in
medical treatment for the poor and needy in the St. Louis area, under which Medicaid recipients will receive
their health care through HMOs.
“Managed care can help curb Medicare costs,” USA Today, Feb.8,1995, A10. An editorial points to the advantages of the managed-care HMO option for older Americans eligible for Medicare, and says that in the
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absence of national health reform, managed care is the future of health care for all Americans; it may be the
answer to holding down health-care costs.
McIlrath, Sharon, “Democrats’ bill offers Medicare managed care safeguards,” American Medical News,
June12,1995, 6. A group of key Democrats has countered the GOP bill to control Medicare costs through
managed care with legislation intended to assure that quality of care is not lost in the process.
Contacts
American Association of Health Plans, 1129 20th St. N.W., Suite 600WashingtonD.C.20036-3403;(202)
778-3200. The AAHP, recently formed by the merger of Group Health Association and the American Managed
Care and Review Association, represents 1,000 managed-care plans nationwide.
American Medical Association, 515 North State St.ChicagoIll.60610-4378;(312) 464-5000. This mainstream
doctors’ organization supports “patient protection” controls on managed-care plans, including the right of doctors to tell patients about treatments not covered by their plan.
Citizen Action, 1730 Rhode Island Ave. N.W., Suite 403 AWashingtonD.C.20036;(202) 775-1580. This consumer group lobbies for regulation of managed-care plans and has produced a “Managed Care Consumers’
Bill of Rights.”
Footnotes
1. See Michael A. Hiltzik et al, “A Mixed Diagnosis for HMOs,” Los Angeles Times, Aug. 27, 1995, p. A1.
2. Steffie Woolhandler and David U. Himmelstein, “Extreme Risk – The New Corporate Proposition for Physicians,” The New England Journal of Medicine, Dec. 21, 1995, pp. 1706-1707.
3. “USHC Drops ‘Gag Order’ from Physician Contract,” Managed Healthcare Market Report, Feb. 15, 1996.
4. Robert H. Miller and Harold S. Luft, “ Managed-Care Plan Performance Since 1980: A Literature Analysis,”
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Journal of the American Medical Association, May 18, 1994, pp. 1512-1519.
5. William Sherman, “What They Didn’t Know About HMOs May Have Killed This Baby,” New York Post, Sept.
18, 1995.
6. Erik Larson, “The Soul of an HMO,” Time, Jan. 22, 1996, pp. 44- 52.
7. Cited in John M. Eisenberg, “Economics,” Journal of the American Medical Association, June 7, 1995, pp.
1670-1.
8. For background, see “Primary Care,” The CQ Researcher, March 17, 1995, pp. 217-240.
9. Cited in Steffie Woolhandler and David U. Himmelstein, Profits from Pain: The Case for Single Payer Reform; The National Health Program Chartbook and Slideshow (1996), Center for National Health Program
Studies, Harvard Medical School.
10. Joseph P. Newhouse et al., Free for All? Lessons From the RAND Health Insurance Experiment (1993).
11. Teresa Fama et al.,“Do HMOs Care for the Chronically Ill?” Health Watch, spring 1995, pp. 234-243.
12. Ibid. The study was based on national data from 1992.
13. “Harvard Study Says Ill and Disabled Have Problems with Managed Care,” Medicine and Health, July 3,
1995, p. 3.
14. Sheldon Greenfield, “Outcomes of Patients with Hypertension and Non-insulin-dependent Diabetes Mellitus Treated by Different Systems and Specialties,” Journal of the American Medical Association, Nov. 8, 1995,
pp. 1436-1444.
15. Miller and Luft, op. cit., p. 1512.
16. Foster Higgins press release, “Health Benefit Costs Rose 2.1 percent in 1995,” Jan. 30, 1996.
17. Gifford Boyce-Smith, “Getting out of the Hospital,” Los Angeles Daily News, Oct. 3, 1995.
18. J.C. Robinson et al., “The Growth of Medical Groups Paid through Capitation in California,” The New England Journal of Medicine, Dec. 21, 1995, pp. 1684-1687.
19. David U. Himmelstein et al., “Who Administers? Who Cares? Medical Administrative and Clinical EmployPage 45 of 47
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ment in the United States and Canada,” American Journal of Public Health, February 1996, pp. 172-178.
20. David Segal, “Managed Care Generates a Paperwork Explosion,” The Washington Post, Feb. 15, 1996,
p. D1.
21. California Medical Association, Knox-Keene Health Plan Expenditures Summary, 1994-5, February 1996.
22. Quoted in Sabin Russell, “Kaiser Trims Care for Well Women,” San Francisco Chronicle, Nov. 2, 1995, p.
A1. For background, see “Women’s Health Issues,” The CQ Researcher, May 13, 1994, pp. 409-432.
23. Bob Ortega, “Some Physicians do Unnecessary Surgery on Heads of Infants,” The Wall Street Journal,
Feb. 23, 1996, p. A1.
24. John E. Wennberg, The Dartmouth Atlas of Health Care, , Jan. 11, 1996.
25. press release, “New Report Questions Geographic Disparity in U.S. Surgery Rates, Numbers of Doctors,
Hospitals,” Jan. 29, 1996.
26. Woolhandler and Himmelstein, op. cit., p. 1706.
27. AMA press release, “AMA Calls on Managed Care Providers to Cancel Gag Clauses and Submit Contracts for Ethical Review,” Jan. 23, 1996.
28. Paul Starr, The Social Transformation of American Medicine (1982), p. 302.
29. Joseph A. Califano Jr., Radical Surgery (1994), p. 42.
30. Cited in Paul Starr, The Logic of Health Care Reform (1992), p. 38.
31. See “The Failure to Contain Medical Costs,” Editorial Research Reports, Oct. 14, 1988, pp. 510-523.
32. Paul Fronstin, “The Effectiveness of Health Care Cost Management Strategies: A Review of the Evidence,” Issue Brief, October 1994, p. 6.
33. “Marcus Welby Goes to Wall Street,” Henry J. Kaiser Foundation Symposium, Dec. 13, 1995 (videotape).
34. News release, Henry J. Kaiser Family Foundation, “Mixed Message from the Public on For-Profit Health
Care,” Dec. 13, 1995.
35. Esther B. Fein and Elisabeth Rosenthal, “Delays by HMOs Leaving Patients Haunted by Bills,” The New
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York Times, April 1, 1996, p. A1.
36. Ron Winslow and Leslie Scism, “Aetna Agrees to Acquire U.S. Healthcare,” The Wall Street Journal, April
2, 1996, pp. A2, A6.
37. Robert Pear, “Doctors May Get Leeway to Rival Large Companies,” The New York Times, April 8, 1996,
p. A1.
38. Steve Langdon, “Push for Insurance Changes Moving to Front Burner,” Weekly Report, March 9, 1996,
p. 620. The amendment is expected to be offered to a bill introduced by Sen. Nancy Landon Kassebaum,
R-Kan., and Edward M. Kennedy, D- Mass., requiring group-health insurance plans to cover all employees
regardless of their medical history.
39. Holcomb B. Noble, “Quality is Focus for Health Plans,” The New York Times, Aug. 3, 1995, p. 7.
40. See David Segal, “HMOs: How Much, …

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