There's good news and bad news for the nation's managed-care plans. The good news is new proof that managed care is saving money when compared with traditional indemnity insurance. The bad news is managed-care organizations are struggling with a serious image problem.
On the good news front, three recent studies have shown that managed care continues to hold down costs. The studies, by Foster Higgins, Towers Perrin and KPMG Peat Marwick, all found substantially lower per-employee health insurance costs for employees in managed-care plans vs. those with indemnity coverage. KPMG, for example, found that hospital costs in high managed-care markets were about 11% below the national average. What's more, the study linked managed care to improved quality: Risk-adjusted mortality rates in high managed-care markets were 5.25% below the national average.
Instead of garnering applause for exploding the high-cost world of fee-for-service medicine, however, managed-care plans are fighting public fears that lower costs are a trade-off for denial of services.
The public's anxiety is being fueled by exaggerated media coverage and HMO-bashing physicians. Struggling to maintain control of the medical-care system, organized medicine is attacking "gag clauses," contending they prevent physicians from telling patients about treatment options that may not be open to them because greedy managed-care plans want to keep costs down. But doctors are not so outspoken when it comes to the ways in which the status quo encourages inefficiency and wastes money that could be better used to improve care for all.
Given time, managed care will either adapt to market realities or give way to some other system that can ensure value-meaning a combination of high quality and reasonable cost. Business executives won't tolerate a return to the inefficient ways of the past.
Market forces are driving the development of integrated networks of care that are able to measure and ensure results across various units. Such a model requires development of clinical pathways-for example, best practices-that can help determine in a less charged atmosphere what care is appropriate. Practice guidelines can help eliminate wide variations in medical procedures in different geographic areas based primarily on economic needs of providers. Further expansion of centers of excellence also is needed.
Otherwise, anxious consumers may simply call down a pox on all healthcare's houses.