California, which led the way in the spread of managed care, now is taking a leadership role in putting it under the microscope-or, more accurately, under many microscopes.
A 30-member task force representing a spectrum of opinion has begun to scrutinize how managed care is working in the state. Twenty members were appointed by Gov. Pete Wilson, and 10 were named by legislative leaders.
To avoid what he called "uncoordinated, reactive, piecemeal decisions," Wilson said last week he will veto virtually all proposed HMO reform legislation until the Managed Health Care Improvement Task Force makes its recommendations in January.
The task force is chaired by Alain Enthoven, a professor at Stanford University's graduate school of business. Enthoven, a member of the influential Jackson Hole Group, developed the concept of managed competition some 20 years ago.
Task force members represent the panoply of players in healthcare-providers, employers, consumer groups, health plans and patients. They are as diverse as Myra Snyder, executive director of the California Association of Health Plans, and Mark Hiepler, an attorney who has made a name for himself through successful multimillion-dollar suits against HMOs.
Few other states have set up such committees. The California task force was established by legislation sponsored by Assemblyman Bernie Richter, a Republican from Chico, Calif., and signed into law last year. It was introduced in response to perceived abuses by managed-care organizations. The panel must report to the governor by Jan. 1, 1998, on the following issues:
The structure and operation of different types of health plans in California and how they are regulated.
Trends and changes in healthcare delivery and how they have affected the healthcare economy, academic medical centers and education for the health professions.
Whether managed health plans' goals are being met, including cost control and improving quality and access to care.
Comparison of the effects of provider financial incentives on healthcare delivery in all types of health plans.
The effect of managed care on the patient-physician relationship.
The task force, which has been holding public hearings since April, has not yet come up with any recommendations.
A lot of the problems associated with managed care today stem from organizations "behaving in insensitive ways," Enthoven says. In addition, no matter how many times people have heard that managed care is essential to put a lid on costs that were rising uncontrollably, "it hasn't sunk in," he says.
On top of that, doctors are chafing because of income loss and the need to deal with what they consider an HMO bureaucracy. Consumers are fighting what they see as limits on their freedom, he says.
But the es-sence of the problems, he says, is that "some trends are different from what Paul Ellwood (another managed-care pioneer) and I had in mind. We envisaged competing delivery systems and consumers who would have multiple choices in health plans." Fee-for-service plans were expected to fade away, but naturally, he says. Consumers were supposed to migrate to more desirable and less costly managed-care plans, which is what happened at the California Public Employees Retirement System and at Stanford, Enthoven says.
At CalPERS, "everyone is in managed care, and 80% are in HMOs. That was driven by consumer choice, which is the good and right way to do this," Enthoven says.
"At Stanford, we started with a wide range of choice, put in a defined contribution, and gradually people migrated. In fact, we don't even have a PPO anymore. We have four HMOs with a point-of-service option. It's a very attractive package," he says.
"Unfortunately a lot of employers have just replaced the fee-for-service plan with one HMO, and people suddenly found their freedom of choice limited. It was seen as a take-away."
Enthoven sees the task force as "an opportunity to assess these problems and come out with a rational and constructive interpretation of what has happened and some recommendations about what ought to happen," he says.
A dozen working groups of the task force are tackling aspects of healthcare, such as expanding consumer choice of health plans and the resolution process for disputes over treatment.
A couple of doctors are looking at whether HMOs are practicing medicine without a license and what is meant by "practicing medicine."
"If there's something inappropriate there, what should be done about it?" Enthoven asks.
A sign of the conflicting viewpoints among task force members arose in their very first meeting. "We started with a mission statement that included coming up with recommendations to make our market-driven system better. Some objected because they don't believe it should be market-driven," Enthoven says.
Beth Capell, a lobbyist for Health Access, a California consumer coalition that sponsored a package of legislation to more strictly regulate managed care, says her organization's representative on the task force objected to Enthoven's "preposterous" assumption that "healthcare is largely self-regulated and market-regulated."
Providers and insurers are licensed by the state, Capell says, and state government has a role "in assuring that patients have safe and adequate care."
A business and insurer coalition is working to defeat 11 bills, including four in Health Access' legislative package. A survey conducted for the coalition by Palo Alto, Calif.-based Spectrum Economics shows that the 11 proposals would increase healthcare costs by as much as $11 billion per year.
One bill in the Health Access package opposed by the business coalition requires a second physical exam if coverage is denied or alternative care is recommended. Another bill would require that all utilization reviews and pre-approvals be performed by California-licensed physicians.
Capell believes the task force is "a deliberate attempt to delay consideration of managed-care issues by the Legislature in the hope consumers will give up and go away and stop worrying about the problems."
Says Enthoven: "I certainly hope this is not seen as a delaying tactic. Healthcare is a very complex and important problem, and it's appropriate for people to spend time sorting things out."
Snyder of the state's HMO trade group says the task force is "an opportunity for people to have an in-depth deliberative discussion of the complexities of the industry. Any forum that increases people's knowledge of health plans and how they function we think is a benefit."
A key issue for the task force is which government agency should regulate managed-care plans. Several bills currently propose moving oversight of HMOs from the California Department of Corporations-which critics say lacks the staff and regulatory "teeth" to oversee health plans-to another agency such as the consumer affairs department.
"Moving the box is not the answer," Snyder told the task force during its first meeting. First the role and responsibility of the regulator should be determined. Then the appropriate structure for the regulatory agency should be devised, she says.
The consumer affairs department is not the appropriate structure for regulating health plans because it licenses and regulates individual healthcare professionals and not corporations.
At the task force's July 26 meeting, Margaret Stanley, CalPERS assistant executive officer for health benefit services, testified that "HMOs are just about the only politically acceptable and effective approach to controlling healthcare costs." CalPERS, which has negotiated premium reductions with HMOs, is now "taking a tough negotiation stance" on medical quality, consumer satisfaction, access to specialists and many of the concerns of HMO critics, she says.
Only 4% of CalPERS enrollees change their health plans every year when given a chance to do so, she testified.