Now that the managed-care industry is recovering from some of its problems of the past three years, it's facing some new ones: looming regulation and the push to revert to the system it replaced.
Regulatory issues have been a fact of life for managed care since the days when Hillary Rodham Clinton and Ira Magaziner dominated the healthcare debate. But those issues have been handled primarily at state and local levels. For now and at least until the congressional elections in November, managed-care regulation will remain one of the hottest topics in Washington.
The Democrats want to regain control of the House, and managed care is the hot button they're pushing to get there. Republicans are under so much pressure-largely from legislators who, oddly enough, happen to be providers-that they may have to pass a managed-care bill with teeth.
Legislation that substantially restricts managed care-by allowing consumers to sue health plans for malpractice, for example-reflects the misconception that all plans are deficient in the same ways and should be treated alike. There are some deficient HMOs that deserve criticism, and malpractice should be an issue for them. But good HMOs should not be penalized by being subjected to frivolous suits.
If the good HMOs publicized what they're doing well, it would be easier for the public and lawmakers to differentiate good plans from bad, and overreaching legislation would have less support.
The industry has an image problem, partly because there are too many HMOs and therefore too many bad HMOs. Maybe because of those excesses, the industry has been ineffective at policing itself, which naturally causes lawmakers to want to police it.
The bad HMOs make treatment decisions on the basis of accounting. But if the industry raised the bar, at least some of the low-quality players would be driven out of business. To accomplish that, managed care must adapt and use quality standards like the ones promulgated by the National Committee for Quality Assurance. Internal report cards don't cut it, because they're not objective.
Of course, managed care provides benefits besides cost reduction, but you would never know that from general media coverage. While we all have read anecdotal horror stories, the improvement stories, which do exist, are rarely if ever printed. In fact, you have to delve deeply into HMOs' company literature to discover how managed care has improved health status.
Why is an industry that has improved child immunization rates seen as an ogre? Now that early detection of breast cancer is known to be critical, why are the higher mammogram rates achieved by managed-care plans virtually unknown? HMOs also promote the use of angiotensin converting enzyme inhibitors after myocardial infarction four times more often than fee-for-service insurers do, according to Minneapolis-based United HealthCare Corp. But these facts never make it to the front page.
The character played by Helen Hunt in the movie "As Good as It Gets" blasted an HMO for its handling of her son's asthma, but the treatment of pediatric asthma in managed care has been a real-life success story. Several parties besides the managed-care industry and filmmakers are to blame for HMOs' bad publicity. Individual enrollees are responsible, too. Many of us choose our health plans based on which one charges the lowest premium. Some enrollees have broadened their interest to finding out which physicians are members of which provider networks. They may pay more to continue seeing a particular OB/GYN or pediatrician, for example. But they need to be willing to pay more to get the expanded services they want.
Some lawmakers are pushing for "prudent layperson" language related to emergency room coverage, but enrollees usually don't even try to find out what is covered by their health plan until they have a serious problem.
Employers are to blame because they haven't pushed HMOs to improve quality standards, and they aren't willing to help pay for improvements. Employers and enrollees should analyze which plans promote preventive medicine because that is one measure of quality. But they rarely request information such as mammogram or child immunization rates before making selections.
In addition, the industry needs to present a unified front. There is far too much backbiting between for-profit and not-for-profit sectors. Unless this changes fairly quickly, costly legislation will be passed that will further depress plans' profitability.
A related problem is the desire for managed care to revert to its predecessor. The largest concern facing consumers and the whole country a decade ago was runaway medical inflation. Now that consumers aren't concerned about cost, their natural reaction is to want more product-specifically, more choice of providers, direct access to specialists and open formularies. If that doesn't sound like indemnity coverage with discounted fee-for-service, I don't know what does. In response, HMOs are offering more open-access products in a system that has become managed indemnity.
There are two ways to confront these changing desires. One is to give consumers what they want and add the costs of extra services to the product costs. This appears to be the response of most HMOs.
As a result, medical costs will rise, and premium rates will follow. Those costs already have been pushed up by influences such as new drug therapies. Over the past few years, profit margins have been compressed by heightened competition. Offering products whose true costs are unknown pressures profit margins even more.
Some people don't believe in healthcare profits. They think there's no need to raise rates, because managed-care plans are making profits and paying significant salaries to their executives. Those who believe healthcare is a right, not a business, don't sympathize with plans that say they can't afford an appeals process or some of the other elements contained in managed-care regulation legislation.
The second and better option is to ensure that quality is delivered with restricted access. Plans should find the doctors who provide the best-quality care most cost-effectively, so they don't need broad-based networks. Networks in some markets may need 50 doctors, not 400.
Despite the potential and successes of managed care, if changes can't be made-other than through sweeping federal legislation-we will be forced to admit that managed care does not work and perhaps end up with something far worse.
Hoehn is an analyst with Furman Selz in New York.