The Battle to Make
Health Care Work
Do HMOs serve only HMOs?
http://www.makingakilling.org/chapter6.html
Will a system set up to maximize profit ever truly care for
patients? One indication comes from looking at how HMOs organize
their lists of approved drugs, or formularies, for their doctors to
use. As one might expect, the drugs are often the cheapest and
typically not the best. For instance, PacifiCare, now the nation's
largest HMO for Medicare recipients, replaced an effective,
high-cost schizophrenia drug called Risperdal with the low-cost, 36
year-old drug, Haldol. A thirty-day supply of Risperdal costs $240
compared to $2.50 for a similar supply of Haldol — nearly a 1,000%
savings for PacifiCare. But the side effects of the inferior Haldol
include severe, uncontrollable shaking.1
While such penuriousness at the expense of patients has come to be
expected from HMOs, the example of how Foundation Health considered
organizing its formulary shows that the hunt for profits never ends.
Sabin Russell, a veteran health care writer at the San Francisco
Chronicle, exposed a proposal by Bristol-Myers Squibb that would
have given Foundation Health a million dollars a month as a fee for
restricting its formulary exclusively to the products of the drug
maker.2
"The draft agreement calls for Bristol-Myers to pay $1 million per
month, for up to three years, to Sacramento-based Integrated
Pharmaceutical Services," Russell reported, meaning a total fee of
$36 million. "A Foundation Health subsidiary, IPS is a 'pharmacy
benefits management' company that handles drug benefits of more than
four million HMO members across the country. The deal appears to be
the latest twist on a little-known practice called rebating, in
which drug companies pay cash to insurers, hospitals and even doctor
groups for high-volume sales of their products."
The rub with this kick-back was that the drugs in question were
neither the most cost-effective nor medically effective in the
class of drugs. Still, "preferred" status on the HMO drug list would
go to Bristol-Myers' blood pressure drugs Monopril and Avapro; the
antibiotic Cefzil; Plavix, a drug that inhibits blood clotting; and
cholesterol-lowering drug Pravachol.
Patients who wanted or needed other drugs, which are more effective
or less costly, would have to circumnavigate a time-consuming
appeals process.
Foundation Health simply considered the deal for its $1 million per
month kick-back at the expense of patients and the medical system.
According to Russell, "In fact, the Bristol-Myers draft agreement
appears to rule out passing the payments to consumers. The drug
company 'contribution' the memo states, 'is not an additional
discount…and is not intended for benefit of payor organizations
whose pharmacy benefits are managed by IPS.'"
Another troubling aspect of the arrangement, as the Chronicle's
Russell reports, is who makes the choices about which drugs Health
Net would cover. Once the choices were in the hands of a committee
of the HMO's participating doctors. Now, acting on the advice of a
new committee of hired consultants, the choices are made by Health
Net executives.
This kind of profit-at-all-costs orientation is having an impact,
even on those in industry. "Along the hallways at Sprint
headquarters here [in Kansas City, Missouri], the great expectations
for managed care have dimmed," reported the New York Times in
October 1998. "In a score of interviews with workers and managers,
no one recounted the kind of HMO horror story that makes headlines:
the wrong leg amputated, a child denied a transplant. Instead, they
said they had found managed care to be exasperating, callous and
sometimes just senseless."3
Health care executives and large employers both admit that quality
has been a casualty of the managed care system. Amazingly, an
academic survey of health care industry executives found that almost
half — 49% — believe the growth of managed care has decreased
the quality of patient care. (At the same time, not surprisingly,
55% say there is no need for increased federal regulation of HMOs;
52% believe there is no need for more state regulation.)4
Employers concur. In 1998, 42% of employers polled believed cost
pressures are hurting the quality of care, up from 33% in 1997 and
28% in 1996.5
Small employers are particularly disturbed, despite the pro-HMO
leanings of the National Federation of Independent Business (NFIB).
In a June 1998 Kaiser Family Foundation/Harvard survey of 800
executives of small businesses conducted for the American Small
Business Alliance, 66% of the executives support enacting a new law
to allow patients to sue their HMO as a way to make sure people get
the care they need, rather than oppose it as unnecessary government
intrusion.6
Managing costs does not mean the proper management of treatment. As
we have seen in too many cases, those goals are often antagonistic.
Moreover, corporations managing their own money well does not
translate to the health care system managing its costs effectively.
Columbia's multi-billion dollar bilking of the taxpayer is one clear
example. The recent HMO industry practice of dumping elders, because
the companies are no longer permitted to cherry pick only the
healthy seniors in Medicare, is another.
In mundane ways, too, HMO corporations have incentives and
opportunities to make money for themselves at the expense of both
cost-effectiveness and health-enhancement of the health care system.
"The price one pays to keep health care affordable is a degree of
aggravation," Health Net chief medical officer Dr. Alan Zwerner told
Russell.7
But affordable for whom? The company or the provision of a
reasonable standard of health care?
Americans are learning from the growing exposure to HMO medicine
that a system set up to manage money will never truly take care of
patients. HMO corporations will simply shift costs away from
themselves. The public and the patient will pay. HMO corporations
will continue to charge.
But what alternatives do we have?
Big "R" Reforms
The HMO reform debate has taken place in state legislatures and
Congress. In the province of politicians, the process has lent
itself mostly to sound and fury without progress. Efforts to
maintain a firewall between money managers and healers have fallen
victim to the entrenched HMO lobby.
"They killed the health care Patients' Bill of Rights," Vice
President Gore said at a White House press conference in October
1998. "I was in — I was in John Dingell's district in Dearborn — and
this is a true story — an emergency room doctor told us of a man who
came in to the emergency room in full cardiac arrest, his heart
stopped, the doctor eventually brought him back to life. The HMO
refused to pay the bill and said it was not an emergency. The man
was dead! (Laughter.)"8
The New York Times reported in October 1998 that consumers'
complaints about health insurers and HMOs are "surging," according
to state health insurance commissioners. Interviews with twelve
state insurance departments in the most densely populated states
show that health care complaints have grown "50% over the last one
to three years, far faster than the growth of enrollment in managed
care plans."9 Audiences across the nation cheered when
the lead actress denounced HMOs in the 1997 movie, "As Good As It
Gets."
During 1998, politicians in Congress and state legislatures,
however, failed to enact many serious reforms, folding under
pressure from the HMO lobby. The Patients' Bill of Rights was
defeated in Congress. The Republicans offered fig-leaf reforms with
no enforceable remedies. The insurance industry is similarly
attempting to prevent states from regulating managed care plans.
In July 1999, the Republican-controlled United States Senate passed
purported patient rights legislation that did not include
significant reforms. The G.O.P. plan allegedly applied to 48 million
Americans in federally regulated health plans, but in fact only 10%
of that population are actually enrolled in HMOs. Vice President Al
Gore said the minimal measure would be vetoed because, "it's a
fraud." Senior G.O.P. Senator John Chaffee (Rhode Island) told the
Associated Press, "What have we accomplished? It seems to me we've
let down the American people."
In the debate over curbing HMO power, everyone — from patient
advocates, to doctors, to the HMO industry — has his own definition
of "reform."
The HMO industry favors greater disclosure and a so-called external
review system, where patients' disputes with their HMO are appealed
to a third party for review rather than heard before a court or
jury.
Those on the side of the patient — consumer groups, nurses, doctors
— have made the right-to-sue without ERISA's hurdles the litmus test
for genuine HMO reform. In 1998, the American Medical Association,
which for decades supported capping the damages of doctors and
hospitals for medical negligence, shunned its sacred cow of national
damage limits. GOP leaders offered this carrot to the AMA in an
attempt to split the ERISA-reform coalition, but in a valiant act,
the AMA refused to take it.
Real reform must stem from serious accountability measures. Can we
get there? Can we create and regulate a system that puts public
health first, so that the many tragedies told in this book never
appear again in our wealthy country?
One vital step is the distinction between three types of reforms,
each of which will be considered in turn. "First tier" reforms would
even the playing field for patients, so that they have the necessary
leverage over their HMOs to get the care they need and deserve.
"Second tier" changes, discussed later, would fundamentally alter
the health care system to provide coverage to more patients at less
cost. Lastly, it is crucial to see through the third tier of phony
reforms and political placebos the HMO industry has put forth in
order to stave off genuine, systemic correctives.
Level-The-Playing-Field Reforms —
Nailing Down Tier One
Restore the right to sue for damages at the federal level.
The most "ripe" reform for those who know the system is to apply the
same liability laws to HMOs now faced by every other industry in
America. As discussed, federal ERISA law shields HMOs that
administer private employer-paid insurance from damages for
wrongdoing, so there is never a price to pay in court. (See Chapter
Five). Congress can and should amend ERISA. Damages should be
available under state common law when HMOs that administer
employer-paid health care commit fraud, negligence, are responsible
for a wrongful death, or breach the covenant of good faith and fair
dealing that applies to every other type of business. From 1974
until 1987, patients with employer-paid benefits could receive
damages against insurers. With the 1987 Pilot Life v. Dedeaux
ruling, state common law was preempted in a way that the federal
framers of ERISA did not intend. The easiest way to close the ERISA
loophole is for Congress to specifically clarify the province of
state courts and juries over HMOs that administer benefits. The
Congressional Budget Office reported in July 1998 that giving
patients the right to sue would add no more than 1.2% to health care
premiums, including the costs of so-called defensive medicine.10
At the time of this publication, in July 1999, a bipartisan
"compromise" in Congress would give patients the right to recover
only compensatory damages, such as lost wages, not punitive damages,
which punish wrongdoing.
Unless HMOs face significant damages, they will continue to ignore
patients' needs and doctors' recommendations. In most states
patients cannot collect for their pain and suffering after their
death, so HMOs could have an incentive to actually let them die
without punitive damages.
States can enact new HMO liability laws to protect against
profiteering HMOs that put money ahead of good medicine. States
can pass legislation that specifically skirts the ERISA loophole and
hold HMOs accountable for their decisions by creating a new
"corporate negligence" cause of action for HMOs. HMOs do deny
treatment, overturn doctors' decisions and dictate limits on medical
treatments and care. New state laws could require that HMOs be held
accountable for reckless health care decisions. As noted, Texas
recently became the first state in the nation to offer its citizens
a way around ERISA to protect themselves against poor quality
medical care. The Texas law assures that the physician, not the HMO,
is in charge of patient care. This begins to restore the
doctor-patient relationship. HMOs are liable when they exercise
"influence or control which result in the failure to exercise
ordinary care," in other words accountable for medical negligence
and quality-of-care issues.
In the fall of 1998, a federal district court judge upheld the Texas
statute because, "In this case, the Act addresses the quality of
benefits actually provided. ERISA 'simply says nothing about the
quality of benefits received.' Dukes, 57 F.3d at 3576."11
By contrast, the Court struck down the Texas independent review
process as preempted by ERISA, because it deals with determinations
of coverage disputes. The review process is the HMO industry's
alternative to liability.
California legislators are also considering another way around ERISA.
Pending legislation makes use of a clause in ERISA that "saves" for
the states the right to regulate the business of insurance. The bill
specifically makes damages available under the state's insurance law
when HMOs breach their insurance contracts.12
If the legislation passes, HMOs will no doubt sue to invalidate it.
Creation of an independent non-profit consumer watchdog
association funded by voluntary contributions, and governed by a
board with a majority elected by members. For years, utility
consumers in three states have been able to unite in order to fight
fraud and unnecessarily high rates because of Consumer Utility
Boards or CUBs. These voluntary associations have been effective
because they have been able to contact every utility ratepayer in
the state and ask them to voluntarily join. The key to this reform —
devised by consumer advocate Ralph Nader — is a voluntary "check
off" on the utility bill, which allows consumers to join the
association with a minimal contribution ($5–$12 per year).
Congress, the state legislature, or the people via ballot initiative
in some states can establish a similar consumer association (a
public corporation) for patients in HMOs.13 It could be
granted access to insurance company mailing lists and the power to
advocate on behalf of individuals or groups of patients, and to
publish reports on quality-of-service provided by HMOs, hospitals,
nursing homes, and other health care businesses. The association
would be a check on the health care industry's business practices,
working to ensure that the profit motive does not diminish the
standard of care and invade the doctor-patient relationship.
An effective consumer health care organization could save lives.
Already CUBs have saved consumers billions of dollars. The Illinois
Citizens Utility Board, with 200,000 members, has saved Illinois
taxpayers more than $3 billion since 1983 by challenging utility
rate hikes, and has successfully educated ratepayers on how to save
money on services and on conservation issues.14
This vehicle is a model for HMO patients to join together to
increase accountability and standards of care. It would be a
democratic organization of HMO members interested solely in quality
medical care.
Prohibit mandatory and secret arbitration of medical grievances
as a condition for health coverage. As previously noted, most
HMOs and managed care plans require the consumer to give up
his rights to go to court in cases of malpractice or in disputes
over quality of care — as a condition of coverage. Instead of
having access to the public forum of a court, patients are forced
into a system of mandatory binding arbitration. Forced arbitration
is costly, unfair, and conceals quality-of-care violations from
public scrutiny.15 Many states now prohibit mandatory
binding arbitration agreements. Arizona's constitution, for
instance, specifically bars any legislative limitation on the right
to trial. However, in too many states, forced arbitration enables
HMOs to hide from juries and judges in a secret and often biased
justice system. Reforms to end binding arbitration as a condition of
health coverage would force HMOs that delay and deny care to face
the scrutiny of an open courtroom. This would publicly air
quality-of-care violations so that they are not repeated.
Require prior approval from regulators before HMOs and insurers
can raise their premiums or lower the rates they pay doctors via
capitation. The property/casualty insurance industry has a
system in most states in the nation requiring state approval before
rates are raised or lowered, as opposed to the old "file and use"
system, where the insurers simply filed the rate and used it. No
such system is in place for health insurance, despite its life and
death stakes. As mentioned earlier, many individual policyholders
with Blue Cross of California saw their rates skyrocket by 58% in
1998. Elderly Kaiser individual members in Washington, D.C. saw a
49.4% increase in premiums.16 Older Americans can become
costly patients and the HMOs hope to discourage them from staying.
HMOs say that the young should not subsidize the old, but this is
precisely the definition of an insurance pool risk. You pay in when
you are young and healthy, and utilize when you are older and
sicker. Requiring prior approval for rate increases, and an
opportunity for a public hearing and comment, will keep the HMO
industry honest. Utilities face this scrutiny, and health care is
certainly as vital a public commodity as water and power.
Health care businesses should be required to show the need for rate
increases and where and how the money would be used. A fair rate of
return must be set on health care companies and HMOs. If care is to
be rationed, so should HMO profits.17
HMOs have used their leverage to squeeze down the capitated rates
for doctors so low that it is virtually impossible for physicians to
do all they can for their patients. Some primary care doctors
receive rates as low as $6 dollars per month for all the care of a
patient. A prior approval system could require that HMOs show that
the capitated rates paid to their physicians and medical groups are
actuarially sound and sufficient to take care of the patients' needs
— particularly the sickest patients. If the rates paid to physicians
who treat a disproportionate number of sick patients are not "risk
adjusted" upward, doctors will simply compete for well patients. The
public has a compelling interest in this type of rate regulation to
make sure the insurance system serves the sick as well as the
healthy.
Ban full-risk capitation. The idea of pitting doctors'
financial interests against their patients' quality of care violates
the fundamental doctor-patient relationship. Today some doctors
accept nearly full risk for all of a patient's care, meaning almost
all costs expended on the patient are paid by the doctors,
not the HMO. This development happened without public debate,
comment or approval. Large physician medical groups act essentially
like insurers, without the solvency requirements to make sure they
are fiscally secure or hold an insurance company license. Whatever
doctors spend on patients comes out of their own pockets. "The less
you do for patients, the more money you make" is an unacceptable
public policy for most Americans. The federal government can outlaw
the payment of capitated rates to physicians, or at least "full
risk" capitated payments that turn physicians into insurers. If HMOs
are prevented from passing full risk, or even any risk, on to
physicians, then the fire wall between the doctor's focus on care
and business concerns will be rebuilt.
Prohibiting HMO bureaucrats from second-guessing physicians who
examine patients. HMOs claim that if they can no longer capitate
doctors, they will have to increase the number and interference of
company bureaucrats. An HMO should not be allowed to deny a patient
a physician-recommended treatment unless another equally qualified
doctor has examined the patient and made a medical determination
that the care is not warranted. In addition, any HMO employee making
treatment decisions should have a valid medical license in that
state.
Would the HMO industry really oppose such basic reforms? Yes. In
1997 and 1998, California's HMO industry fought such legislation
twice. The reform, aimed at curtailing the overriding of doctors'
decisions, focused on extreme cases, where a patient's life and
health was certified to be in jeopardy by the first doctor who
examined them. The industry prevailed on Governor Pete Wilson to
veto this eminently reasonable reform.18 This common
sense rule of law, however, must be applied to HMOs if bureaucrats
are to be prevented from overruling qualified doctors and making
life and death decisions. In particular, if capitation is
prohibited, this reform will ensure that HMO bureaucrats do not
interfere in the doctor-patient relationship when a doctor is
seeking critical care for his patients. This vital legislation
returns control over medicine to doctors, not accountants.
States must set safe staffing standards so that nurses and
doctors are available to patients based on acuity of illness,
regardless of whether the patient is in a nursing home or in a
hospital. Typically, staffing protections exist only for the
most severely ill patients in critical care units. Even in these
areas, some businesses routinely violate the law. Stronger penalties
are needed. Safe staffing requirements do not currently exist for
hospital units outside of critical care, nursing homes, medical
offices, and same-day surgery centers. This is why HMOs often seek
to shunt patients who need to be in the hospital to so-called
skilled nursing facilities or nursing homes, which are less costly
because doctors and nurses do not have to be on the premises in any
ratio to the patient population. Until safe nurse- and
physician-staffing levels are set by regulators for all acute
patients, HMOs and insurers will continue to cut corners and strand
patients in inappropriate settings based solely on cost.
Mandate public disclosure of data on health care quality,
financial information and complaints and arbitrations against the
health care organization. One of the key components of our
medical system should be informed consent by patients. HMOs may deal
with questions of life or death, but they are under no obligation to
tell you anything about their day-to-day operations. They do not
disclose how they determine whether you receive needed care, how
much money they make based on those decisions or about why any legal
actions were taken against them. HMOs should be required to publicly
disclose all information relating to quality of patient care. This
includes all data and studies used to determine quality, staffing,
and reduction of services; financial reports, including corporate
affiliates or subsidiaries; and complaints and arbitrations.
WARNING: Today HMOs claim they are trying to get more information
into consumers' hands. But this information is often useless. For
instance, patient-satisfaction surveys are often taken among people
who are well and rarely use their HMO. And private report cards are
maintained by industry-sponsored groups such as the Joint Commission
on the Accreditation of Healthcare Organizations (JCAHO) and
National Committee For Quality Assurance (NCQA).
NCQA was formed in 1979 by the trade associations for the managed
care industry — the American Managed Care and Review Association and
the Group Health Association of America. The group was founded, in
fact, to counter the federal government's attempts to monitor HMOs.19
The main funding source for NCQA continues to be HMOs, although the
group is seeking to diversify its funding to appear more
independent. In 1997, NCQA's board of directors was a "Who's Who" of
HMO executives and corporate chieftains, including representatives
from Aetna, Blue Cross, Henry Ford Health System, PacifiCare,
Harvard Pilgrim Health Care. NCQA has created its own performance
measurements, the Health Plan Employer Data & Information Set (HEDIS).
"The critical point here is that 'value' as used by NCQA is to be
measured strictly in terms of cost of health care delivery,
as distinguished from the clinical needs of a patient as defined by
the trained professional," said former U.S. Justice Department
attorney Kenneth Anderson, an expert in anti-trust law who contends
NCQA is a part of collusive behavior among the managed care
industry. "Thus, the NCQA criteria by which performance is measured
are initially framed by those entities — HMOs, managed care
companies and employer payers — who have a strong incentive to
define 'appropriate' levels of care in narrow economic (e.g. cost)
terms."20
Anderson says "This NCQA effort is, in part, essentially a massive
public relations program orchestrated by the managed care industry
in hopes of averting the establishment of a truly independent and
objective mechanism, whether private or governmental, to define what
quality health care really is and then measure plan performance
against such standards."21
As for JCAHO, a July 1996 audit by the national consumer group
Public Citizen found JCAHO "views hospitals not as entities to be
regulated, but as customers to be serviced and kept satisfied." Part
of the basis for the finding is that twenty-one out of twenty-eight
members of the JCAHO's Board of Commissioners were industry
representatives who each paid $20,000 a year for a seat.
Prohibit health care businesses from selling medical records
without the express written authorization of the patient. Here
is a scary thought: It is easier for people to find out if you have
cancer or AIDS than it is for them to get a list of the videos you
have rented. Patient records are now a commodity for sale.
Hospitals, HMOs, and drug companies all maintain commercial data
banks which collect and store individual medical records, containing
sensitive personal information. Most states' civil codes have
extensive provisions for maintaining medical confidentiality, but
most were written before the computer explosion. The new technology
changes everything and leaves patients extremely vulnerable. Dr.
Beverly Woodward, an ethicist at Brandeis University, says employees
at most Boston-area hospitals enter patient information directly
on-line without consent from the patient. Any doctor at any
affiliated hospital can access these records, including psychiatric
records.22 In Maryland, Medicaid clerks tapped into
computers and accessed critical patient information — names,
addresses, incomes, medical records — which they sold, sometimes for
less than fifty cents per head, to HMO recruiters.23
Breach of privacy can have serious consequences. Patients with AIDS
or mental illnesses have a great deal to lose if their condition is
made public — sometimes their jobs, even their families.
Prohibit HMOs, hospitals, nursing homes or other health care
businesses from firing, delisting or retaliating against doctors and
licensed caregivers who speak out on behalf of patients or who
report patient care violations to authorities. "Gag" or
"disparagement" clauses in contracts between physicians and HMOs or
insurers pressure doctors to keep silent about practices or policies
they believe may be injurious to patients.24 Hospitals
have fired, sanctioned, and threatened doctors, nurses and other
licensed caregivers who advocate for their patients, challenge
unsafe practices or cooperate with official investigations. These
pernicious practices must be barred if doctors are to be trusted by
their patients. HMOs say "gag" clauses do not exist today. If they
do not, there is no reason not to ban them.
Fixing Long-term Care Insurance — Integrating Support Systems.
The average life expectancy has lengthened more in the last 100
years than in the previous 2,000.25
People are living longer, but their final years are not necessarily
healthier. Half of all women and a third of all men 65 years of age
and older will spend their last years in a nursing home, at a cost
of about $40,000 a year.26
Long-term care is the assistance people need when they are not able
to accomplish some of the basic "activities of daily living" like
bathing, dressing, walking or moving from the bed to a chair. The
National Center for Health Care Statistics reported in 1996 that
half of those 85 and older require long-term care assistance.
Unfortunately, traditional health insurance and Medicare will
generally not cover home care or community-assisted nursing home
living. One must be poor or become poor before becoming eligible for
long-term care benefits through Medicaid. Standard health policies
pay less than 1% of long term care costs. Medicare covers less than
4%. Private payments, which are costly to individuals and their
families, account for 29%. Medicaid — which covers the poor and
those who have "spent-down" their assets (a difficult process) —
accounts for 68% of the payments.27 Should it take
becoming poor or disabled, or driving your family into poverty, in
order to qualify for home-care coverage? Shut-ins who cannot afford
home care develop bed sores or anorexia, then need to be
hospitalized at a much higher cost.
Long-term care in California averages about $124 a day, or about
$45,000 a year.28 According to the Brookings Institute
only 4 to 5% of the elderly nationwide have some kind of private
long-term care coverage.
Marketing is not prompting consumers to buy policies at a younger
age — the average purchaser of private long-term care insurance is
68 years-old. Plus, policies are sold almost exclusively on an
individual, rather than group, basis, with concomitant high
administrative costs for insurers. According to the National
Association of Insurance Commissioners (NAIC), annual premiums for
long-term care insurance can run as much as $2,000 for the
average-aged purchaser. Premiums increase as one gets older and
there are so many options in policies that even sophisticated
consumers have difficulty understanding what they are buying and how
it compares with other products.
Deceptive and fraudulent marketing is also increasingly a serious
problem for long-term care insurance. federal legislation in 1996
created a national long-term care insurance policy to be sold by
private insurers. Drafted at the behest of the insurance industry,
the federal policy provides less generous benefit payments than many
state-based policies, including California's — eliminating the most
common form of disability, the inability to walk, as a trigger for
paying benefits. The insurance lobby sold the less generous benefits
policy to Congress, and then marketed it to seniors, under the
pretense that because the policy's cost was tax deductible, older
Americans would benefit. The problem is that the vast majority of
seniors do not itemize their medical deductions and will not reap a
tax benefit.
The affordability and availability of long-term care must be
addressed in a coherent national health care policy, particularly as
it relates to Medicare and Medicaid.
Can society afford to pay to keep all older Americans alive as long
as they and their family want and technology allows? Critical to
answering this question is a more reasonable long-term care public
policy. One solution is for the federal government to issue
long-term care insurance that includes the most common form of
disability — the inability to walk — and for it to be jointly
underwritten by private companies.
A second potential solution is to build long term care insurance
into the federal Medicare package, so that families will not have to
"spend-down" or "go-bankrupt" just to get nursing home care. Surveys
show that the majority of the American public agree with expanding
Medicare to include long term care.
Private companies like Columbia/HCA have milked and bilked the
homecare market at the expense of the taxpayer, mostly through
Medicaid. Meanwhile, those doing the job are underpaid and
overworked. Integrating the continuum of home care into the medical
care delivery system is vital to cost-effectiveness and health
enhancement.
Systemic Changes:
The Second Tier Reforms
Important as they are, first-tier reforms will not fundamentally
alter the drive to sacrifice care in the name of profit. More
potent, systemic remedies like those enumerated below are likely
needed.
End For-Profit, Investor Ownership of HMOs and Health Care
Businesses. Medical care is not a commodity. It should not be
bought and sold like automobiles. Health care does not fit the logic
of the market. Many observers trace the reckless, profit-driven
care-cutting at HMOs and managed care companies to the rise of
for-profit, investor-owned HMOs and health care businesses. The easy
money in managed care, though, is long gone. How do investor-owned
HMOs respond to the current serious slide in their stock? They move
to fewer facilities, reduced access to specialists, cheaper drugs,
shorter hospital stays, fewer doctors and hospitals, less caution.
In the current environment, the maintenance of the company's rate of
return to attract investors demands that patients pay the price. The
HMO network of doctors is made more restrictive, research and
training programs are cut, doctors are fired.
Former United States Surgeon General C. Everett Koop and John
Baldwin, the dean of the medical school at Dartmouth College, posed
the question of control of health care this way: "Sustained profits
require aggressive cost-cutting. This results, inevitably, in
restriction of access and withholding of care. But do we really want
to relegate such decisions to analysts within the health care
industry, or should we assert the public interest in these crucial
ethical, societal and medical issues?"29
When California-based PacifiCare bought failing FHP International in
1997, for instance, the executives and directors took home millions.
FHP patients had already paid the price. Long before the sale, about
one-third of FHP doctors were fired, training programs were
dismantled and the drug list cut, according to FHP's founder, in
order to dress the company up for sale by clearing FHP's books of
expensive overhead. FHP shareholders, who took the HMO officers to
court, claimed unscrupulous board members and executives purposely
destroyed a viable and healthy company just to sell off its
resources and make millions for themselves.
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Wall
Street electronic ticker-tape machine constantly updating
PacifiCare's stock price above the elevator to the medical
directors' office suite.
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Without new
controls to protect health resources, the current system is clearly
open to raids by profiteers. In the $9 billion U.S. Healthcare
merger with Aetna in 1996, for instance, U.S. Healthcare chief
Leonard Abramson walked away with over $900 million. PacifiCare
medical directors, who are responsible for approving or denying
physician requests for expensive drugs and treatment, view a
constantly updated electronic ticker-tape of the company's stock
price on the wall above the elevator to their offices. These medical
directors decide physician requests that could affect that stock
price. Do business or medical decisions rule?
Patients deserve a moratorium on for-profit HMO takeovers of
not-for- profit HMOs, hospitals and clinics. This would discourage
the quick buck mentality by HMO executives while protecting the
availability and accessibility of health care. Medical resources are
far too valuable a public commodity to evaporate the next time a
Wall Street bubble bursts. A ban on for-profit, investor ownership
of HMOs would put HMOs back in the hands of doctors and health care
professionals who have been trained to run the system.
A study in the July 14, 1999 edition of the Journal of the
American Medical Association found that not-for-profit HMOs
deliver a better quality of care than investor-owned, for-profit
HMOs in fourteen categories selected by the NCQA. For instance,
investor-owned HMOs had lower rates of immunization, mammography and
psychiatric hospitalization. One can only imagine how much better
still the non-profits would perform if they did not have to compete
in markets dominated by for-profit companies.
Some might say that doctors are for-profit enterprises themselves.
This is correct. But, unlike HMOs, physicians also hold medical
licenses that can be taken away and they can be held accountable in
a court of law in every state. Effective checks on physician
conflict of interest can be maintained. Doctors working within the
framework of a non-profit medical system will have additional
ethical constraints.
HMOs are starting to fail financially. Oxford in New York, for
instance, fell apart after its stock tumbled. New Jersey officials
were forced to take over HIP Health Plans of New Jersey in October
of 1998 because it was bordering on insolvency. Governor Christine
Whitman's administration announced that it wants to create a safety
net for patients by exploring the possibility of a "guaranty fund"
for HMOs — which, unlike traditional insurers, do not have reserve
requirements. The stress on HMO finances will only continue.
For-profit HMOs operate in a climate of profiteering and investor
demands for a strong rate of return on their capital. The non-profit
HMOs compete in the same environment as the for-profits — trying to
undercut their for-profit competitors' prices. This is what happened
to Kaiser, a non-profit, competing in a for-profit environment.
Kaiser reduced its once excellent service to maintain its price
levels for employers. A disillusioned Paul Ellwood, the father of
HMOs, who even coined the term managed care, relayed recently, "A
Kaiser official told me the other day, 'Until better quality
attracts more patients, I don't care about it any more. We've been
talking about quality improvement for thirty or forty years without
much to show for it.'"30 The non-profits are subject to
the same downsizing demands to lower costs in order to cut premiums
so they can attract more customers. Take the investor-owned,
for-profit company out of the managed care equation and the
management of quality care within a budget will be the primary
concern, rather than return on investment. The non-profit medical
group can return to its primary goal of treating patients.
Boycott HMOs and Receive Health Care Direct From Employers.
Motorola Corporation received so many complaints from its employees
about their HMOs that it created a new system where the company
itself contracts with a network of doctors and hospitals to take
care of its employees' medical needs. Motorola cut out the
unnecessary middle men — the HMOs and insurance companies. Employees
report greater satisfaction with their health care and doctors say
they now are the ones in control of managing care, knowing they must
contain costs (or they will lose their contracts), but not at the
expense of medically necessary treatment. Motorola's vice president
for benefits, Rick Dorozil, told CBS News, "We will continue to do
this as long as we can do it faster, better, cheaper, and at better
quality." For $12.50 a week and 10% of bills, employees and their
families can see any doctor in the network, including specialists,
without preauthorization. Seventy percent of Motorola's 80,000
employees have enrolled in this new plan.31 As more
employers follow suit in this voluntary arrangement, at least
patients with employer-paid health care will have more options.
There are two daunting problems with this model. First, employers
have access to personal medical information about their employees.
This creates a very real threat to patient privacy. AIDS patients,
for instance, might find themselves out of work and filing
discrimination lawsuits because of a bigoted employer. Most
obviously, those without employer-paid health care would still have
to deal with HMOs, and these patients would tend to be seniors on
Medicare, the disabled and poor on Medicaid, and others without jobs
or with low-paying jobs — people who tend to be sicker. HMOs would
have to serve a sicker population without taking in the premiums
from the healthier working population. This system would be destined
to collapse. HMO medicine, which prefers to take in dollars from the
healthy and limit care for the sick, would be destroyed by adverse
selection — the "risk pool" being drained of the best risks and left
with the worst.
A more comprehensive national strategy is warranted precisely
because we must have one health care system that shares the risk
equally for the healthy and the sick rather than many systems which
compete for the healthiest and leave the sickest to the taxpayer's
generosity.
The Fox Guarding the Henhouse:
Avoiding HMO Attempts to Control Reform
Privatization advocates have long tried to turn public control of
our schools, courts, public assistance systems and municipal
services over to private corporations in the name of greater
efficiency. But Aetna, PacifiCare, Kaiser and others among the
nation's largest HMOs have actually tried to privatize legislative
reforms of their own industry by promising to implement private
"independent" review systems, where the HMO voluntarily pays a third
party to review patient problems, rather than submit to public
mandates.32
State and federal legislators cannot trust the HMO industry's
promise to reform itself. The HMOs' independent review systems
purport to give patients facing delays and denials an appeal, but
deliver infrequently.
First, reviewing companies are hardly 'independent' of the HMOs that
contract and pay for their services. For instance, marketing
communications from one such company, Medical Care Management
Corporation of Bethesda Maryland, to HMO clients boast that the
company "can save payers millions of dollars a year on just a few
cases. Our expert physicians affirm the high cost, high risk
procedures submitted for review in one-half to two-thirds of cases,
depending on the type of disease and the patient's profile. If you
are paying for 100 such cases now, inadvisable treatments may be
costing you over $6 million." So the so-called independent reviewers
market a "denial" rate of 33–50%.
California actually already enacted an "independent" review system
in 1996 for patients in need of "experimental procedures" when
standard therapies do not work. In theory, this "independent" review
system was unassailable, but in practice no reviewing agency was
accredited for six months to perform reviews under the law.
Subsequently only two were accredited, one of which was Medical Care
Management Corporation. Other companies have been unable or
unwilling to prove their "independence" through detailed disclosure
about their financial ties to HMOs, their protocols and their
reviewers.
Appeals decided by such companies are the HMO industry's reform of
choice because the private process permits bureaucratic maneuvers by
HMOs against which the seriously ill patient has neither the time
nor capacity to defend.
Folsom, California resident Barbara Brown, once a teacher of the
year, ran up against this situation when she contracted advanced
ovarian cancer and standard treatments would not do. On July 1, 1998
she appealed under California's new experimental treatment law. With
no accredited reviewers, Kaiser picked an agency of its choice,
Medical Care Management Corporation. Barbara says, "First, Kaiser
made every effort to control all the information that went into the
review process…Second, Kaiser biased the panel of experts against my
proposed experimental therapy by steering the experts toward
Kaiser's own leading set of questions…Third, in their reports, the
experts all stated that their assigned role was to respond to
Kaiser's questions."
Denied life-saving treatment by both Kaiser's internal grievance
process and then its so-called external review, Barbara was forced
to sell her house to pay for her treatment. Only a community bake
sale and car wash that raised $25,000 provided the down payment for
her care. Barbara is now recovering. Her "experimental" surgery,
which her HMO said would kill her, resulted in the complete removal
of all visible tumor from her abdomen. As of this writing in June
1999, she has had ten healthy months with her family. However,
creditors are still pursuing her and she has had to move out of her
home.
Private review systems are no substitute for civic scrutiny.
Congress and state legislatures must not be deterred from enacting
right-to-sue legislation and other public mandates. The wealthiest
nation on earth must impose its civil values on private corporations
rather than let the fate of mothers like Barbara Brown depend on the
success of car washes and bake sales.
Third-party reviewing systems will only work well in conjunction
with public laws for HMO accountability. Companies must know that if
they do not play fair they will face large damage awards or other
fines. Texas's independent review process, for instance, has been
held out as successful, but the state is the only in the nation
where a patient can take an HMO to state court for quality-of-care
violations. The independent review and liability laws were passed
simultaneously. While the review process was struck down by a
federal judge as in violation of ERISA, the state and HMOs reached a
voluntary agreement to continue using the system.
A private system of appeal without ultimate public accountability is
destined to betray the HMO patient. Legislators who forget their
public mandate to reform HMOs and favor a private solution do their
constituents a grave disservice.
The Final Frontier:
The Uninsured
National Preventive Health Care.
One of HMO medicine's biggest promises was to reduce the number of
uninsured Americans by making insurance more affordable.
Unfortunately, HMO medicine has failed on this front too.
The Census Bureau reported in 1998 that the proportion of Americans
without health insurance rose to its highest level in a decade:
16.1%. This is 43.2 million fellow citizens, a group in which most
of the adults have jobs.
"In a healthy economy, you'd think you would have more people with
jobs, and that would tend to increase coverage, so you'd see fewer
people uninsured," Census Bureau statistician Robert L. Bennefield
said.33 In the largest states, like Texas and California,
the proportion of the uninsured has soared to one in five people.
The HMO industry promised that by moderating premiums, health
insurance would be in the reach of more Americans. Yet many
employers, particularly small businesses, are now dropping workers
and their families from coverage. As noted earlier, premiums are on
the rise again. Paul Ellwood predicted in May 1999 that the
double-digit increases in premiums will continue "with a vengeance."34
The New York Times reported in March 1999 that "the uninsured
are not the poorest of the poor, who tend to be covered by
Medicaid…Of the 43 million Americans without insurance, 75% work at
least part time, but are not offered insurance through an employer
or cannot afford their contribution. The rest tend to be students,
children and early retirees…They are a diverse group, from the
chronically ill woman in Harlem who borrows her mother's medicine
because she cannot afford her own, to a roofer in Yonkers who is
fending off bill collectors, to a young web site designer making
about $65,000 a year who takes the calculated risk he will never
have to see a doctor at all."35
A letter to the New York Times from Albany Medical Center
President James Barba sums up the problem the uninsured pose not
only to themselves and their families, but to the nation.
"Having no insurance does not mean that these patients do not get
medical attention," wrote Barba. "Regrettably, many wait until they
have a health crisis, then present themselves to emergency
departments, with the tab picked up by all of us in the form of
charity care. This process is highly expensive and inefficient.
Prevention and wellness are less expensive. Getting the uninsured
assigned to primary-care physicians so that ailments can be treated
before they become full-blown crises is a better use of resources,
with substantial savings to the country and taxpayers."36
Mr. Barba's point is not revolutionary. Well-educated policymakers
in Washington have recognized this fundamental reality since the
turn of the century. The question ever since has been how to
insure, not whether to.
Government-run health insurance programs like Canada's have been
opposed by the American insurance industry. Insurers have
effectively used their deep pockets to turn the public against
legislative and ballot attempts aimed at preventing private insurers
and HMOs from running the system and mandating certain coverage
levels. Some segments of the industry, particularly the smaller
insurers, spent tens of millions of dollars to defeat President
Clinton's proposed national health care system. Opponents of a
government dominated system have asked whether Americans wanted the
post office as a model for their medicine. Increasingly in the age
of HMOs, however, Americans may respond that at least the post
office lives up to its commitments and delivers the mail. Of course,
it is the Medicare system, not the post office, which is the apt
comparison. The Medicare program operates with a mere 2% for
overhead costs. By contrast, private HMOs spend up to 30% for their
overhead and profit.
Dr. Carl Weber of White Plains, New York summed up why recent
exposés about HMO medicine make a compelling case for the ouster of
corporate control of our medical system: "After years of interfering
in doctor-patient relations, exacerbating the problem of the
uninsured, denying responsibility for medical education and research
and rationing health care, health maintenance organizations are
refusing to cover the elderly while asking for rate increases. How
much more evidence do we need before we realize that managed care is
a failed system that should be abandoned?"37
Traditionally, there have been two fundamental approaches to
"universal health care" — the premise that our society as a whole
will insure everyone to protect us all.
First, employers could be required to pay for health care coverage,
either through a pay-roll tax or simply by providing coverage for
their employees. Such an employer mandate was first proposed by
Richard Nixon, so it is hardly a radical idea. The business lobby
has fought the employer mandate model on the national level. This
model, which currently exists in Hawaii, does not cut private
insurers out in favor of a government-run system. In Hawaii, workers
and non-workers are covered by the state but given care by private
HMOs and health insurers. The state is simply a financing mechanism.
Hawaiians, as a whole, seem to feel more satisfied with their HMOs
than the rest of Americans, probably because they have the choice of
three major competitors and those companies have to compete with
quality treatment to win business. President Clinton was working on
a similar model for the nation in 1994, but his "managed
competition" concept also turned the administration of the system
over to HMOs and insurers, which would then tend to compete with
each other for healthier customers from the start. Moreover, under
"managed competition," too large a percentage of the health care
dollar could still go to the companies' profit and overhead rather
than to patient care.
A second, more straightforward (some might say radical) model is to
make the federal government the payer for all health care services,
the ultimate administrator and coordinator of a national health care
system that is serviced by private health care service givers —
doctors, nurses, hospitals, HMOs that "manage care" rather than
simply manage money. This system could take many forms. Canada and
most European nations have a "single payer" model, which guarantees
universal health coverage to all citizens.38 The problem
for many American legislators, whose careers have been sustained by
insurance company campaign contributions, is that the insurers are
cut out of the deal. The government, not insurers, underwrites risk.
More problematic, a single-payer system is typically financed by
taxes on employers. Politically, the corporate lobby has teamed with
the medical-insurance complex to stop implementation of a single
payer health care system. The Republican Congress, of course, needs
little encouragement from corporations to oppose any government-run
health care plan.
The conservative American Medical Association has opposed such a
system in the past because of doctors' fears that a government-run
system would cap their fees. But many doctors, having seen the
horrors of corporate HMO controls, may yet be ready for a government
system that is more reasonable to them. While the public once
believed that for-profit companies were more capable of running the
health care system, attitudes have changed after prolonged exposure
to HMO medicine's vices. A February 1998 poll found that, for the
first time, the public believes that not-for-profit companies would
do better in running the nation's health care system. In HEDIS
patient satisfaction data, not-for-profits also receive much higher
ratings.39
Certainly, there is enough money in the system to insure everyone. A
novel proposal by Boston University professor Alan Sager calls for
simply freezing all national payments to the health care system from
the previous year, and covering every American with a full benefit
package from that pool of money.40
The trillion dollar health care economy could easily cover every
American with comprehensive benefits. Canada, for example, spends 9%
of its gross domestic product to insure everyone — while we spend
14% and leave 43 million without insurance. The new American health
care system could be coordinated through regional administrations
representing all the stakeholders — physicians, patients, payers,
and others — that calculate reasonable fees for those providing
treatment and monitor utilization of doctors, as well as watching
for fraud. Such a government-run system could be far more efficient
than the current one.
Sager's system would require no taxes, simply a freeze on payments
currently made by employers and other payers. Alternatively the same
program without the co-payments patients now are forced to make
would include only a moderate increase in taxes, equal to 5% of
health care spending. Such a tax would substitute for the co-pay,
which Sager calls, "the tax on being sick." The question Americans
and their representatives must ask themselves is which model ensures
greater potential for the health of the nation — one run by
corporations intent on profits or one run on a non-profit basis and
regulated by the government.
Ellwood, whose change of heart about his own HMO concept was
fostered by his personal experiences with bad medicine, now says,
"Uneven health care in the United States is a national disgrace.
Ultimately this thing is going to require government intervention.
The question is what form government intervention will take. I think
whatever it is, it's going to have to be a condition of doing
business." Ellwood agrees reform "is not going to come from within"
the industry.41
Two recent independent studies, commissioned by the Massachusetts
Medical Society, indicate the waste and overhead in the current
system. According to a report in the Boston Globe, a
Canadian-style single-payer system would save between $170 million
and $1 billion annually in the state. Additionally, hundreds of
thousands of Massachusetts residents would have coverage; cutting
back on the fiscal strain of emergency room medicine. Surely
Massachusetts is not unique in this regard.42
It is, of course, significant that a state chapter of the AMA would
sponsor such a study. The national organization has been steadfast
in its opposition to a single-payer system. American doctors,
however, have had both their incomes and freedom to exercise
appropriate medicine eroded under for-profit managed care.
Any standardized system would reduce the needless paperwork that
bogs down medical offices dealing with the vagaries of private
insurers. Market enthusiasts should be interested in reducing the
inefficiencies in the current system. Certainly American ingenuity
can design a public/private partnership to restore the primacy of
the doctor/patient relationship and insure more citizens. This will
require the elimination of the for-profit insurers from any
significant role in American medical care. It will be a bitter
political struggle because of the billions of dollars involved. But
it may become inevitable as the nation grows older, requires more
medical care, and experiences the many flaws of managed care.
Never before in American history has there been such an intersection
between the interests of the uninsured and of those who pay for
insurance but lack peace of mind that they will receive coverage for
their medical conditions.
In early 1998, an insured Massachusetts newspaper publisher killed
himself, leaving behind a suicide note about his travails trying to
get mental health care from his HMO. In the spring of 1998, a
distraught man with health insurance parked his truck on a Los
Angeles freeway and unfurled a banner that read, "HMOs are in it for
the money." Observed by television viewers across the nation, he
proceeded to set himself on fire, then discharge a gun in his mouth.
Such despair might once have been conceivable among the uninsured,
but hardly from the insured in the wealthiest nation in the world.
As extreme as the reactions were, too many Americans can identify
with the intense frustrations of dealing with HMOs.
In June 1999, the Los Angeles Times reported that specialists
on call with local emergency rooms are now refusing to respond to
emergencies for HMO patients because their HMOs do not pay enough.
In one case, a surgeon refused to come to the emergency room to
operate on a seven month-old who fell and cut her upper lip down to
the muscle.43
A system that manages treatment and costs is needed. But who will
run it? The health care crisis that led to the national debate in
1994 over universal health coverage has only been deferred. The
rising anger at the deficiencies of HMO medicine is merely a symptom
of the same national malaise. Americans will ultimately have to
weigh in, once and for all, about the future of their health care
system.
If the people do not act, private entrepreneurs certainly will.
A high-profile group of investors are already raising venture
capital to launch a for-profit HMO patient assistance service and
1-800 hotline, much like the pre-paid road service plan for
motorists. For an annual premium or membership fee of about $80 per
year, the corporation will provide information about HMOs and
limited access to an advocate to help you navigate your HMO when you
run into problems — more advanced advocacy packages would cost more.
The program amounts to insurance for your health insurance. Should
we need to buy more insurance just to collect on our HMO policy? Can
the failure of HMOs to serve us be corrected by more market
mechanisms? Will private solutions result in another proliferation
of niche businesses that play on patients' fears and are just as
exploitive as the HMOs? Unless civil society reasserts itself, the
answers may be all too clear.
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