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Chapter 18

The Revolution

Intense legislative action in all states, litigation in many jurisdictions, repeated debates in congress, and many statements by the executive branch lead to only one conclusion: the revolution against managed care has already started, is advancing, and may bear fruits in the not too distant future.

The critical breakthrough may come at any of several fronts: The enlightened Texas legislation superseding the ERISA shield and the Sherman Act may be copied by many states. Precedents already in existence may lead many federal courts to order self-financed programs to obey state laws. A true Bill of Patients' Rights may be sent by Congress to President Clinton, who himself is campaigning for it. Collective bargaining by physicians may be approved by Congress. Federal agencies, especially the Justice Department, the Federal Trade Commission and the Labor Department may finally regulate the cartel created by the managed care companies. Any of these developments would represent the beginning of the end for the managed care failed experiment.

18.1 The Future

Can physicians and patients help the American people see beyond managed care? We believe we can, mostly because we now have facts to challenge many early managed care assumptions.

The advent of corporate decision making in American medicine was supposed to control costs, improve quality of care, and provide stability in health care endeavors. Costs are higher than ever. Inflation in health care in the United States has increased relentlessly during the years that managed care has had the most influence. At the same time, services have been reduced. As to the claims for increased quality under managed care, there is no evidence that quality has improved, but much evidence that quality has not been a consideration in the managed care strategic plans. Many patients not only do not receive quality care, they have lost any care they had before.

The Census Bureau figures may have exaggerated the contributions of private sector employer sponsored health insurance. While the proportion of non-elderly employees who receive health insurance from their employers has been calculated around 64% (1997), those who depend principally on health insurance paid for by private-sector employers may not be more than 43.1% (1996). The remaining majority may depend on publicly funded insurance (34.2%), purchase their own insurance (7.1%) or have no insurance (15.6%)

The erosion of private insurance has continued and accelerated: the reasons are many, including rising premium costs, increasing numbers of temporary or part time workers, reductions in benefits, increases in co-payments and co-insurance, and business trends, including acquisitions and mergers. The persistent loser is the employee who had come to count on fringe benefits for health protection. Cost shifting, manipulation of benefits, and threats of unemployment are all events that force employees into submission to plans that offer progressively less.

Even when some form of private insurance still exists, the benefits are now controlled by the financial needs of the employer and the profits of the insurance company. This is predicated on destroying the relationship between physicians and patients, so that these two groups do not get together against the common aggressor.

In some situations, like in Medicare, some strategies by the managed care industry lead to immediate or delayed damage. In November of 1998, 43 HMOs, citing financial losses and other problems, announced their intention not to renew their Medicare contracts. Another group of 54 HMOs announced that they were going to abandon some geographic areas. These decisions affect some 406,000 beneficiaries! It does not come as a surprise that 87% of the beneficiaries affected were covered by for-profit plans.

The courts will continue to take an active role regarding Medicare enrollees' HMO suits. In August of 1999, a California appeals court ruled that Medicare recipients may sue their HMOs for punitive damages in state courts. The patient claimed the HMO has denied him important treatment and proper referral to a specialist. A Superior Court judge had dismissed his suit contending that it was precluded by the federal Medicare act. The repeal received a unanimous vote by the appeals court.

Managed-care has now come to Medicaid. The results have been widely publicized. Horror stories in Tennessee and Montana led to action by patients and physicians to vigorously oppose managed care practices that were destroying the care of the poor. The old dreams of using Medicaid to bring the poor into the main stream of medicine are now changed into the hope that the managed-care plans do not drown Medicaid in a sea of red ink.

Even if the people supported HMOs, can they survive financially? At the time of this writing (1999), they have been increasing costs and declaring more profits for some time. Will that last?

In 1996, HMOs had profits of $700 million. In 1997, they lost $768 million. 57% of HMOs lost money in the first six months of 1998, before they announced cost increases that will reflect poorly on their claims of financial wizardry and cost reduction.

There is also the issue of quality. No matter who defines it, quality in health is not like a rabbit pulled out of a hat by a dexterous deceiver. An analysis of quality requires several steps:

First, a protocol is formulated, establishing the problems, interventions and outcomes to be studied. Organized medicine has advanced greatly by creating specific practice guidelines based on scientific evidence. Managed care companies have formulated practice guidelines of uncertain lineage.

Second, quality performance indicators are created that permit to study the successful application of guidelines.

Third, outcomes of interventions using indicators are examined so that the best results can be studied.

Managed-care companies have claimed to know about outcomes, even though they have been absent from the scientific study of indicators, and their guidelines are highly suspect.... so much for their claim to quality.

As we examine the future, we have to address what we can expect from the people, from the physicians and from their interaction with each other.

18.2 PLANNING FOR THE FUTURE

People are as good in calculating health expenses as they are in calculating the cost of homes, cars, vacations, children's' education, and other expenses. This comes as a surprise to the planners who believe that extreme paternalism in health care is needed to avoid a national catastrophe. Paternalism is backed more by propaganda by the insurance companies than by actual fact. Numerous studies have shown that people spend judiciously in health when the money comes out of their own pocket; that among those younger than 65 years, most health expenditures in one year are paid by 5% of the population; that average health expenses in one year are affordable to the majority of the population; that most people are willing to spend on their own health; that most financial concerns are about "catastrophic" events, and that the individual may be a better judge of care than his employer or his insurance company.

Based on all these considerations, the time has come to free the individual. Regina Herzlinger, Professor of Business Administration at the Harvard Business School and author of "Market Driven Health Care", has persuasively argued in favor of consumer-controlled health coverage. Her message will sound familiar to those who read our chapter on "Stormy" Johnson and the AMA.

Dr. Herzlinger writes(25): "What would people buy if they were given greater control over their health insurance dollars? Many surveys show that people most want a health insurance policy that protects them against catastrophically expensive medical events, those they could not afford to pay out of their own pockets. A detailed analysis of nearly 3,000 survey respondents found that when presented with fair market prices, the respondents chose health insurance policies with greater coverage for catastrophic illnesses, which also contained incentives to reduce utilization of other, less expensive medical care. Indeed, Americans' concern about the costs of such events is so great that an increasing number buy insurance for long-term expenses that are not covered in the typical insurance policy, and pay for it out of their own pockets. By l992, nearly three million such policies had been sold. The average 1995 premium of $1,505 required the average buyers to spend 6% of their annual income on the purchase."

Catastrophic insurance is a high-deductible insurance that covers health expenses the buyer cannot reasonably expect to afford. Dr. Herzlinger comments that "in a 1996 survey 82 percent of the respondents, the highest number, wanted catastrophic health coverage, and 76 percent, the second highest, wanted coverage for long-term disability."

The same way we believe in universal catastrophic coverage, we do not believe in "first dollar insurance", when the payment responsibility moves from the patient to the insurer. We prefer a combination of individual responsibility for low cost expenses, and catastrophic insurance.

A tax-deductible medical savings account permits the individual to defray low expenses, save for a rainy day, and also purchase a catastrophic coverage. Congress has imposed severe limitations on medical savings accounts that should be lifted: let the individual decide!!

What, then, about the employer? Let's exclude him from the equation. Employers have so far enjoyed tax exemptions for health coverage that really belongs to the employees. Let's ask employers to stop interfering with the health of their employees, devote their attention to their products, and do not take tax benefits for denying health care. One day every employer will realize that meddling with health care has not been a good business practice. Most employees know their rights as patients have been diminished by coalitions of insurance companies and business groups.

18.3 PATIENTS AND DOCTORS

Patients and doctors have progressively acquired reciprocal obligations that will gradually or rapidly remove the intermediaries from their relationships.

Patients are increasingly better educated on health and illness; increasingly savvier in medical decisions; increasingly more willing to choose physicians and treatments; increasingly prepared to share responsibility for treatment once they are informed of the risks and potential benefits; progressively better equipped to understand medical knowledge and apply it to decisions made by the partnership patient-physician.

Physicians are more prepared to share knowledge, to understand their patients, to make themselves available when necessary, to work together with their patients and the patients' families to obtain the best outcome, and to create a new covenant based on mutual trust.

Intermediaries exist because they have become necessary so that employers limit health care and obtain tax exemptions. Tax deductions for health care should be the same for all Americans, and not related to employer-employee relationships. The poor would be better off using tax vouchers than in the hands of managed care entrepreneurs.

Increasingly larger groups of physicians and patients are not willing to accept the invasion and control by groups of greedy entrepreneurs that are paralyzing physicians, removing them from decisions on diagnosis and treatment, and trying to make profit out of increasing pain and suffering. To free America from this scourge, patients and physicians need to work together.

main | table | intro| 1 | 2 | 3| 4 | 5 | 6 | 7 | 8 | 9 | 10 | 11 | 12 | 13 | 14 | 15 | 16 | 17 | 18 | *

©2000 Munoz and Eist, The People v. Managed Care


main \| table \| intro\| 1 \| 2 \| 3\| 4 \| 5 \| 6 \| 7 \| 8 \| 9 \| 10 \| 11 \| 12 \| 13 \| 14 \| 15 \| 16 \| 17 \| 18 \| *

	Chapter 18 The Revolution

	Intense legislative action in all states, litigation in many jurisdictions, repeated debates in congress, and many statements by the executive branch lead to only one conclusion: the revolution against managed care has already started, is advancing, and may bear fruits in the not too distant future.

	The critical breakthrough may come at any of several fronts: The enlightened Texas legislation superseding the ERISA shield and the Sherman Act may be copied by many states. Precedents already in existence may lead many federal courts to order self-financed programs to obey state laws. A true Bill of Patients' Rights may be sent by Congress to President Clinton, who himself is campaigning for it. Collective bargaining by physicians may be approved by Congress. Federal agencies, especially the Justice Department, the Federal Trade Commission and the Labor Department may finally regulate the cartel created by the managed care companies. Any of these developments would represent the beginning of the end for the managed care failed experiment.

	18.1 The Future

	Can physicians and patients help the American people see beyond managed care? We believe we can, mostly because we now have facts to challenge many early managed care assumptions.

	The advent of corporate decision making in American medicine was supposed to control costs, improve quality of care, and provide stability in health care endeavors. Costs are higher than ever. Inflation in health care in the United States has increased relentlessly during the years that managed care has had the most influence. At the same time, services have been reduced. As to the claims for increased quality under managed care, there is no evidence that quality has improved, but much evidence that quality has not been a consideration in the managed care strategic plans. Many patients not only do not receive quality care, they have lost any care they had before.

	The Census Bureau figures may have exaggerated the contributions of private sector employer sponsored health insurance. While the proportion of non-elderly employees who receive health insurance from their employers has been calculated around 64% (1997), those who depend principally on health insurance paid for by private-sector employers may not be more than 43.1% (1996). The remaining majority may depend on publicly funded insurance (34.2%), purchase their own insurance (7.1%) or have no insurance (15.6%)

	The erosion of private insurance has continued and accelerated: the reasons are many, including rising premium costs, increasing numbers of temporary or part time workers, reductions in benefits, increases in co-payments and co-insurance, and business trends, including acquisitions and mergers. The persistent loser is the employee who had come to count on fringe benefits for health protection. Cost shifting, manipulation of benefits, and threats of unemployment are all events that force employees into submission to plans that offer progressively less.

	Even when some form of private insurance still exists, the benefits are now controlled by the financial needs of the employer and the profits of the insurance company. This is predicated on destroying the relationship between physicians and patients, so that these two groups do not get together against the common aggressor.

	In some situations, like in Medicare, some strategies by the managed care industry lead to immediate or delayed damage. In November of 1998, 43 HMOs, citing financial losses and other problems, announced their intention not to renew their Medicare contracts. Another group of 54 HMOs announced that they were going to abandon some geographic areas. These decisions affect some 406,000 beneficiaries! It does not come as a surprise that 87% of the beneficiaries affected were covered by for-profit plans.

	The courts will continue to take an active role regarding Medicare enrollees' HMO suits. In August of 1999, a California appeals court ruled that Medicare recipients may sue their HMOs for punitive damages in state courts. The patient claimed the HMO has denied him important treatment and proper referral to a specialist. A Superior Court judge had dismissed his suit contending that it was precluded by the federal Medicare act. The repeal received a unanimous vote by the appeals court.

	Managed-care has now come to Medicaid. The results have been widely publicized. Horror stories in Tennessee and Montana led to action by patients and physicians to vigorously oppose managed care practices that were destroying the care of the poor. The old dreams of using Medicaid to bring the poor into the main stream of medicine are now changed into the hope that the managed-care plans do not drown Medicaid in a sea of red ink.

	Even if the people supported HMOs, can they survive financially? At the time of this writing (1999), they have been increasing costs and declaring more profits for some time. Will that last?

	In 1996, HMOs had profits of $700 million. In 1997, they lost $768 million. 57% of HMOs lost money in the first six months of 1998, before they announced cost increases that will reflect poorly on their claims of financial wizardry and cost reduction.

	There is also the issue of quality. No matter who defines it, quality in health is not like a rabbit pulled out of a hat by a dexterous deceiver. An analysis of quality requires several steps:

	First, a protocol is formulated, establishing the problems, interventions and outcomes to be studied. Organized medicine has advanced greatly by creating specific practice guidelines based on scientific evidence. Managed care companies have formulated practice guidelines of uncertain lineage.

	Second, quality performance indicators are created that permit to study the successful application of guidelines.

	Third, outcomes of interventions using indicators are examined so that the best results can be studied.

	Managed-care companies have claimed to know about outcomes, even though they have been absent from the scientific study of indicators, and their guidelines are highly suspect.... so much for their claim to quality.

	As we examine the future, we have to address what we can expect from the people, from the physicians and from their interaction with each other.

	18.2 PLANNING FOR THE FUTURE

	People are as good in calculating health expenses as they are in calculating the cost of homes, cars, vacations, children's' education, and other expenses. This comes as a surprise to the planners who believe that extreme paternalism in health care is needed to avoid a national catastrophe. Paternalism is backed more by propaganda by the insurance companies than by actual fact. Numerous studies have shown that people spend judiciously in health when the money comes out of their own pocket; that among those younger than 65 years, most health expenditures in one year are paid by 5% of the population; that average health expenses in one year are affordable to the majority of the population; that most people are willing to spend on their own health; that most financial concerns are about "catastrophic" events, and that the individual may be a better judge of care than his employer or his insurance company.

	Based on all these considerations, the time has come to free the individual. Regina Herzlinger, Professor of Business Administration at the Harvard Business School and author of "Market Driven Health Care", has persuasively argued in favor of consumer-controlled health coverage. Her message will sound familiar to those who read our chapter on "Stormy" Johnson and the AMA.

	Dr. Herzlinger writes(25): "What would people buy if they were given greater control over their health insurance dollars? Many surveys show that people most want a health insurance policy that protects them against catastrophically expensive medical events, those they could not afford to pay out of their own pockets. A detailed analysis of nearly 3,000 survey respondents found that when presented with fair market prices, the respondents chose health insurance policies with greater coverage for catastrophic illnesses, which also contained incentives to reduce utilization of other, less expensive medical care. Indeed, Americans' concern about the costs of such events is so great that an increasing number buy insurance for long-term expenses that are not covered in the typical insurance policy, and pay for it out of their own pockets. By l992, nearly three million such policies had been sold. The average 1995 premium of $1,505 required the average buyers to spend 6% of their annual income on the purchase."

	Catastrophic insurance is a high-deductible insurance that covers health expenses the buyer cannot reasonably expect to afford. Dr. Herzlinger comments that "in a 1996 survey 82 percent of the respondents, the highest number, wanted catastrophic health coverage, and 76 percent, the second highest, wanted coverage for long-term disability."

	The same way we believe in universal catastrophic coverage, we do not believe in "first dollar insurance", when the payment responsibility moves from the patient to the insurer. We prefer a combination of individual responsibility for low cost expenses, and catastrophic insurance.

	A tax-deductible medical savings account permits the individual to defray low expenses, save for a rainy day, and also purchase a catastrophic coverage. Congress has imposed severe limitations on medical savings accounts that should be lifted: let the individual decide!!

	What, then, about the employer? Let's exclude him from the equation. Employers have so far enjoyed tax exemptions for health coverage that really belongs to the employees. Let's ask employers to stop interfering with the health of their employees, devote their attention to their products, and do not take tax benefits for denying health care. One day every employer will realize that meddling with health care has not been a good business practice. Most employees know their rights as patients have been diminished by coalitions of insurance companies and business groups.

	18.3 PATIENTS AND DOCTORS

	Patients and doctors have progressively acquired reciprocal obligations that will gradually or rapidly remove the intermediaries from their relationships.

	Patients are increasingly better educated on health and illness; increasingly savvier in medical decisions; increasingly more willing to choose physicians and treatments; increasingly prepared to share responsibility for treatment once they are informed of the risks and potential benefits; progressively better equipped to understand medical knowledge and apply it to decisions made by the partnership patient-physician.

	Physicians are more prepared to share knowledge, to understand their patients, to make themselves available when necessary, to work together with their patients and the patients' families to obtain the best outcome, and to create a new covenant based on mutual trust.

	Intermediaries exist because they have become necessary so that employers limit health care and obtain tax exemptions. Tax deductions for health care should be the same for all Americans, and not related to employer-employee relationships. The poor would be better off using tax vouchers than in the hands of managed care entrepreneurs.

	Increasingly larger groups of physicians and patients are not willing to accept the invasion and control by groups of greedy entrepreneurs that are paralyzing physicians, removing them from decisions on diagnosis and treatment, and trying to make profit out of increasing pain and suffering. To free America from this scourge, patients and physicians need to work together.