t’s no secret that Health Maintenance Organizations, known as HMO’s, have made
healthcare affordable for many Americans, but at what risks? Most employers offer
some type of health care plan that is an HMO. Let’s face it, given the choice among
insurance coverage through your employer, in which he pays half the costs, or
acquiring private insurance coverage outside your employer, most Americans
choose to go with employer-provided HMO’s. Why then, has there been so much
controversy with HMO’s?
An HMO is an organization whereby the subscriber, or patient, is allowed to choose
a medical provider from a list of doctors within a certain medical group. Each
physician has signed a contract to see patients at a reduced rate. This type of plan
does not allow the patient freedom to see just any doctor. All referrals to a doctor,
other than the patient’s primary care physician, must be approved by both that
physician, and the insurance company.
Most physicians add HMO’s as a supplement
to their practices. With HMO’s, the patient has little or no co-payment depending on
how the plan is set up. Most HMO co-payments range between $5 to $15 dollars
per office visit. The doctor, may receive half or less than half of his normal fee from
the insurance companies. HMO’s are characterized with the tendency to over or
under treat patients. HMO’s put limitations not only on the income of the provider,
but also on the type of treatment that may be done. If a patient is in need of a
specialist for a specific ailment, the insurance company has to review and approve a
referral and deem it necessary.
The process involves the patient going to his or her general practitioner, also
referred to as primary care physician, to obtain referral. After this, the primary
doctor submits referral to the insurance company and from there it must approve.
This process could take weeks due to cumbersome paperwork and the limited
number of specialist per each group or health plan. Again, many doctors only accept
these plans to supplement their practices. It is common for them to stop accepting
your HMO after only a few years which leaves the patient a choice of either paying
cash, or changing doctors or insurance companies. One can see why this might be a
frustrating process.
Managed care reduces cost by keeping a pool of doctors and specialist to a
minimum, and at the same time keeping the volume of patients high. This often
means that a patient may not receive the same amount of attention and care as they
should, or were accustomed to. Consumers have long grumbled that HMO’s have
done too much too keep health costs down by stinting on patient care.
(1). Healthcare expenditures have more than doubled since 1965. Americans spend over
a trillion dollars a year on health care. (2). As of 1996, 110 million Americans were
enrolled in HMO’s. More than three-fourths of all individuals in HMO’s are covered
by job-based insurance. More than 13 million Medicaid recipients have been put
into managed care plans. Managed care and HMO’s have been the subject of many
negative stories in the press and are constantly being charged with endangering the
health and lives of their enrollees. As a result, congressional hearing, state, and
federal regulation, and action by the attorney’s general has been warranted.
Before we can truly understand what beast may lay before us in regards to HMO’s
and the state of healthcare in America, let’s review its’ inception. Managed care was
brought forward as a remedy for rising health care costs. The HMO Act of 1973
established federally qualified health maintenance organizations and overruled
restrictive state regulations prohibiting HMO’s. This act also provided certain grants
and loans for the establishment of HMO’s, and required employers to offer HMO
coverage if the employers was located within a qualified HMO’s service area.
It has
been cited that the underlying configuration of HMO’s rests in third-party payment.
This means that someone other than the patient picks up the tab for service. The
largest percentage of third-party payment in the system goes for Medicare and
Medicaid. These programs were enacted in 1965 and are rapidly growing. To date,
there are more than 160 million Americans who have job-based health coverage.
The main technique by which HMO’s cut back on costly treatment is through
resource constraint. This means that a certain fixed amount of money is assigned to
health care and people who provide the services must come within this limit.
Methods of this sort can be seen in the health care systems of countries like Canada
and England. It has been observed that these systems spend less of GDP in health
care than the U.S. (3). HMO’s undertake to provide for people’s medical needs for a
fixed amount of money, then “manage” the care that we receive to stay within the
limits. (4). Under Medicare contracts, HMO’s agree to take patients off the
government’s hands for a fixed percentage of per-capita program outlays,
regionally adjusted. This amounts to a colossal $5000 per enrollee. HMO’s, as a
result, have been criticized for “cherry picking” these enrollees.
HMO’s want to
attract healthier members of the Medicare population. In March of 1995, the
Inspector General of the Department of Health and Human Services reported that
more than 40% of Medicare HMO enrollees were asked about their health status
prior to joining the HMO. A small, but significant percentage of those seeking to
join HMO’s were given a pre-enrollment physical. This practice is not permitted
under current law!
Experience has shown that once enrollees become sick, HMO risk participants tend
to get out of the program. This reduces the HMO’s costs and drives up costs in the
Medicare fee-for-service program. There is an incentive for HMO’s to limit access to
care for older and sicker enrollees. The sicker Medicare beneficiaries return to the
fee-for-service pool, thus relieving HMO of costs associated with providing that
patient with advanced or chronic illnesses and necessary equipment for care.
The
Medicare HMO program cost the American taxpayers more than $410 million
dollars. A 1991 analysis of the managed care industry by Health Care Financing
Review estimated that the sickest 5 percent of the American population consume as
much as 50 percent of the health care dollars.
(5). United States healthcare delivery is currently in the process of extensive
restructuring. This reform movement has been underway for nearly a decade now. It
has indeed manifested itself through HMO’s and other managed care type delivery
plans. Who is really benefiting from HMO’s? It’s certainly not the doctors.
Instead of
the traditional fee-for-service, providers are being pre-paid a flat monthly fee for
providing care, known as “capitation.” Like the HMO itself, each staff physician is
paid a certain sum of money per patient, whether or not that patient comes in for
treatment. Some HMO systems incorporate withholds and bonuses, and grading
sheets to reward physicians who are most cost-effective. This clearly puts the
financial interest of the doctor against the medical interest of the patient! The
premise is clear that medical decisions are not being made according to a
physician’s best medical judgement, but according to the HMO’s profit motive.
(6). HMO’s assert they have no liability when it comes to claims of medical negligence
when injury or death occurs because they are only administering a benefit plan. In
contrary, HMO’s often determine which tests can be performed, who can have
surgery, who can be admitted to the hospital and for how long, which doctor is
available to take care of patients, and even what doctor can tell a patient about
healthcare options. HMO’s continue to claim they do not make medical decisions.
Peter Roam, spokesperson and attorney for Pacificare states: “HMO’s normally
cannot make decisions about treatment provided to their members. Those
determinations must be made by treating physicians under contract with the HMO”.
(7). Another alarming fact of HMO’s is that under financial pressure, some hospitals
are using nurses to fulfill the function normally provided by primary care physicians.
As a result of these practices, HMO’s have made huge profits and their executives
are earning large incomes. These profits and large incomes are the result of funds
created by limiting important and necessary medical care. As noted, the negative
press associated with HMO’s negligence is everywhere. What happens if you really
get sick and require long and or expensive treatment in an HMO? HMO’s dictate how
long you can stay in the hospital and whether or not treatment or surgery is
“medically necessary”.
Medical necessity rests with the HMO and its’ cost-
controllers, not with you, or even your physician. Even if your doctor thinks
treatment may be needed, pressures can be exerted on him or her to prevent this.
Last week Daniel Jones, a 40-year old Long Beach, California man, killed himself on
live television. Before he died, he made a grim and very public statement about
health maintenance organizations.
HMO’s are trying new ways to manage costs and improve care for their sickest and
most expensive patients. HMO’s only concern with regards to costs is that a very
small proportion of their enrollments become extremely sick because most people
stay fairly healthy. The premiums HMO’s charge however, hasn’t kept pace with their
costs, and profit margins have dropped shortly as a result.
(8). Kaiser Permanente
Group, the largest health maintenance organization in the U.S., reported an
operating loss of $92 million in the first quarter. The Group has struggled to cut
cost after reporting a $270 million loss just last year. The Oakland based company
cites the loss was caused by a need to direct patients away from its’ network in
California, and pay for them to be treated elsewhere. Governor Pete Wilson, of
California, has signed two bills in Los Angeles that will allow easier access to health
specialist, and require HMO’s to present their costs and benefits to consumers in
easier terms.
California joins 15 other states with AB12, in allowing women in
HMO’s to choose women’s health specialist as their primary care physicians, and to
seek services from an gynecologists without a referral.
(9). HMO’s are indeed big businesses that make a profit, however, they are not free-
market institutions. As managed care surges to the forefront of our health care
system, something radically new and different is happening. The social and political
effects of this remain to be seen!
