FREE ESSAY ON PROBLEMS WITH HMO'S

PROBLEMS WITH HMO'S

Many employees must designate a health plan through their employer. These days, as HMOs
(health maintenance organizations) and managed care plans continue to proliferate, that
means a choice between bad and worse. As employees line up in the lunch-room for a
process called open enrollment, they may be surprised to learn that managed care rates
have gone up - again. The mirage that managed care is cheaper care is finally fading.
And, for the first time in years, employees may also have the promise of free choice in
medicine in the form of a new method of financing health care. Consumers are already
aware of horror stories involving HMOs, but cheap rates persuaded many that managed care
is less expensive. Recent rate hikes are proving otherwise. Many patients must go out of
network for crucial care. Co-payments are rising. It's little wonder why. As HMO
executive Randall Crenshaw, chief medical officer for Cariten Healthcare of Tennessee,
recently told the Wall Street Journal, more managed care patients are becoming frequent
fliers; they over utilize health care and drive costs up. The deterioration of managed
care stems from a basic economic principle: health care subsidized by government and
rationed by bureaucrats is doomed to failure. Canada's socialized medical system, which
designates knee replacement an elective, is sending patients scurrying across the border
and national health care in the United Kingdom restricts heart transplants to anyone
under age 55. Managed care in America is no exception. Congress made health insurance
premiums fully tax deductible to employers covering employees' health care in 1942. This
discouraged individuals from buying insurance for themselves and encouraged employers to
offer benefits. Eventually, employees came to regard health care as an entitlement
provided by the employer. In 1965, Congress created Medicare. Seniors were forced into
the free-for-all of Medicare, personal responsibility was replaced by paternalism, and,
predictably, unrestricted health care for older Americans lead to frenzy of spending by
patients and doctors. Those who had clamored for Medicare argued that, since the state
subsidizes seniors' medical care, the state ought to pay for everyone's health care. In
an act of pragmatism, President Nixon proposed the HMO Act, which Congress passed in
1973. The law gave millions of dollars to HMOs, which, until then, had constituted a
small portion of the market.
HMOs multiplied rapidly with the new federal giveaways. Managed care, now including PPOs,
mushroomed. Employers initially perceived managed care plans as cheaper than traditional
fee-for-service insurance. Gradually, they stopped offering a choice of health plans,
making individual policies more expensive. HMOs' penetration of the industry had been
subsidized into existence. Government had instituted managed care. Today, while overall
quality of patient care remains the best in the world, doctors practice medicine in an
increasingly intricate web of rationing and regulations: Physicians are stripped of
professional autonomy. As patients wander the maze of managed bureaucracy, costs rise and
quality deteriorates. Every American dependent on a third party for health coverage is a
potential victim of managed care. And state sponsored management of medicine is growing.
Last year, Congress and the President increased regulations on the medical profession
with the Kennedy Kassebaum legislation. This year, Congress approved the President's $24
billion in kiddie care state subsidies. A few politicians (Senotors Kennedy and
Wellstone), demand national health care on the grounds that health care is a right.
Is health care a right? The Declaration of Independence protects the inalienable right to
life, liberty and the pursuit of happiness; it does not guarantee happiness or health
care. The right to act in your self-interest and provide necessities for yourself means
you have the right to choose. A proper solution adopts and protects this right.
Fortunately, Congress has the power to preserve the freedom of choice in medicine: they
can vote to expand medical savings accounts (MSAs). Approved for a limited test last
year, MSAs are used in conjunction with high deductible insurance. Contributions are
tax-deductible and money earns interest; funds may be used to cover medical expenses -
including mental health, vision and dental care - tax-free. MSAs, offered by Merrill
Lynch, Time Insurance and Wells Fargo, among others, allow employees to boost savings.
MSAs offer patients an escape from managed care and put the patient in charge. Currently,
the MSA option is restricted to a small group of self-employed, uninsured and small
business people and a paltry 390,000 Medicare recipients. Expanding eligibility for MSAs
to all Americans will protect what is left of the right to choose. A choice between
trying to manage managed care with a plethora of new regulations and government run
health care is not a choice, it's a death sentence. Congress ought to face the truth
about managed care, back off trying to regulate HMOs and give unrestricted free choice in
medicine a chance.
Four years ago, fears of faceless federal bureaucrats making important medical decisions
sunk the Clinton administration's national health insurance initiative. Today, many
Americans find their medical decisions are being made by faceless bureaucrats of a
different sort. These bureaucrats represent managed care health plans instead of the
government. Once celebrated as forward-thinking, super-efficient organizations that would
put a needed squeeze on doctor and hospital bills, HMOs and other managed-care plans are
enduring a wicked backlash, frequently accused of irresponsible and potentially dangerous
penny-pinching at the expense of patients stripped of medical options they once took for
granted. In 1996, about 60 percent of Americans were enrolled in some sort of managed
care health plan (the most common of which are health maintenance organizations, or HMOs,
and preferred provider organizations, or PPOs). That's up from 36 percent in 1992. The
increase is due in large part to employers shifting their workers away from the
traditional - an considerably more expensive - fee-for-service health insurance plans.
(About 16 percent of Americans have no health insurance at all.) Candidates in 1998
responded to public furor against managed care with proposals establishing certain
patients' rights. Both parties are promising action on the issue, but Republicans and
Democrats are offering different prescriptions.
Legislation
Both parties claim they support the idea of codifying what people should get from their
health plans, and polls show that no other action by Congress would be as welcomed by the
American people. Driving the debate on the issue is a Democratic proposal that would
establish patients' rights to: Appeal denials of services and benefits by a health plan
to an outside body; Access a specialist when needed; Use doctors outside the plan (for a
larger fee); Use emergency services if the symptoms justify alarm, even if the problem
proves not to be a genuine emergency; Get an understandable explanation of coverage
rules; Sue an employer-sponsored health plan for damages. Senate Republicans killed this
plan in October, saying that while they too favor patients' rights, the emocratic bill
called for too much regulation and would have made HMOs too vulnerable to lawsuits.
Democrats vowed to fight for the bill again in 1999.
The Industry
All this comes when the managed care industry is struggling. Many health care plans held
their rates at unprofitable levels during a long industry price war in an attempt to grab
market share. Now they want to increase their profitability, analysts say. However, they
have already reaped the easy savings by squeezing payments to doctors and hospitals.
Other ways of saving money - further reducing hospital stays, restricting patients'
access to specialists and expensive medical tests, limiting patients' choice of
physicians - are ones patients are coming to hate.
The Change in Patient Care
Most Americans used to have fee-for-service health insurance, where patients can choose
their medical service provider and the insurance company pays a percentage of the fees,
after a deductible. This creates various financial incentives: for patients, to see a
doctor only when absolutely necessary; for doctors, to provide more tests and treatments
rather than less. In managed care, patients pay vastly reduced fees to see their primary
physician - but they can't see specialists or other medical service providers without
their primary physician's approval. For patients, the financial incentive encourages
casual doctor visits for such things as preventive care, but makes it almost impossible
to choose medical options not approved by the primary physician. And for doctors, watched
over by plan accountants, the incentive encourages minimum tests, referrals and
hospitalizations. Both systems have their advantages, and no consensus exists among
medical researchers about whether consumers are being served better or worse in the
managed care environment than they were in fee-for-service.