THEORETICAL REFLECTIONS
2. MANAGED CARE
As explained in more depth earlier, the concept of managed care is not new. It was first introduced in a nonprofit format and on a local scale in the 1920s but never really gained much ground. The early managed care initiative was an effort to create access to basic health care for persons who were unable to afford health care insuranceif such was available at all in those days. By the 1980s, the concept of managed care was again being viewed as a reasonable alternative to full-pay or fee- for-service care in order to secure access to health care. This time around, the change was prompted by the need to find new ways of coping with the rising costs of fee-for-service health care and, subsequently, the increase in premiums for indemnity insurance.
As employers faced double-digit premium increases year after year, they began voicing concerns about, and seeking an alternative to, the financial impact of rising insurance premiums (Health care costs continue to soar 2002). Offering health care benefits to employees placed increased pressure on the financial performance of businesses, which were at increasing risk of losing their competitive advantage, thus jeopardizing their long-term corporate survival. Managed care, initially mostly in the form of health maintenance organizations (HMOs), made strong claims about its ability to reduce the cost of health care insurance to the employer while still providing plan enrollees with access to high-quality health care services. Managed care offered employers a cost-efficient alternative that provided health care benefits to employees for a fixed, oftentimes lower, annual premium.
As a result, the concept of managed care quickly became the most prominent form of health care insurance nationwide. The drawbacks of the system became known as well. As a general rule, negotiated cost savings would prove inversely proportional to benefits coverage and, as many have contended, to service quality.
The fact of the matter is that less expensive health plans tend to offer coverage for a limited number of services and products and to restrict access to health care services.
2.1 Public Frustration
Enrollees in the new managed care plans were confronted with dramatic changes from what they had been accustomed to with traditional indemnity insurance. Chief among them was the move from unrestricted access to health care services to various limitations. But something else was also new. To obtain access to health care services, enrollees in managed care plans had to become accustomed to the 156
mechanism of service preauthorization by case managers. Health care managers, however, did not approve or deny coverage simply on the basis of an assessment of contractual benefits in the plan purchased by the enrollees. What was truly new was that case managers customarily intervened to provide only what they considered
“appropriate care” at minimal cost.
MCOs deliberately set out plans, guidelines, and policies to shape the care- related decisions of clinicians for the purpose of managing the medical loss ratio, which is generally considered the key factor for financial success. Professional clinical judgment was no longer necessarily the exclusive or, as some contended, even the primary driver of the health care service delivery system. The widely held public perception was, and still is, that the system of managed care allows clinical judgment to take second place to whatever the health care managers deem appropriate in the care of a patient.
Despite this massive change, many employees were left with no other option than to participate in a managed care health plan. In the early stages of managed care, employers offered workers single-plan coverage for reasons of cost-efficiency.
Employees had no input on selecting a health plan or on choosing a level of plan coverage. If they were dissatisfied, their only option was to exit the plan, which, considering the financial and personal impact of such a decision, was not a realistic alternative. In essence, the skyrocketing costs of health care forced employers to quickly find avenues to contain and reduce the cost of employee health care benefits.
MCOs offered employers just that: the promise of affordable, cost-efficient, basic health care.
As managed care became more entrenched, health plans offered customized contracts with different levels of service coverage. Negotiating contracts, particularly in the early days of managed care, was considered a matter between the employer and the health plan; employees were simply not included in the plan selection process. As a result, the transition from indemnity insurance to managed care was short and expeditious.
The speed with which the change to a managed care system occurred might also explain why, at the front end of the transition phase, so little effort was put into researching the assumptions, operational details, and clinical implications of managed care. Are MCOs indeed capable of validating the claim that they have the ability to contain or reduce the costs of health care and, at the same time, maintain the high quality of care that people are used to having? What are the operational tools with which cost reductions in health care are to be achieved? How valid and appropriateboth from a clinical and a moral perspectiveis the service authorization process in managed care?
The fact that there was little or no public debate, either on the desirability of managed care or on its operational procedures, preceding the introduction of a managed care−based health care system explains in part the public disappointment and frustration that followed. Health care consumers who were used to a distribution system based on entitlement and unrestricted access showed little enthusiasm for accepting the changes, which translated into less of both for them. Historically, there has been no incentive for bringing the issue of rationing in health care to the
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forefront of public discussion. Politicians and policy makers alike shied away from the subject of denial (solely for the purpose of limiting medical spending) of medical services that, in essence, are both beneficial and desired.
Before the large-scale introduction of managed care, the validity and legitimacy of the rationing of health care had hardly been the subject of broad public debate.
But times have changed. Most politicians have begun to agree that the health care budget cannot continue to increase and, in fact, should be reduced. The reduction of health care costs implies that choices must be made about access to health care. Not all of the health care services available can possibly be provided to everyone.
Instead, health care must be rationed. Thus, within the context of health care, the term rationing has come to mean
policies and procedures that result in individuals being denied services that would be of significant medical benefit to them for reasons other than absolute scarcity or inability to pay. (Hackler 1998, p. 373)
Without having expressed a need for rationing and without having mechanisms for rationing discussed and agreed upon, most people reacted in disbelief and frustration when confronted with the restrictive access rules inherent in managed care. Plan enrollees protested against the rigid, data-driven service authorization process (Anders 1996). They expressed concern that applying outcomes data to determine access to care would result in unpredictable and inconsistent decisions, particularly when these data are often collected and interpreted at the sole discretion of health plan administrators. They also pointed out that the management of medical loss ratios appeared to be more a function of corporate profit enhancement than a matter of the fair redistribution of health care services.
2.2 Health Care as Business
The negative public reactions toward managed care became even stronger as consumers began to realize that most MCOs were operating as proprietary business entities in a market governed by classic libertarian business principles. Their fiduciary responsibilities weighed heavily on their operational decisions.
Maximizing the return on investments is considered by many business executives to be the number one priority. Financial strategists in health care business value limiting access to care and lowering the quality standards of services as essential tools to enhance financial performance. Thus, improving an organization’s medical loss ratio is often the primary key to business success.
Other business strategies, frequently used in the early period of managed care, included hostile takeovers and buyouts. All these experiences seem to indicate that MCOs do not differ from any other type of for-profit business. They are no worse but they are certainly no better.
Despite public and legal allegations about misconduct, MCOs may not be to blame for any of the problems in health care. They conduct business according to what have become widely accepted standards. The perception that MCOs represent a repugnant system of health care delivery is fueled by a series of omissions for which managed care should not be held accountable. Producing a workable definition of
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health and a new appreciation for the status of health is a societal responsibility that cannot be delegated in a roundabout way to MCOs.
Society also fell short in reaching an agreement or even starting a discussion on an authoritative standard for defining the scope of entitlements. No authoritative standard has been construed that defines the domain and the quality of health care services and products to which everyone should be entitled. The federal government has floundered by not taking responsibility for assuring universal access to health care and establishing agreement on the distribution of labor between public and private-sector entities in regard to access and quality (Buchanan 1998). A significant portion of public criticism pertains to exactly these issues.
Although putting the blame solely on managed care may not be justified, the concerns about health care are truly legitimate. The uneasiness and frustration about the current practice of managed care, however understandable, can be resolved only by addressing the root causes of the problem rather than by relying on the application of stopgap measures. It appears that the discussion about health care comes to a head on the issue of responsibility.