Correspondence
Managed Care in the Crystal Ball
N Engl J Med 1997; 337:344-345July 31, 1997
- Article
To the Editor:
Ginzberg and Ostow (April 3 issue)1 rightly predict that managed care's days are numbered. Less clear is whether others will acquire the authors' insights the easy way or the hard way (i.e., through foresight or through the forehead). If we do not take corrective action soon, but instead stand by until managed care has run its course, we may find ourselves bailing one more industry out of the financial crisis we have allowed it to create.2 I expect Ginzberg and Ostow's crystal ball to be right, but I fear that many of the rest of us will find that only our hindsight is 20/20.
2 ReferencesGiles R. Scofield, J.D.
University of Connecticut Health Center, Farmington, CT 06030-19101
Ginzberg E ,Ostow M . Managed care -- a look back and a look ahead. N Engl J Med 1997;336:1018-1020
Full Text | Web of Science | Medline2
Akula JL . Insolvency risk in health carriers: innovation, competition, and public protection. Health Aff (Millwood) 1997;16:9-33
CrossRef | Web of Science | Medline
To the Editor:
I'm with you in predicting that managed care is here to stay.1 Ginzberg and Ostow convict managed care on the trumped-up charge of failing simultaneously to provide universal coverage, sustainable financing, and better care for all Americans. No health care system yet devised can meet this challenge. But for a substantial and growing number of Americans — who vote with their enrollments — managed care represents the best balance among competing objectives. . . .
Editor's note: Mr. Piescik's company provides information-technology consulting services to hospitals, other provider groups, health insurers, and managed-care organizations.
1 ReferencesJohn B. Piescik, M.P.P.M.
American Management Systems, Fairfax, VA 220331
Kassirer JP . Is managed care here to stay? N Engl J Med 1997;336:1013-1014
Full Text | Web of Science | Medline
To the Editor:
Ginzberg and Ostow assert that managed care provided through health maintenance organizations (HMOs) has lowered the cost of medical care. An examination reveals that this reduction in cost is a mirage. The cost of medical services in the past included the costs of education of students and physicians, clinical research, some social services, and other services to maintain health and prevent disease. These costs are largely unfunded by most HMOs. The costs of liability insurance, which contribute to the rising cost of medical care, are as yet essentially negligible for HMOs and are borne by physicians. Furthermore, the compensation received by physicians has decreased while paperwork and administrative costs have increased dramatically.
Reducing medical education and medical research by decreasing funding has important Machiavellian consequences. Restricting education results in the emergence of physicians with knowledge hardly distinguishable from the knowledge of those with less formal education. HMOs are already replacing specialists with generalists, and generalists with nurse assistants. A second Machiavellian effect is that less-educated physicians may consider fewer differential diagnoses and thus less expensive evaluation and treatment of patients. Further “savings” are thus achieved.
The bell is tolling for the disappearance of educated physicians. For the maintenance of medical education, HMOs should be taxed at a percentage at least similar to that provided by Medicare for education. A similar tax on pharmaceutical houses could be used to support research. Funds would then be available for education.
Apoptosis of medicine can be prevented.
Lewis A. Barness, M.D.
University of South Florida, Tampa, FL 33606-3475To the Editor:
The Sounding Board article by Ginzberg and Ostow unfortunately fails to differentiate among the many types of HMOs. Unlike nonprofit HMOs such as Kaiser Permanente, whose mission is to spend the subscriber's premium optimally on direct patient care, community services, and medical education, the for-profit HMOs have the mission of maximizing the return to their investors.
In their historical review, the authors do not state that before 1960 health care insurance was uncommon. Paradoxically, it was the creation in the 1960s of third-party fee-for-service reimbursement, both private (through workplace benefits) and public (through Medicare and Medicaid), that led to the current dominance of managed-care programs. The third-party reimbursement system dissociated supply from demand so that the additional number of physicians and hospitals, instead of leading to reduced unit costs, led to increased utilization, higher prices, and increased total health care expenditures.1,2 It was the inflated fee-for-service costs, as compared with competitive marketplace prices, that enabled Wall Street to invest in health care and extract profits for shareholders.
The unmanaged growth of the fee-for-service system from 1960 to 1990 led to the duplication of services in areas such as invasive cardiology and cardiac surgery. Not only has this duplication resulted in increased costs, but also the minimal volumes in many institutions have led to poor-quality outcomes. Opportunities exist for socially responsible programs to create centers of excellence and use economies of scale both to improve the health of subscribers and to limit the growth of their premiums. Although the excesses of health care programs that are driven by Wall Street should not be excused, nonprofit programs such as Kaiser Permanente, which spend more than 96 cents of the subscriber's dollar on direct patient care, can be a solution to the unmanaged, unorganized, and inefficient systems of the past. Unlike Ginzberg and Ostow, I believe that by making health care more affordable, well-managed HMOs increase the possibility of both universal coverage and an improved quality of care for the American people.
2 ReferencesRobert M. Pearl, M.D.
Permanente Medical Group, Santa Clara, CA 95051-53861
Pearl RM . Health care -- past, present, and future. Ann Plast Surg 1997;38:191-192
CrossRef | Web of Science | Medline2
Pearl RM ,McAllister H ,Pruzansky J . An economic analysis of health care reform and its implications for plastic surgery. Plast Reconstr Surg 1997;99:1-9
CrossRef | Web of Science | Medline
Author/Editor Response
The authors reply:
To the Editor: We agree with Dr. Barness that it is the funding for medical care that has been reduced by managed-care plans (which provide little or nothing for medical education and research) and that the efficiency of expenditures for patient care has not improved substantially. Moreover, we noted in our article that annual increases in health care costs, after declining, are once again heading upward.
Mr. Piescik, drawing on his own experiences with managed care, is enthusiastic about what it has been able to do for him and for many others who prefer to rely on the marketplace to buy health care. No system is perfect, but competition is better than all the known alternatives. We wonder whether younger and older disabled persons and those with chronic diseases whom managed-care plans seek not to enroll would vote for the competitive marketplace.
Mr. Scofield warns that the United States had better address the managed-care issue before the country faces a bailout of many hundreds of billions of dollars if and when many of the current for-profit plans are forced into bankruptcy by a particularly strong reversal in the stock market. This point is worth raising and, what is more, is worth answering.
Dr. Pearl, of Permanente Medical Group in Santa Clara, has a much more positive view of nonprofit HMOs than Dr. David Lawrence,1 the long-time chief executive officer of Kaiser Permanente. The fact that Kaiser spends such a high proportion of its revenue on patient services is commendable, but this fact provides no assurance that Kaiser is properly configured for the present, much less for the future — although it remains the leader among the nonprofit HMOs.
The crux of our assessment of managed care can be restated as follows. The easy “savings” have been made; these “savings” largely represent the unwillingness of managed-care plans to provide the substantial cross-subsidization funding that fee-for-service health insurance plans have long contributed for medical education, research, and charity care. The public is in active revolt against widespread undertreatment by managed-care plans without adequate processes of appeal and the right to sue for damages. The Congressional Budget Office estimates that by 2007, the United States will be spending over $2 trillion on health care annually and that 53 percent of the expenditures will be government dollars, not counting tax subsidies. Who is kidding whom about the competitive market?2
2 ReferencesEli Ginzberg, Ph.D.
Miriam Ostow, M.S.W.
Columbia University, New York, NY 10027
