<html> I was asked to write a very short summary of managed care for a popular economics book.  This is a draft.  The text in [brackets] was not included in the actual draft but notes to myself that I decided to leave in for the email audience. I would be interested in any comments.  _______________________________________________ “Managed care” in general means that someone besides the health provider and the patient has a say in what care is provided. In the United States, “managed care” originally arose as a response to rising medical costs in the 1920’s. The Kaiser Foundation Medical Care Program, the first large managed care organization in the 30’s, began as a way for large employers of low wage workers to offer regular care at a fixed price with a fixed staff. [These employers would not pay for other health coverage and the workers were happy to get this care (depression and all that). The fixed staff model meant that health providers gained experience and empathy for the particular ailments of the workers they served. The workers felt “invested” in their HMO and the staff fostered a somewhat progressive “two-way” dialogue about the health care offered. This is why HMO’s are often considered “progressive” in their origin. It is interesting to note that the original staff model HMO is nearly exinct today. The notion of the consumers as true partners in the organization and structure of any form of managed care is non-existent today as well.] The term “Health Maintenance Organization” was coined in 1970 and these fledgling organizations received tax breaks to help them grow. HMOs would provide access to health care for a fixed price if the payer was willing to let the HMO decide the who, what and where of the care. While HMO’s were cheaper than traditional insurance plans, initially the number one argument in favor of HMOs was that they created incentives to prevent illness rather than just treat them. [When Richard Nixon gave his presidential address to push for HMO’s in 1971 he mentioned that the “ancient Chinese” only paid their doctors if they were well. This is considered a myth (even if a widespread one) by every scholarly account I have explored on the practice of ancient Chinese medicine. The most favorable reading of the myth is that it may have been the practice in a few isolated places for short periods of time.] This was not enough to convince many people to switch to them. Despite steady growth in the 70’s and 80’s, HMO’s and managed care did not take over health care delivery until the 90’s. Health care cost increases in the late 80’s and early 90’s drove up health insurance premiums. Payors demanded that insurers and managed care organizations look for ways to control costs.  Thus began the creation of a wide range of health care options. The focus of managed care was now controlling costs, mainly to offer purchasers a lower annual cost. [This is my main point here. We did not get managed care because it was a better way of providing care or even because it was a result of careful study of the tradeoffs between cost and quality. As Arnold Relman, M. D. put it in an editorial in the New England Journal of Medicine “Large portions of the health care system have undergone revolutionary change, and not for the purpose of improving health care, but in order to reduce the cost of doing business for large corporations.” I would add the government as well.] The range of managed care options consists now of traditional indemnity insurers, who pay for a good portion of the care doctors and patients choose to initiate); preferred provider organizations [PPOs], who organize a network of providers for consumers to get care from and penalize them if they choose not to use care in the network; point of service plans (POSs), who organize care like PPOs for a fixed fee but generally have greater incentives to receive care within the network and fewer choices on what kinds of care the consumer can choose; and HMOs, who offer an increasing array of health care provision options for a fixed fee. Incentives have changed dramatically for the providers as well. Providers are often owners or employees of managed care organizations rather than independent agents for their patients as they once were. They face economic incentives to provide care in an inexpensive manner. Health care workers of all kinds face new and unexpected pressures from the managing of care: layoffs, “speed-up” and other demands in their work, “gag orders” preventing them from publicly discussing their work, and wage stagnation. The main change that managed care has added in the 90’s is the widespread introduction of the profit motive into every facet of medical care. While non-profit and not-only-for-profit organizations still exist in health care, the “for-profit” companies and motives seem to increasingly drive all organizations. While hospitals and provider organizations continue make increasing profits (4.1% of revenue in 1991 to 5.3% of revenue for all hospitals and 4.3% to 9.3% for for-profit hospitals; Source: Trends and Indicators in the Changing Health Care Marketplace), HMO’s continue to lose money (the median HMO lost 3.5% of revenue in 1997 and that is down from a median profitablility of 2.4% in 1994). This means the pressure to cut costs will continue in the system. The pressure to cut costs in health care has taken a toll on health care workers, the providers are most adamant that the managing of care has led to a significant decline in patient care. [The main source of evidence is a preponderence of editorials, books, articles on the subject.  Some specific sources include George Anders’s Health Against Wealth (Houghton Miflin, 1996); Opinion page in Managed Care magazine in nearly any month (I have Theodore N. Hariton, M. D.’s December 1998 piece in front of me); surveys of nurses and health care workers done by SEIU (“Safe Staffing:  An Action Plan for Nurses”, SEIU Nurse Alliance).] Managing care has been felt most intensely by the sickest and poorest patients. A strong majority of health care is for routine procedures and this is what managed care excels at. [The figure I see most often is 85% which I tracked down to a quote by  Dr. Allan Hillman, Professor of Health Policy at University of Pennsylvania but I never found any original sources or research.] A long list of HMO “horror stories” circulate in newspapers and conversations across the U. S.: toddlers who have ear infections for over a year before the HMO authorizes any specialty care, people with fevers and bronchitis being told over the phone to take a few aspirin and call in a few days, people with rare diseases needing to get three concurring opinions before any life-saving care is initiated, and those with mental illness who are dismissed by HMOs hours or days before they kill themselves. CBS and NY Times polls in 1998 indicated 85-90% of Americans thought the health system needed “fundamental change”. Over half of people in those polls indicated that managed care would harm quality of care. Studies from the National Committee for Quality Assurance’s compilation of HEDIS (Health Plan Employer Data and Information Set) show that not-for-profit health plans provide higher quality in all the key measures than for-profit plans. [This is an interesting public opinion reversal because I have a Harris poll from 1995 in which over half the people think that access to managed care would help rather than hurt quality. It should be noted that while this data is new the quality of care overall went down between 1996 and 1997.] Overall, managed care has reduced the money available for care for the uninsured. Historically, hospitals subsidized uncompensated care by making insurers pay more. Managed care has meant that hospitals, even if they provide a lot of care to the uninsured, must compete to keep costs down with hospitals who care for just the insured. The number of public hospitals has fallen each year since the early 1980’s (fallen in total 14% from 1985 to 1995). The uninsured face increasingly severe consequences for their care (and as managed care begins to dominate Medicaid the consequences there grow as well). <div>"With a song in my heart I took all the blows."</div> <x-tab>    </x-tab><x-tab>   </x-tab>--Jackie Leven, "Ballad of a Simple Heart" </html>