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| Health Care's Trojan Horse
by John M. Curtis Copyright July 14, 1999
With unemployment at record lows, employers scrambling for a finite group of qualified employees, and unit labor costs on the rise, many cost conscious employers are also finding HMO plans too tempting to resist. In today’s insurance market there’s just no other way to go. Indemnity insurance plans — except for the Aristocratic CEO class — are prohibitively expensive. What’s left is not Nova Scotia Lox, but a plate filled with peanut butter and jelly. For several years now, HMO plans have dominated the health plan industry and represent the only viable option for most employers. Promising lavish benefits at bargain-basement prices, HMO commercial plans have become the popular fast food among employers seeking to satisfy employees’ basic needs for health care. Only one small problem. While the American public is slow to catch up, it’s leaking out that subscribers aren’t quite as happy as the plans would have you believe. Recent findings published in JAMA [Journal of the American Medical Association] are unhappily reporting that enrollees in for-profit HMOs don’t measure up to nonprofit HMO plans. Though this jibes with common sense, it doesn’t tell the whole story. In case anyone’s wondered, nonprofit HMOs — like Kasier Permanente — are going the way of the dinosaurs, driven out of the market by their lean, mean, hungry for-profit competitors, offering what seems like respected health insurance, without the appearance of low cost government clinics. Already an endangered species, today’s nonprofit HMO, saddled with excessive weight and suffering from institutional high cholesterol, finds itself lumbering along trying its best to shed the baggage which comes with owning its own hospitals, clinics, laboratories, physician groups, and miscellaneous health services. Despite the claptrap, Wall street is cheering on profit-driven HMOs which have witnessed — along with the Tech sector — unprecedented growth in recent years. Unlike internet stocks, the HMO industry is still dependent on earnings which have soared together with other health-related industries, like pharmaceuticals and medical equipment manufacturers. With nonprofit HMOs nearly extinct, the new better adapted and more evolved for-profit counterparts, have jettisoned all the excess weight, abandoning hospitals, clinics, laboratories, physicians and the like. Guess what? They don’t even own the printing presses on which they print their glossy benefit plans and brochures. Even nonprofit HMOs — like Kaiser — have tried to jettison budget busting hospitals and clinics in recent years. What a deal! Profit-driven HMOs have virtually eliminated all their overhead of running a costly health care conglomerate — other than subsidizing their own bureaucracy. Contracting out all their services — from prescriptions to bypass surgery — today’s lean and mean HMOs control profit margins by placing most service providers, especially hospitals and large multispecialty medical groups called IPAs, on fixed budgets known as capitation. By fixing their costs, HMOs pass the buck and the risk of doing business to the hospitals and physician groups contracted to serve their subscribers. Dispelling a popular myth, physician groups — not HMOs — provide medical services to health plan subscribers. Though the public blames the HMO for rationing health care, the truth is that the contracted medical group doles out the medical benefits. Designated gatekeepers aren’t employed by HMOs, they’re working for the medical group providing the services. Medical groups are always carping about the HMO’s paltry monthly allowance, while they tighten the noose on costly medical benefits out of fiscal survival. Gatekeeping is no joke. Without it, medical groups quickly hemohrrage into fiscal insolvency. Now comes the real dilemma. In the present HMO system which pays medical groups fixed dollar amounts per month, how do they prevent medical cost overruns without rationing health benefits? All the talk about gatekeepers’ imposing medical necessity to deny subscribers access to costly tests, procedures and medications can be placed in the proper context: Saving the medical group from going broke. As much as we’d like to blame the HMO for rationing care, it’s the cost conscious medical group that’s forced to pinch the pennies. Though comparing nonprofit and for-profit HMOs has its place, it sadly misses the mark about what’s responsible for the intolerable mediocrity in the present system. Since the vast majority of HMOs contract out all their services on a fixed monthly budget, medical groups have no other choice but to ration medical care. While it’s tempting to blame the problem on the HMO’s IRS tax status, it’s more fruitful to examine how HMOs force medical groups to live within restrictive budgets. With HMOs controlling access to patients, medical groups are at their mercy. In competitive markets, capitation rates are so abysmal the medical groups can barely afford to recommend Dr. Weil’s book on alternative medicine, let alone pay for appropriate tests and procedures or approve reasonable hospital stays. Before leaping into ambitious new programs, it’s high time that Congress and the White House find a workable solution to the current health care crisis. Blaming the problem on HMO’s IRS tax status fails to accept the fundamental flaw in today’s managed care system: Health plans — not physicians — should take back the risk and pay the freight. About the Author John M. Curtis is director of a West Los Angeles think tank specializing in human behavior, health care and political research and media consultation. He’s a seminar trainer, columnist and author of Dodging The Bullet and Operation Charisma. |
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romise them more than you can deliver," said American entrepreneur and super-promoter P.T. Barnum, and "you can always deal with their disappointments later." Sound familiar? "Save all your prescription costs and deductibles," promises a persuasive agent to unsuspecting seniors, asking them to 'sell-off' their Medicare benefits and join an HMO senior health plan. Wanting to believe in a medical fairy tale is not uncommon for many seniors living on lean budgets. As they quickly find out, things aren’t exactly what they imagined.|
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