Format: video with audio
Running time: 15 min 30 sec.
Summary: Dr. Hui explains what managed care organizations are, and their relationship to the current health care crisis in the U.S.
Pinky: Hello everybody, this is The Pinky Show. Today we have Dr. Hui with us. Hi, Dr. Hui.
Dr. Hui: Hi Pinky.
Pinky: Dr. Hui is a practicing physician that has a background in, among other things, studying the history of economics in the field of medicine. Dr. Hui, thank you for coming all the way out here in the desert just to talk to us.
Dr. Hui: Thank you for inviting me Pinky.
Pinky: Dr. Hui, I was wondering if we could talk a little bit about the current state of health care here in the United States. Lately I've been hearing many references to a "health care crisis" - can you please tell me what this is all about?
Dr. Hui: Well Pinky, much of that has to do with skyrocketing costs. The cost of health care continues to rise at the fastest pace in U.S. history. This year is the fourth consecutive year of double digit increases. And the consequences are serious - for example, health care costs are a leading cause of personal and corporate bankruptcies. General Motors, for example, they spend more on health care than steel, and Starbucks spends more for health care than coffee. Another direct consequence is the huge number of people who can't afford to have any insurance at all - currently 46 million Americans, or 15% of the entire population, have no medical insurance. Another problem is the structure and institutional values of the health care system itself - a 2003 study showed that 31% of health care dollars, or $400 billion, went directly to administrative bureaucracy and profits. That's $400 billion dollars. Okay, so, Managed Care was supposed to control costs and extend affordable health care to everyone, but this hasn't happened.
Pinky: What exactly is 'Managed Care'?
Dr. Hui: 'Managed Care' refers to any system in which health care is administered by a Managed Care Organization, or MCO. It's by far the dominant model for providing health care here in the United States. 97% of all U.S. workers who have private medical insurance through their employers belong to some kind of Managed Care Organization. The idea of Managed Care itself is not new. It was invented, so to speak, in the 1970's, in response to the wildly escalating costs of health care at that time. The basic idea was that Managed Care was supposed to control costs through a combination of cost control strategies. Proponents of Managed Care claimed that they'd be able to keep costs down by making the health care system more efficient, promoting disease prevention, providing only quote-unquote "necessary and appropriate care".
Pinky: Using a phrase like "necessary and appropriate care" makes it sound like there were lots of unnecessary and inappropriate care being performed by doctors before Managed Care came along. Was that really the case?
Dr. Hui: Well before the advent of Managed Care, the typical way of getting health care for the average American was through what we call the 'Fee For Service' system. That system basically had no controls over access and care. When somebody wanted to go to the doctor, they basically just went to whichever doctor they wanted to, for whatever reason, and then the doctor would run tests, they would treat them, whatever. The doctor might collect money directly from the patient if they had no medical insurance, but more often they'd be billing an insurance company and get paid from them. Now you can imagine under this kind of system in which there is no limit on the choice of doctors, no limit to access to specialists, and no limit on doctors' services, there's actually going to be a financial disincentive on the part of the health care apparatus to keep patients in good health. In other words, doctors and insurance companies could perform more services, and then get paid more money, whenever people got sick, right? Under this kind of system the economic results were as one would expect - by the 1970's this Fee For Service system had helped create a massive problem you know - cost inflation extreme enough to lead President Nixon to declare that the country was in the middle of a health care crisis.
Pinky: So how are Managed Care Organizations different from the previous system? I mean, in simple terms, how do Managed Care Organizations work?
Dr. Hui: There are actually a few different kinds of Managed Care Organizations. For example you've probably heard of Health Maintenance Organizations, or HMOs, right?. There are also these other things called PPOs, and POS plans - basically these are all somewhat different versions of the Managed Care model. But what they all have in common is that all Managed Care Organizations are businesses. They have various interconnected parts that all work together to form a whole. Of course they provide patients with access to doctors, and nurses, technicians, but they also have administrative and financial workers who create and manage the health insurance policies that are then marketed and sold to the public. So, you can kind of think of MCOs as being sort of like a conjoined twin - hospital on one side, insurance company on the other. The insurance side of the MCO will create a range of health care insurance plans and market them to individuals or employers. So when a person 'joins an MCO', what they're really doing is they're buying one of these plans and they're paying for it by making continuous periodic payments - monthly, semi-annually, whatever - in order to keep their 'membership' to the MCO active. The MCO collects these thousands and thousands of payments ('insurance premiums', in MCO lingo) from their customers (which they like to call 'members') and from this the MCO basically derives it's budget, from which it's going to have to deliver all of its health care services.
Pinky: So as long as you keep paying the monthly bill to your MCO, you're free to just go see the doctor whenever you get sick?
Dr. Hui: Well, if you're getting your health insurance through your employer, your employer is already paying for your health insurance and providing it as a benefit. Or they may be taking a certain amount from your paychecks to pay for that insurance. That's why most people don't actually have to mail a check in to their MCO every month, it's already being done for them. In addition to the monthly insurance premiums you have to pay, many health insurance plans also require that you have to pay a certain percentage of your medical bill out-of-pocket when you do receive some kind of medical treatment. Or there may be built-in controls as to which doctors you can see, whether you have to see a primary doctor before being able to see a specialist, and so on. And like I mentioned earlier there are always controls in place in the form of "only necessary and appropriate care" kinds of stipulations in regards to what kind of tests are ordered or what kind of medical care is actually rendered.
Pinky: Who gets to decide what's "necessary and appropriate"? I mean, wouldn't a Managed Care Organization be inclined to try and save money and maximize profits by rendering less than necessary, less than appropriate care?
Dr. Hui: This is a very difficult question to answer. Depending on how you do the analyses you're going to get different answers. There's certainly been many claims, many of them highly publicized in the mainstream media, regarding inadequate care and legal judgement against MCOs, but there is also little data to support this as a generality that extends across the board. There's also been some data that seems to indicate that the quality of health care has actually remained more or less constant, you know, extending back to the Fee For Service era. If this means that MCOs are doing an equally great job, or that the Fee For Service era also sucked, I guess that's very open to debate! A more reasonable conclusion probably rests somewhere in between the two. The National Committee for Quality Assurance (NCQA) has recently started to collect data to try to answer questions just like the one you just asked. Early evidence seems to suggest that the quality of health care and patient satisfaction are actually slowly improving.
Pinky: So what would be the best way to promote improvements in health care? Can you do that while also reducing costs?
Dr. Hui: Well, in 1999, President Clinton created this
thing called the Advisory Commission on Consumer Protection and Quality
in the Health Care Industry. They issued a "Patients' Bill of Rights" to
protect people from denial of service and other MCO limitations. Around
the same time, many states passed laws that allowed MCOs to be sued in
instances of malpractice. Securing these 'rights' for consumers was
generally lauded by consumer protection advocates as victories. But
immediately thereafter the cost of health care to consumers just shot
up. MCOs raised their insurance premiums to something like five times
the rate of inflation. The MCOs basically said that they had to do this
in order to cover the increased costs of their newly acquired
accountability. Was that true? Well, it's hard to tell, especially since
MCO profits increased 10.7% in 2004!
Look Pinky, the bottom line is that Managed Care Organizations are businesses and their decisions as to how they are going to be run, are driven by market forces. As businesses operating within a larger 'health care industry', health care is going to be bought and sold as a commodity. Priorities are going to be set, and decisions are going to be made, based on the MCOs' ability to make profits and patients' ability to pay. Under this kind of logic, health care is allocated based on wealth, so there is always going to be a problem for people who are unable to pay. The uninsured are totally excluded from the system.
Pinky: So what's next for Managed Care?
Dr. Hui: Well, here we are in the middle of a crisis. I
should clarify - when I say 'we', I don't necessarily mean Managed Care
Organizations. In general, MCOs have continued to adapt to the
constantly changing economies and markets, and they continue to make
profits. It's really the working people who are feeling the brunt of it,
you know. Patients are having to pay more for less coverage, employers
are also incrementally cutting back coverage. Patients are now paying
more out-of-pocket. As a nation, we spend more on health care than any
other country, 15% of the Gross Domestic Product (GDP) - that's over
$1.7 trillion in 2003. And yet, for all that money spent, the U.S. ranks
35th for life expectancy at birth, and 42nd in infant mortality. The
statistics are, predictably, far worse for those Americans located
towards the bottom end of the socioeconomic scale. 15% of Americans have
no health insurance at all, and the U.S. spends two times per capita
versus Canada, a country that has universal coverage for all of its
people. With almost 100% of all privately insured Americans receiving
their health care from some form of MCO, I think it's fair to say that
any indictment of the health care industry in general is also an
indictment of Managed Care.
So the question is - does government have the moral responsibility to take care of its people? Is health care a basic human right that should be available to everyone? Many countries, well, actually all industrialized countries except the United States, have universal health care.
Pinky: Why don't we already have universal health care here in the United States?
Dr. Hui: Well, there's actually been a number of failed
attempts over the years. Presidents Roosevelt, Truman, Clinton - all of
them tried in some form or another. Okay, rewind a bit - during the
Second World War, as a way to control costs and inflation and basically
keep the war machine running, there were strict wage and price controls
imposed by the U.S. government. And one of the side effects of this was
that employers began offering incentives in the form of health benefits
as a way to compete for workers; that gave rise to the present
employer-based insurance system that we still use today. This is the
historical foundation that essentially relieved the federal government
from the responsibility to create and maintain a nationalized program of
health care. From time to time, the employer-based system would show
glaring inadequacies, for example in 1965 the federal government
initiated the Medicare and Medicaid programs as partial solutions.
But the logic of capitalism is quite clear. The employer-based insurance system has obvious limitations and without deep, fundamental changes, this long-standing crisis will not go away. Part of the problem are established special interest groups that have both money and power, and also the fragmented nature of the health care industry produces many competing interests: patients, doctors, hospitals, pharmaceutical companies, insurance companies, employers, government... I think that's a whole other episode.
Pinky: I think so, I'm going to have to ask you to draw me a diagram.
Dr. Hui: Yeah, it'll have many boxes and arrows.
Pinky: Yeah, I want to know who is responsible for blocking the creation of a system that would provide health care to everyone. I'm also curious as to what their motivations for doing this would be. I mean, I'd like names and dollar amounts! [laughter] Dr. Hui, thank you very much for sharing this information with us.
Dr. Hui: Thank you Pinky, I always enjoy seeing you.
Pinky: Please come again.
Dr. Hui: I will. Bye bye.