Managed Care Was The Problem. Neither HMO’s or ACO’s Are The Solution

Health care policy is a very complex subject, but that doesn’t stop bloggers from writing on the topic well beyond their level of understanding. While liberal bloggers have been far more accurate than those on the right, I’ve seen quite a lot of uniformed opinions coming from the liberal blogosphere. This has included some liberal bloggers, while too young to have meaningfully experienced the failed experiment in managed care first hand, tout managed care as a realistic means of controlling health care costs.

I don’t happen to have any good links handy from those with this view as I had not intended to post a response until I came across this post from Wendell Potter. Potter is a former insurance company executive who has exposed many of the practices of the insurance industry. I present his comments on managed care in the hopes they will be recalled whenever seeing HMO’s being presented as a good solution:

Soon after the Clinton reform plan failed in 1994, insurance companies offered up managed care as a “private sector solution” to the country’s health care crisis. Government involvement would be unnecessary, we argued, because the invisible hand of the market and the techniques of managed care would simultaneously bring down both costs and the number of people without coverage.

Employers bought it. By the end of the decade, they had moved almost all of their workers into HMOs or similar types of managed care plans.

But for many people, managed care turned out to be more of a nightmare than a solution. One of the ways insurance companies controlled costs was by refusing to pay for care for a variety of reasons. HMO patients were out of luck, for example, if they received care, even unknowingly, from a doctor or hospital outside of their HMO’s network. Many women were especially disadvantaged. Citing actuarial data as justification, their HMOs refused to pay for more than a 24-hour stay in the hospital after a woman delivered a baby or had a mastectomy.

Insurance companies also became especially vigilant in searching for evidence that a policyholder’s medical treatment might be related to a “preexisting condition,” as the president’s mother, Ann Dunham, found out.

In other words, managed care and HMO’s were the major mechanisms by which insurance companies have performed the abuses which made health care reform necessary. HMO’s were a large part of the problem, not the solution.

Today some liberal bloggers see managed care as a meaningful tool to bring down health care costs, failing to understand the degree to which they were the problem. Even more troubling, the Obama administration is now promoting Accountable Care Organizations (ACO’s) to reduce health care costs. Unfortunately this largely is a matter of a change in acronyms from HMO’s, with some attempts to revise the plans to reduce the problems. ACO’s as presently devised do not appear likely to accomplish the desired goals.

Beyond all the old problems seen with HMO’s, the latest fad in health care reimbursement is to pay less for services and offset this by paying larger incentive payments based upon results. The problem is that this is difficult to measure, and outcomes are only partially affected by medical intervention.

For example, an insurance company might pay based upon lowering of the Hgb A1c (a measure of long term control of diabetes) to under 7 in diabetic patients. Lowering the HgbA1C to under 7 (or ideally under 6.5) is certainly beneficial, but it is difficult to pay physicians based upon this. Every year I get a number of new diabetic patients with a Hgb A1c of 12 to 14, and sometimes higher. As this is a test of long term control, it takes a matter of months to see any meaningful change. By the end of the year, when incentive payments are being calculated, I might have only had time to get this down to around 8 or 9.  In this case, my incentive payments are reduced despite all the efforts it took to make a considerable improvement in the patient’s diabetic control. The numbers will be even worse if I didn’t receive the patient until the fall or early winter and didn’t have time to bring about improvement.

It takes far more physician effort to get a diabetic patient under control when they have been out of control for several years. This extra work is most likely to be done under a fee for service system which rewards physicians for the extra effort as incentive systems fail to account for many real world situations. Even worse, the physicians who are gaming the system by dropping their patients with an elevated HgbA1c (for others such as myself to pick up) might wind up with higher payments by limiting their practice to patients who are already healthy.

While I have seen many insurance plans pay based upon an absolute number, I have yet to see one which will pay for achieving a marked improvement such as described above. This is just one example, and there are many other limitations in any plan based upon flawed attempts at measuring quality. Moving away from fee for service will only exacerbate problems  in treating complex patients as it will often be far more profitable to avoid complex cases if there is not adequate reimbursement for all the extra physician time required for their care. The move towards ACO’s is likely to just return us to the problems of the managed care era, both due to improper incentives as well as excessive controls upon medical decisions.

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  1. 1
    Mike B.T.R.M. says:

    My personal physician had an interesting comment. She said it doesn’t matter what the government does or doesn’t do with health care if our nation continues its generally unhealthy eating habits, the medical care system will be overwhelmed.  According to her, only significantly changing how most people in USA eat will have a chance of saving health care services of being overwhelmed. Your thoughts on that?

  2. 2
    Ron Chusid says:

    It might not determine whether the health care system is overwhelmed, but getting people to follow a healthier diet would certainly have a tremendous impact.

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