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The Managed Care Debate: Correcting the Errors and Omissions

 

As issues about the future direction of our country's health care system are debated in Washington and the state capitals, policymakers and the public are examining managed care plans. As an industry, health plans welcome careful examination of their record. While much more work needs to be done to promote quality, affordable health care that serves patients well, we are proud of our role in fostering the transition from the failed system of the 1960s-1980s to a better system built around evidence-based medical practice.

Notwithstanding health plans' successes in moving America's health care system closer to the goals of quality, affordable medical care, much of the current debate about managed care proceeds from inaccurate and incomplete information. In this paper, AAHP's goal is to contribute to a more meaningful debate about quality health care by examining commonly heard views about managed care.

Section I provides just a few key facts and figures that are rarely heard in the debate, but should be considered as national and state policy is developed. Section II addresses some of the claims about managed care that have been made in state and federal legislative debates. Many of these claims are simply wrong; others are provided without any of the context needed to evaluate them properly. We hope the result of this effort to provide the vitally needed facts and context will be a more informed debate that takes on the broad quality issues in the American health care system.

 

In This Paper

Section I: A Few Examples of What Is Being Left Out of the Managed Care Debate

Section II: Examining Common Assertions about Managed Care

A. Assertions about Managed Care and Choice

B. Assertions about Managed Care and Quality

C. Assertions about Managed Care Plan Practices

D. Assertions about How Health Plans Are Regulated

E. Assertions about Public Opinion

F. Miscellaneous Assertions

Major Sources

Chart: Summary of Health Plan Regulation

April 1998

 

Section I. A Few Examples of What Is Being

Left Out of the Managed Care Debate

- According to literature reviews, most studies find that the quality of medical care received by managed care plan members is equal to or better than the quality of care received by individuals in traditional indemnity plans (Miller and Luft, 1997; Miller and Luft, 1994).

The following are a few examples of specific findings about quality of care in managed care plans:

HMO members in hospital intensive care units are more likely than indemnity plan members to survive (Journal of the American Medical Association, Oct. 1996).

Rheumatoid arthritis patients cared for through a prepaid group practice HMO receive as much care as and experience similar outcomes as those in traditional indemnity plans (Journal of the American Medical Association, Oct. 1996).

In California, women covered by capitated Medicaid plans were less likely than women with traditional Medicaid indemnity coverage to give birth to low-birthweight babies (Health Services Research, April 1998).

- Physicians report that health plans approve coverage for virtually all of the care they recommend (Inquiry, Fall 1997).

- Health plans have made health coverage more affordable for workers and families, and as a result, more Americans can afford health insurance.

Between three and five million Americans who would have lost their employer-sponsored health insurance were able to keep it because health plans brought out-of-control health care costs under control (The Lewin Group, 1997).

- Legislation that would increase insurance premiums would add to the number of uninsured Americans.

Every 1% real increase in private insurance premiums results in 400,000 additional uninsured Americans (The Lewin Group, 1997).

- Six million Americans have chosen to disenroll from traditional Medicare and enroll in Medicare managed care plans, even though every one of them could have remained in traditional Medicare.

Seniors continue to switch at the rate of about 100,000 each month. According to the government's Prospective Payment Assessment Commission's June 1997 report, each senior switching to Medicare managed care plans obtains, on average, about $950 in extra benefits.

- Health plans have helped achieve increased wages for covered workers and savings for families.

The average wage gain attributed to managed care for covered workers in 1996 was $228-356. Total savings attributed to managed care for married couple families in 1996 were $408-549 (The Lewin Group, 1997).

- Health plans, working in partnership with employers, have pioneered the development of information that consumers can use to assess plan quality and performance.

Indemnity coverage has few, if any, counterparts to health plan measures such as HEDIS and health plan report cards issued by many employers and state governments.

 

Section II. Examining Common

Assertions about Managed Care

A. Assertions about Managed Care and Choice

Assertion: The growth of managed care has restricted patient choice.

- FACT: First, the growth of managed care has expanded the options available to consumers. Second, managed care plans offer consumers a choice among providers. Third, nearly all employees are given a choice of joining a plan that covers care by out-of-network physicians.

Prior to the development of PPOs, HMOs and other managed care plans, individuals were limited to traditional indemnity coverage. In response to the old system's failings, health plans developed as a new choice for consumers, allowing them access to coverage with features such as credentialed practitioners, low cost-sharing, preventive care and quality assurance programs. Moreover, health plans typically offer a broad choice of providers within their networks. In fact, some policy experts criticize plans for offering too broad a choice of providers.

Finally, 92% of American workers who receive health coverage through their employer are offered at least one plan that covers care provided by out-of-network physicians and hospitals (i.e., PPO, POS, or indemnity), according to 1996 KPMG Peat Marwick LLP data analyzed for AAHP by the Barents Group. (Most of the 8% of workers offered only a closed panel plan were employed by small firms, which face difficulty offering any coverage at all.) In addition, two-thirds of workers offered health coverage are offered a choice of more than one health plan (Barents Group, 1996).

 

 

Assertion: The 40+ million Americans in HMOs are required to use only physicians participating in the plan.

- FACT: Again, more than nine out of 10 employees are given a choice of joining a plan that covers care by out-of-network physicians. Additionally, health plans promote quality, affordable health coverage by selectively contracting with a network of physicians. Members are free to choose from among network practitioners and to switch among network practitioners.

First, 92% of American workers who receive health coverage through their employer are offered a plan that covers out-of-network physicians and hospitals. Second, of workers enrolled in HMOs, 74% voluntarily chose HMOs over other types of plans that cover non-network providers. Another 9% of these workers are offered two or more HMOs. Among the remaining 17% of workers covered by HMOs, two-thirds worked in small firms, where the ability to offer any coverage at all usually is based on affordability (Barents Group, 1996). Similarly, all six million Medicare managed care enrollees could have remained in traditional Medicare, but chose to switch.

Health plans benefit their members by selectively contracting with physicians. In developing their physician networks, health plans typically verify the physician applicants' credentials. In addition, plans periodically re-credential their physicians through ongoing evaluation. These credentialing activities help ensure that the provider's qualifications match the needs of the health plans' enrollees. It also is important to point out that health plans typically have a much higher than average percentage of board-certified physicians participating in their networks.

 

 

Assertion: Over 90 million Americans are in point-of-service options or preferred provider plans, where they face substantial financial penalties for use of non-network providers.

- FACT: High cost-sharing is one of the defining characteristics of indemnity plans and traditional Medicare. Enrollees with PPO or POS coverage have a choice of seeking care from a participating provider and incurring lower cost-sharing or seeking care from a non-participating provider and incurring higher cost-sharing. This is a choice that individuals with indemnity coverage do not have.

Individuals with indemnity coverage face significantly higher financial cost-sharing burdens no matter where they seek care and are not given the opportunity available to PPO and POS members to have lower cost-sharing if they seek care from participating providers.

 

 

Assertion: Enrollees may not have access to all specialists participating in the plan, because referrals are limited to a subset of specialists associated with a medical group or gatekeeper.

- FACT: First, studies published in peer-reviewed journals report that health plans provide equal or greater access to specialty services than indemnity coverage. Second, a few plans have developed innovative arrangements under which referrals occur within a medical group. This innovation has won praise from observers. In addition, plan members cared for through such arrangements have the option to switch medical groups, thereby switching to different practitioners. And, at the same time, other plans have been developing innovations that streamline or eliminate referrals for specialty care. Both types of products represent innovations that plans have introduced to promote quality, affordable care.

Some plans have developed innovative arrangements under which referrals occur within a medical group, though this remains the exception rather than the rule. This type of innovation is one way that plans are working to promote good medical care through on-going peer review among providers and creating a "medical home" for patients.

For instance, one plan has eliminated "gatekeepers" and created several competing sub-networks within which enrollees may choose their providers. Enrollees are offered a choice among the competing sub-networks. An October 8, 1997, New York Times editorial praised the plan for developing an "intriguing" option that capitalizes on the benefits of closed panels -- according to the Times, they have the potential to "create a bond between physicians and insurers that pays off in good patient care." In addition, the Times notes that the plan's approach allows it to "dispense with gatekeepers, cut out waste and set low premiums." The Times also points to the important benefit of information. The plan will have detailed information about treatment outcomes for each network, and this information can be used by enrollees in selecting their networks. In addition, Empire's approach would guarantee employees who are offered only one plan a choice of networks.

More broadly, studies published in peer-reviewed journals have reported that health plans provide equal or greater access to specialty services than indemnity coverage. For example, a study of HMO patients with rheumatoid arthritis found no significant differences in the number of office visits with rheumatologists, the number of outpatient surgeries, or the number of hospital admissions when compared to indemnity patients (Journal of the American Medical Association, 1996). In addition, an AAHP-commissioned study found that the percentage of admissions to teaching hospitals, where specialists are predominant, was comparable between health plans and indemnity plans. In fact, health plans had a slightly higher admission rate to major teaching hospitals (27%) than indemnity plans (22%) (MEDSTAT Group, 1997).

 

 

 

B. Assertions about Managed Care and Quality

Assertion: Quality problems are widespread.

- FACT: This assertion implies that managed care is responsible for widespread quality problems. In fact, quality of care provided to HMO enrollees is better than or equal to care provided in other settings.

Important quality problems exist throughout our nation's entire health care system. However, the above assertion erroneously implies that health plans are responsible for these problems. In fact, a review of the research shows that quality of care provided to HMO enrollees is better than or equal to care provided in other settings. In 1997, Robert H. Miller and Harold S. Luft, two eminent health services researchers, examined quality of care studies published between late 1993 and early 1997. The study found that most quality of care results in the 15 studies examined were favorable to HMOs or showed similar quality of care compared with fee-for-service. Similarly, their 1994 analysis, which examined studies issued between 1980 and 1994, showed that for 14 out of 17 indicators of quality of care, HMO care was better than or equal to care provided in other settings.

Much more work needs to be done to achieve uniformly high quality throughout our health care system, but "managed care bashing" will not achieve this goal. Health plans have built the structures, such as quality assessment and improvement programs, that can focus on evidence-based medicine and help produce better medical care for all Americans.

 

 

Assertion: Research on quality indicates that much more needs to be done to improve quality of care in the United States. There are large gaps between the care that people should receive and the care they do receive.

- FACT: The assertion implies that quality is suffering because of health plans. However, as an eminent health services researcher points out, "[m]anaged care is not the problem, quality is." (Brooks, JAMA, 1997)

Dr. Robert Brook argues that the propensity of some to focus on the way services are organized and reimbursed "ignores the quality problems that have always existed in fee-for-service care and the lack of systems to help physicians provide more evidence-based rational management of their patients." (JAMA, 1997)

 

 

 

C. Assertions about Managed Care Plan Practices

Assertion: Plans use gag rules, which prevent physicians from telling patients about uncovered services.

- FACT: A recent survey by the General Accounting Office (GAO) found no evidence that health plans use gag clauses.

Among the 1,150 physician contracts with 529 HMOs that GAO examined, none used contract clauses that specifically restricted physicians from discussing all appropriate medical options with their patients. Sixty-seven percent of contracts that have "business clauses," such as nondisparagement, nonsolicitation, or confidentiality clauses, contain specific "anti-gag" provisions, encouraging discussion of all appropriate medical options between physician and patient. The GAO survey concluded that these business clauses "are not likely to have a significant impact on physician practice." Notably, physician-owned plans had the same patterns of using business clauses as other plans (GAO, 1997).

 

 

Assertion: Plans use improper incentive arrangements, which reward physicians for failing to treat or refer patients appropriately, and put physicians at financial risk if they recommend necessary but costly care.

- FACT: Financial incentive arrangements between health plans and providers are beneficial to patients. Often, they are linked to quality of care and patient satisfaction, as well as utilization patterns. Increasingly, practitioners value risk sharing arrangements. A recent study found that California women in capitated Medicaid plans had better birth outcomes than their counterparts in traditional Medicaid. The Department of Health and Human Services--which uses extensive risk sharing for hospital payments in the traditional Medicare program--found no link between plan payment arrangements and quality of care.

Plan payment arrangements are designed to encourage appropriate, affordable, quality care. Payment amounts often take into consideration a variety of performance measures unrelated to the volume of services and resources used by the provider. A 1995 study of HMOs conducted for the government's Physicians Payment Review Commission reported that 66% of the plans surveyed considered quality measures in calculating payment amounts; 60% considered patient complaints and grievances; 55% considered consumer surveys; and 36% considered enrollee turnover rates. The study noted that a growing number of plans are also considering additional performance measures (e.g., scheduled office hours; participation in the plan's continuing medical education; peer review by colleagues; telephone access) in determining payment amounts. In addition, payment arrangements typically include measures, such as stop loss coverage and risk corridors, to protect providers from excessive financial risk and patients from undertreatment (New England Journal of Medicine, 1995).

Physicians increasingly recognize the advantages of plan payment arrangements. In its guide to physicians on capitation, the American Medical Association states, "[O]ne of the big advantages of capitation is that it restores your clinical autonomy because it increases your responsibility for patient care. When done right, capitation can provide as good or better quality care than fee-for-service because it puts clinical decision making back where it belongs -- with the physician." (AMA, 1995). During 1996 consideration of a ballot initiative in Oregon that would have drastically limited certain types of health plan payment arrangements, which many interpreted to prohibit capitation, the state medical society showed its support for health plan payment arrangements by joining forces with the Oregon state HMO association in successfully defeating this proposal.

The Department of Health and Human Services--which puts hospitals at financial risk through prospective payment in the traditional Medicare program--"failed to find a link between the quality of care provided under Medicare and Medicaid programs and the structure of physician incentive plans." (Federal Register, Dec. 14, 1992) A recent study of California's Medi-Cal program showed comparable care of pregnant women between the capitated payment group and the fee-for-service payment group. In fact, women in the capitated payment group had a lower likelihood than women in the fee-for-service payment group of giving birth to low birth weight babies (Health Services Research, 1998).

 

 

Assertion: Physicians and nurses are being prodded by threats and bribes to shun the sickest patients.

- FACT: Numerous studies show that HMOs and indemnity plans enroll similar proportions of members who are in poor health.

For instance, according to a 1998 Congressional Research Service (CRS) report: "One reason that the frequency of physician visits differs only slightly between people enrolled in HMOs and those with fee-for-service insurance is that average health status, as measured by the percentage of people who have chronic health problems differs very little between these two groups. In the 1994 Health Interview Survey, 37% of people enrolled in indemnity insurance plans and 37% of those in HMOs reported that they had a medical condition of any kind. Among those covered by indemnity plans, 30.7% reported one or more chronic medical conditions, versus 29.9% of those in HMOs." (CRS, March 1998)

Additionally, HMOs enroll a higher proportion than indemnity plans of individuals in low-income households, who generally are believed to be in poorer health than higher income individuals. A 1997 survey of 165,000 households by the National Research Corporation found that 40 percent of insured individuals under the age of 65 in families with annual incomes below $25,000 are enrolled in HMOs. Only 18.6 percent of individuals in such families were enrolled in fee-for-service plans.

 

 

Assertion: Plans use abusive practices such as contract clauses that allow a plan to discharge or exclude doctors from a network without stating any reason for their actions or providing a right of appeal.

- FACT: Termination at will clauses are standard practice in many professional services contracts. Moreover, termination at will provisions typically work in both directions--both the plan and the physician have the opportunity to terminate at will. A survey by the Georgia Association of HMOs found that more physicians leave health plan networks voluntarily than are terminated by plans.

 

According to the American Medical Association, only 6% of physicians are involuntarily terminated by health plans (AMA, 1997). A recent survey by the Georgia Association of HMOs found that 0.98 percent of physicians were terminated by health plans in the state. A greater percentage of physicians--1.5%--voluntarily left a health plan network (Georgia Association of HMOs, 1997).

Creating statutory employment rights for physicians would extend labor rights not available to any other class of American worker to the highest paid class of professionals in the country.

Physician participation with managed care plans has been increasing rapidly. According to the American Medical Association's Socioeconomic Characteristics of Medical Practice, in 1990, only 36% of physicians contracted with HMOs and only 49% contracted with PPOs. By 1996, 72% of physicians contracted with HMOs and 75% contracted with PPOs (AMA, 1997).

 

 

Assertion: Physicians and nurses risk being fired for giving, or even discussing, expensive services .

- FACT: The General Accounting Office found no evidence that health plans use gag clauses. Moreover, only a small percentage of physicians are terminated by health plans, and the percentage of physicians participating in PPOs and HMOs has expanded rapidly (GAO, 1997).

As discussed above, the GAO did not find any gag clauses in the contracts it examined, and few physicians are involuntarily terminated by health plans.

Additionally, physician participation with managed care plans has been increasing rapidly. According to the AMA's Socioeconomic Characteristics of Medical Practice, in 1990, only 36% of physicians contracted with HMOs and only 49% contracted with PPOs. By 1996, 72% of physicians contracted with HMOs and 75% contracted with PPOs (AMA, 1997).

These facts, coupled with the previously mentioned facts regarding health plans' referral patterns to specialists and teaching hospitals, refute the claim that providers risk being fired for giving or discussing expensive services.

 

 

Assertion: Utilization review personnel routinely overrule doctor's decision on necessary treatment. Physicians are forced to spend a tremendous amount of time and energy justifying treatment decisions to clerks in distant offices.

- FACT: A recent study of over 2,000 physicians caring for patients in plans that utilize managed care techniques found that the final coverage denial rate for physician recommendations within eight categories of care was at most 3%, and much less for most categories of care. The majority of physicians reported no coverage denials whatsoever for any form of care surveyed. Moreover, physicians are spending more time with patients than they did a few years ago and spend just 3 percent of their time on insurance paperwork. According to a 1997 survey of physicians, managed care doesn't increase the paperwork burden.

Coverage for hospitalization was denied only 1% of the time, surgical procedures 1.2%, and specialist referrals 2.6%. Initial denial rates were somewhat higher, but between one-half and two-thirds of initial denials were reversed by the health plan, resulting in the lower ultimate denial rates (Inquiry, Fall 1997).

According to calculations based on data reported in the AMA's Socioeconomic Characteristics of Medical Practice 1997, physicians spent more time on direct patient care activities per patient visit in 1996 (26.9 minutes) than in 1985 (24.3 minutes). This time encompasses patient visits in all settings. At the same time, physicians spend very little time on insurance paperwork. According to a 1997 physician survey by Medical Economics, "physicians in all fields of practice combined devote just 3 percent of their average workweek to insurance paperwork....Managed care doesn't seem to increase the paperwork burden. The 3 percent average remains constant whether a doctor has 1 percent or 99 percent of his patients in HMOs or PPOs."

 

 

Assertion: Plans attempt to reduce costs and increase profits by such indefensible policies as arbitrary limits on the length of a hospital stay.

- FACT: Length of stay patterns for health plan enrollees and indemnity plan enrollees are similar.

In general, effective and appropriate care often means less time in the hospital than was thought necessary several years ago. This is true for both indemnity and health plan coverage. For example, an AAHP analysis of Medicare data shows that the average length of stay for all diagnoses among traditional Medicare patients declined by 21% between 1990 and 1995 (AAHP, 1997).

Moreover, length of stay for health plan enrollees is consistent with the recommendations of physicians. An AAHP analysis of data prepared by The MEDSTAT Group found that 95% of both HMO and indemnity hospital admissions had a length of stay that fell within the length-of-stay range or exceeded the high end of the range recommended by surgeons surveyed by the American College of Surgeons (ACS) regarding ACS-identified procedures. The other 5% of admissions fell below the recommended length of stay range for both HMO and indemnity enrollees (AAHP, 1997).

In addition, health plans often use practice guidelines to promote higher quality of care, but these guidelines do not dictate treatment. A recent AAHP comparison of actual lengths of stay in health plans with the Milliman and Robertson (M&R) Optimal Recovery Guidelines shows that 62% of all HMO admissions (compared to 67% of indemnity admissions) for selected DRGs had a length of stay that was longer than recommended in the guidelines (AAHP, 1997).

 

 

Assertion: Plans have attempted to reduce costs and increase profits by such indefensible policies as requiring that mastectomies be done on an outpatient basis.

- FACT: Outpatient mastectomy is not a health plan issue. The largest number of outpatient mastectomies are performed on women in traditional Medicare, not managed care. Creating concerns about a procedure that is receiving growing recognition by physicians and patients is a disservice to women, since doing so discourages them from considering an alternative that can reduce infections, accelerate recovery, and offer familial support. The procedure has been developed by physicians working at world-renowned medical institutions, such as The Johns Hopkins Hospital, to improve medical care. It was not developed by managed care plans.

The New York Department of Health reports that of the 124 outpatient mastectomies performed in New York in 1995, 72 (58%) were performed on women in traditional Medicare. Two outpatient mastectomies (1.6%) were performed on women in Medicare HMOs. Fifteen outpatient mastectomies (13%) were in HMOs serving the commercial portion of the market.

Data from the Maryland Health Services Cost Review Commission shows that of the approximately 540 outpatient mastectomies performed in Maryland in 1996, 201 were performed on women in traditional Medicare and 0 were performed on women in Medicare HMOs.

An AAHP-commissioned study of 1993 and 1994 commercial market data by The MEDSTAT Group found that, overall, there was not a statistically significant difference in outpatient mastectomy rates among HMO, PPO/POS, and indemnity plans (MEDSTAT Group, 1996).

The Johns Hopkins Breast Center, which has gradually eliminated inpatient stays for some women undergoing certain types of mastectomies, has found that outpatient mastectomies are associated with lower infection rates and high levels of satisfaction among women (Washington Post, Nov. 19, 1997). Johns Hopkins' use of outpatient mastectomies was developed totally independent of managed care and reflects a growing recognition among physicians and patients that outpatient mastectomies can be appropriate in certain cases. In testimony before the Senate Finance Committee last year, a nurse at the Johns Hopkins Breast Center, who also was a patient of the Center, testified that legislation mandating that health plans cover a minimum length of stay for mastectomies "would discourage health care providers from developing improvements in surgical management that women deserve." (Testimony of Lillie Shockney, Senate Finance Committee, Nov. 5, 1997)

 

 

 

D. Assertions about How Health Plans Are Regulated

Assertion: Health insurance plans are largely unregulated. The Employee Retirement Income Security Act (ERISA) preempts most state regulation of employer-sponsored insurance.

- FACT: Health plans are regulated at both the state and federal level. This regulatory framework is supplemented by private accreditation standards as well as private purchaser requirements. Nearly all employees enrolled in an HMO are enrolled in fully insured, state regulated HMOs. Additionally, state laws governing utilization review are not preempted by ERISA.

In areas such as quality, utilization review, and access, for example, many states require that HMOs and PPOs monitor the quality of care delivered by plan providers, make all covered services available, have a sufficient number of providers in the network who are accessible, provide information to members on plan policies, and have appeals and grievance procedures in place. Specific regulation of HMOs and PPOs varies by state (AAHP, Feb. 1998).

State regulatory requirements for HMOs and PPOs are supplemented by (1) extensive federal program requirements for plans participating in Medicare, Medicaid, and the Federal Employees Health Benefits Program, (2) the Federal HMO Act, for federally qualified HMOs, and (3) the Health Insurance Portability and Accountability Act, among other laws (AAHP, Feb. 1998).

Employers contracting with HMOs are nearly always contracting on a fully insured, state-regulated basis. In instances when an employer is self-funding the plan, the plan's practices typically conform to those required by state regulation. Many PPOs and point-of-service plans are state regulated, and state laws governing utilization review are not preempted by ERISA, regardless of whether a plan is fully-insured or self-funded (AAHP, Feb. 1998).

Many HMOs are voluntarily accredited by the nationally recognized National Committee for Quality Assurance (NCQA), Joint Commission on Accreditation of Healthcare Organizations (JCAHO), or American Accreditation HealthCare Commission (AAHCC/URAC). PPOs are voluntarily accredited by AAHCC/URAC and JCAHO (AAHP, Feb.1998).

The enclosed chart, "Summary of Health Plan Regulation," provides a summary description of how health plans, including employer-sponsored plans, are regulated.

 

 

Assertion: Under ERISA, patients have no effective recourse if a plan fails to cover needed care.

 

-FACT: As discussed above in Part C, physicians report that between one percent and three percent of their care recommendations are not covered by plans, depending on the category of care. Most physicians reported that all of their care recommendations within the eight specified care categories were covered. Initial coverage denial rates were somewhat higher, but the initial decision was reversed by the plan between half and two-thirds of the time--indicating that consumers do have effective recourse when they disagree with a plan determination (Inquiry, Fall 1997). In addition, current federal and state law provides recourse to consumers.

For the few coverage denials that do exist, ERISA requires plans to have procedures to provide a "full and fair review" of disputed claims. If the result of the plan's internal claims appeal process is not satisfactory, ERISA provides plan participants with a right to judicial review in either federal or state court, and the court may award attorney's fees, court costs, the value of the benefit denied, and/or injunctive relief where appropriate. Moreover, plan fiduciaries who are found to have improperly denied claims in violation of ERISA's stringent fiduciary rules can be held personally liable and barred from administering health plans. Many state and federal government programs operate under similar rules.

Furthermore, numerous employer-sponsored plans are subject to state law grievance and appeals requirements and, increasingly, to state external review requirements. Even in the instances when the employer is self-funding the plan, the plan's practices typically conform to those required by state regulation.

 

 

 

E. Assertions about Public Opinion

Assertion: Forty-two percent of health plan enrollees in California report problems with their health plans. The worst problems were reported by those who need good care the most.

- FACT: The 42 percent figure is accurate, but it typically is not offered with the context needed to accurately interpret that result and avoid misleading claims. Alain Enthoven, Chairman of the California Task Force for which the survey was conducted and a participant in the survey's design, has written that the survey "is particularly susceptible to misinterpretation (and has been unfairly represented) by those who wish to attack managed care, and by the media who wish to create sensational headlines." Additionally, according to Dr. Enthoven, findings from this and a similar survey "refute the notion that HMOs satisfy the healthy and dissatisfy the sick. Apparently, the sick are more satisfied than the general insured population." (California Managed Health Care Improvement Task Force, 1998)

In a January 6, 1998 letter to Governor Wilson and leaders of the California Assembly and Senate, Dr. Enthoven pointed out key facts that contradict the disparaging conclusions others have drawn, including the following:

First, the survey reported high satisfaction rates for managed care plan members who both had serious chronic conditions and were hospitalized in the past year. According to Dr. Enthoven, "This and similar data from CalPERS refute the notion that HMOs satisfy the healthy and dissatisfy the sick. Apparently, the sick are more satisfied than the general insured population."

Second, the survey was designed to encourage respondents to think of a problem. "Many of the respondents might not have had a problem on their minds until encouraged to think of one. They were not asked, "did you have a good experience?"

Third, according to Dr. Enthoven, "Of the 33% who reported they were 'very satisfied' with their health plan, a full 24 % said they had a problem last year; of the 43% who said they were 'satisfied,' 40% said they had a problem, so the 'problems' could not all be too serious. Only 8% of Californians both had problems and were dissatisfied."

Fourth, "the survey did not assess the merits of the complaints." Independent medical experts might reach a different judgment about, for example, the complaint of 10% of respondents that they had difficulty with referrals to specialists.

Fifth, "The survey mixes medical problems and insurance problems, and who to blame, if anyone, is not clear."

 

Assertion: There is a crisis of confidence in health care.

- FACT: Clearly, many Americans are expressing concerns about the health care system. Health plans recognize these concerns, take them seriously, and are working to address them. Nonetheless, commentators often exaggerate the level of public concern. For instance, newly-published findings from Rounds 1 and 2 of the federal government's Medical Expenditure Panel Survey show that, of individuals with employer-sponsored coverage by an HMO or other managed care plan with a "gatekeeper," 81.5% are very satisfied and 15.1% are somewhat satisfied that their family can get care when it is needed. The results were nearly the same both for all individuals with public or private insurance and for individuals in a managed care plan without a "gatekeeper" or a non-managed care plan (EBRI, April 1998).

Additionally, repeated inaccuracies and misrepresentations about health plans can diminish consumer confidence in their health care--which is one vital reason that responsible policymakers should stick to the facts when debating the issues.

Time and again, the evidence does not support the claims about health plan practices, and the facts about quality of care in health plan settings are rarely considered or even offered. For example, despite definitive evidence from a GAO report concluding that health plans do not use so-called "gag" clauses, opponents of managed care continue to proclaim the need for legislation banning "gag" clauses.

Similarly, while extensive evidence shows that the vast majority of outpatient mastectomies are performed on women with traditional Medicare coverage, opponents of managed care continue to frame this as a health plan issue in need of a legislative solution.

Moreover, it is important to remember that the failed indemnity insurance system some proposals would return us to did not inspire confidence. For instance, the articles in a five part series that appeared in the New York Times during January 1976 included the following headlines: "Unfit Doctors Create Worry in Profession;" "Incompetent Surgery is Found Not Isolated;" "Thousands a Year Killed by Faulty Prescriptions;" and "Few Doctors Ever Report Colleagues' Incompetence." According to a recent report by Michael Millenson of the benefits consulting firm William M. Mercer and commissioned by AAHP, "[t]he abuses of fee-for-service doctors and hospitals led directly to what one could call the 'fee-for-service' backlash. It is a phenomenon that defenders of the old system seem to have forgotten." (Millenson, Oct. 1997)

The often proclaimed "crisis of confidence" does not affect consumers' satisfaction with their health plans. A 1997 study of about 167,000 households showed that individuals enrolled in HMOs, PPOs, and FFS report similar satisfaction levels regardless of their health status or age (National Research Corporation, 1997). Similarly, Consumer Reports readers were, on average, "fairly well satisfied" to "very satisfied" with their experience in 37 HMOs. A 1996 national survey of 90,000 consumers found that HMO, POS, and PPO members in poor-to-fair health were more satisfied with their health care than those in FFS (Sachs Group, 1996).

Finally, overall enrollment and disenrollment rates do not suggest that health plan members are dissatisfied. For instance, six million Medicare beneficiaries have voluntarily chosen Medicare managed care plans, and that number is growing by about 100,000 beneficiaries a month. Only 2% of Medicare risk plan enrollees voluntarily disenrolled to return to traditional Medicare in a given year (Health Affairs, March/April 1997).

Likewise, while state government employees often have very broad choice among different types of health plans and very generous premium subsidies if they choose to remain in traditional indemnity plans, the percentage of state employees picking managed care plans has increased year after year (AAHP, 1997).

 

 

Assertion: Ninety percent say a Patient Protection Act to regulate health insurance plans is needed.

- FACT: There is a major gap between what people say they support when given no context, and what they say would support when asked about real world tradeoffs. For example, support for federal regulation of health plans drops dramatically when consumers consider the potential impact on the cost of health insurance and access to health insurance coverage.

The Kaiser Family Foundation reported that support for a consumer bill of rights plummets from 72% to 43% when consumers consider the potential for an increase in health insurance premiums of $1-5 per month. A potential increase of $15-20 per month causes support to drop further to just 28%. Similarly, support for a consumer bill of rights drops from 72% to just 20% when consumers consider the possibility that just a small number of employers would drop health care coverage for their workers (Kaiser Family Foundation, 1998).

 

Assertion: Seventy-four percent of consumers believe that insurance plans often compromise the quality of care to save money.

- FACT: According to the opinion poll reporting this result, virtually the same proportion of consumers (1) are satisfied with the quality of their health care and (2) believe that hospitals cut corners to save money (Journal of Health Care Finance, 1997).

As mentioned above, numerous studies of consumer satisfaction and disenrollment rates show health plan enrollees to be satisfied with their health plans. The seemingly contradictory results attest to the power of repeated attempts by opponents of health plans to promote inaccuracies and misrepresentations about health plans. It is not surprising, therefore, that this persistent, yet unsupported, criticism of health plans has misled and confused consumers who are otherwise satisfied with the quality of their health care.

In addition, the survey also reported that 80% of consumers believe hospitals cut corners to save money and that 79% believe that quality health care is almost unaffordable for the average person.

 

 

 

F. Miscellaneous Assertions

Assertion: Even patients whose personal doctor participates in their plan could find themselves without access to that physician if the plan drops that doctor or their employer switches health plans.

- FACT: First, a majority of Americans in network-based plans are in plans that also cover non-network providers, easing transitions for those who wish to continue being treated by a provider who has left a plan. And 92% of workers are offered a plan that covers non-network providers, easing transitions when an employer changes plans. Second, some transitions of care are inevitable; e.g., physicians often voluntarily leave plan networks. Because transitions are inevitable, plans are working on new ways to make transition arrangements with enrollees who are required to move from one health plan to another.

Health plans understand the importance of a smooth transition between health care providers for patients with chronic or protracted illnesses. For example, the Colorado HMO Association and the Colorado Medical Society have jointly developed and agreed to a protocol for the transition of care for patients with special needs to facilitate the transfer of care. This protocol recognizes that practitioners as well as health plans have responsibilities for a smooth transition of care (Colorado HMO Association, Dec. 1996). It also is important to recognize that physicians may voluntarily leave health plans for their own business or personal reasons--a recent survey by the Georgia Association of HMOs found that the percentage of physicians choosing to leave a health plan (1.5%) was greater than the percentage who were involuntarily terminated by the plan (0.98%).

 

 

Assertion: Only a small number of managed care plans are accredited by independent quality review organizations.

- FACT: As of March 31, 1998, 42% of HMOs had received accreditation from the National Committee for Quality Assurance (NCQA, 1998). HMOs surveyed by NCQA include 75% of all HMO enrollees. Accreditation is also beginning to be extended to other types of health plans, such as PPOs. Additionally, JCAHO also has begun to accredit HMOs, and PPOs are beginning to be accredited by AAHCC/URAC and JCAHO.

Major Sources

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AAHP, The Regulation of Health Plans: A Report from the American Association of Health Plans, Washington, DC, Feb. 3, 1998.

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Angus, D., et al., "The Effect of Managed Care on ICU Length of Stay: Implications for Medicare," Journal of the American Medical Association, Oct. 2, 1996.

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Sachs Group, Sachs/Scarborough HealthPlus 1996 Survey, 1997.

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Vernon, Sally, et al., "Quality of Care for Colorectal Cancer in a Fee-for-Service and Health Maintenance Organization Practice," Cancer, May 15, 1992.

Yelin, E., "Health Care Utilization and Outcomes Among Persons with Rheumatoid Arthritis in Fee-for-Service and Prepaid Group Practice Settings," Journal of the American Medical Association, Oct. 2, 1996.

 

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