Printer-Friendly Format The Managed Care Debate: Correcting the Errors
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
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
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
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
Chart: Summary of Health Plan Regulation
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.
˜ 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,
- 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
- 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
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
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
- 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
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
- 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
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
- 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,
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
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,
C. Assertions about Managed Care Plan
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
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
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,
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
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,
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
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,
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
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
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
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,
D. Assertions about How Health Plans Are
Assertion: Health insurance plans are largely
unregulated. The Employee Retirement Income Security Act (ERISA)
preempts most state regulation of employer-sponsored
- 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.
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.
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,
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
- 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
- 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
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
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
- 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
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
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
- 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.
AAHP, "An Analysis of Inpatient Hospital Length of
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© 1998 by the American Association of Health Plans,
Inc. All rights reserved.
Reproduction of this publication in any form is
forbidden without express permission of the American Association of
Health Plans (AAHP). The information shall not, in whole or part, be
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AAHP. May not be cited without attribution to AAHP. Contract (202)
778-3200 for further information.