Good day, I would love to get assistance with my assignment.

Good day, I would love to get assistance with my assignment.
QUIZ 1 HSA 312 – 01 MANAGED CARE AND HEALTH INSURANCE – THE BEGINNING THROUGH THE MANAGED CARE BACKLASH OF THE LATE 1990s MANAGED HEALTH CARE SPRING 2020 L. EITEL       NOTE: THESE QUESTIONS ADDRESS KEY POINTS ABOUT U.S. HEALTH INSURANCE FROM 1929-2000. THIS COVERS MATERIAL THROUGH MID-MARCH 2020. FROM THE BIRTH OF EMPLOYER-BASED GROUP HEALTH INSURANCE; TO THE FULL DEVELOPMENT OF THAT INSURANCE IN INDEMNITY AND SERVICE PLANS; TO THE CRISIS OF HEALTH CARE EXPENDITURES IN THE 1970’S AND 1980’S; TO THE TRANSITION TO MANAGED CARE; AND THE MANAGED CARE BACKLASH OF THE LATE 1990s. ********** QUESTION 1: DIFFERENT APPROACHES TO HEALTH INSURANCE FOR PERSONAL HEALTH CARE SERVICES: INDEMNITY AND SERVICE HEALTH INSURANCE PLANS: USING ATTACHED READING 1, ANSWER THE FOLLOWING: PART 1: Did the Indemnity and Service plans which dominated the U.S. private group health insurance market from the 1930’s through the 1980’s focus on Financial Risk Management of health insurance benefits (making sure health plan expenditures did not exceed health plan revenues from premiums), or on broader Medical Risk Management of the health status of health plan enrollees? PART 2: Briefly describe 2 ways in which these plans made sure that health plan enrollees would have to pay for some health services out-of-pocket: In other words, give 2 examples of enrollee Cost Sharing, and briefly define them. PART 3: As a rule, prior to the 1970s, did Indemnity and Service health insurance plans actively attempt to manage physician and hospital decisions about the length of hospital stays, or the location and choice of medical treatments for patients? What was their overall attitude toward third-party interference in the decisions made by physicians and patients? USING READING 1.C., PAGES 1-3, ATTACHED, ANSWER THE FOLLOWING: What was the major reason the Federal government, and eventually employers, Blue Cross/Blue Shield plans, and commercial insurance companies sought to move private group health insurance from an Indemnity/Service Plan Model to a Managed Care Model between 1975 and 1996? USING READING 2., PAGE 6., ATTACHED, ANSWER THE FOLLOWING: Indicate the three (3) main ways in which the HMO Act of 1973 made it possible for Managed Health Insurance plans to spread beyond their regional strong holds on the East and West coasts. USING READING 1.C., ATTACHED, ANSWER THE FOLLOWING: Between 1988 and 1996, which forms of health insurance became prevalent: Indemnity and Service Health Insurance Plans OR Managed Health Insurance Plans? QUESTION 2: WHAT IS MANAGED CARE? USING READING 2.A., ATTACHED, ANSWER THE FOLLOWING: PART A.: What is one (1) of the main definitions of Managed Care? Describe briefly. PART B.: How do Managed Health Insurance plans define the scope of their Risk Management responsibilities differently from Indemnity and Service plans? QUESTION 3: MANAGED HEALTH INSURANCE PLANS: COMPARING HEALTH MAINTENANCE ORGANIZATIONS (HMOs) AND PREFERRED PROVIDER ORGANIZATIONS (PPOs): NOTE: In the 1990s, and even today, HMO health insurance plans are considered more restrictive than Preferred Provider Organizations. USING ATTACHED READINGS 2 (PAGES 8 – 10), READING 3, AND READING 4: PART A: Describe briefly 2 of the main ways in which HMOs manage and direct the medical care delivered to enrolled plan members. PART B: Describe briefly 2 ways in which PPOs differ from HMOs. QUESTION 4: MANAGED CARE IN THE 1990s AND THE MANAGED CARE BACKLASH. USING READING 2 (PAGES 9 – 10), READING 2.B., AND READING 5., ANSWER THE FOLLOWING: PART A: Briefly describe two (2) of the restrictive techniques used by some of the most restrictive Managed Care Health Plans of the 1990s to influence and/or control provider and patient choices about the type and source of medical treatment. PART B: Briefly describe two (2) positive accomplishments of Managed Health Insurance Plans in the 1990s. PART C: Briefly describe ONE Provider complaint that formed the basis of the Managed Care Backlash. PART D: Briefly describe ONE Health Plan Member complaint that formed the basis of the Managed Care Backlash. QUESTION 5: WHAT IS SPECIAL ABOUT THE NATURE OF AND THE DEMAND FOR PERSONAL HEALTH CARE GOODS AND SERVICES – WHY CAN WE NOT JUST PAY FOR THEM AS INDIVIDUALS, BUT NEED GROUP HEALTH INSURANCE TO ENABLE US TO PAY FOR THOSE SERVICES WHEN WE NEED THEM? USING READING 6, ANSWER THE FOLLOWING: Give and briefly explain two (2) reasons why Personal Health Care Services are different as indicated above. QUESTION 6: LARGE GROUPS AS THE PROPER BASIS FOR FINANCIALLY STABLE HEALTH INSURANCE PLANS. USING READING 6, ANSWER THE FOLLOWING: Why can it be argued that large groups are the only acceptable basis for sustainable group health insurance plans? This is clearly the case for both employer-based group health insurance and public health insurance programs like Medicare and Medicaid.
Good day, I would love to get assistance with my assignment.
HSA 312 XT81/H01/01 MANAGED HEALTH CARE SPRING 2020 L. EITEL READING 1.C. THE CRISIS OF THE PREVAILING EMPLOYER-BASED INDEMNITY/SERVICE PLAN, THE MASSIVE SHIFT TO MANAGED HEALTH CARE PLANS 1988-1996, AND THE MANAGED CARE BACKLASH          HEALTH INSURANCE IN THE UNITED STATES: CRISIS AND TRANSITION – LATE 1960s THROUGH EARLY 1990s CHALLENGES TO THE SUSTAINABILITY OF THE EMPLOYER-BASED GROUP HEALTH INSURANCE MODEL FROM THE 1960’S THROUGH THE EARLY 1970S. The influx of Medicare and Medicaid recipients making demands on the U.S. Health Care services system beginning in the late 1960s interacted in a variety of complicated ways with other changes going on in that system to produce substantive and unprecedented increases in the portion of Gross Domestic Product allocated to health care services, and in sustained year-to-year increases in National Health Expenditures. These substantive increases in price and expenditure started to threaten the stability of the prevailing system of Indemnity and Service health insurance plans – would premiums become unaffordable for workers and their employers? How would that impact on the accessibility and affordability of health insurance for a large percentage of the American population? For Details: See Reading 3 in the Required Readings for February 18, 20, and 24. Managed Care and HMOs began to be seen by some politicians, policy makers, academicians, and advocates of the primacy of Primary Care as a quality-oriented answer to the prevailing health insurance system’s inability to address massive, sustained price and expenditure increases. President Nixon and Congress in 1973 approved the HMO Act of 1973, which played a major role in the 1970s and 1980s in starting the spread of Managed Care Health plans beyond their East and West Coast strongholds and breaking down local resistance to the previously marginalized Managed Care health insurance plans. II. THE MASS MOVEMENT OF AMERICANS WITH EMPLOYER-BASED GROUP HEALTH INSURANCE FROM INDEMNITY AND SERVICE PLANS TO MANAGED CARE HEALTH PLANS 1988 – 1996. Throughout the late 1970s through the 1980s, Blue Cross and Blue Shield health insurers, and large commercial health insurers, tried to maintain and save the Indemnity and Service plans in which the vast majority of Americans with employer-based insurance were enrolled. (As late as 1988 73% of American workers and their families who were covered by employer-based private group health insurance were enrolled in those Indemnity and Service plans.) Indemnity and Service Plans had originally been thoroughly opposed to the idea and practice of Managed Care (as exemplified in the Kaiser-Permanente Model). These plans followed the principles of non-interference in the practice of medicine, unrestricted consumer choice of a health care service provider, and non-interference in the decisions of patients and physicians about the preferred place of and treatment for a given medical condition. In part inspired by Federal government experiments in Utilization Review and Management, these plans started to adopt some aspects of Managed Health Plan/HMO practice in order to constrain annual expenditure increases for Personal Health Care Services. They adopted Large Case Management programs, Utilization Review programs, and used other medical management tools traditionally uses by Managed Health Insurance plans, and thus started to do just what physicians and hospitals had feared prior to 1930 – they started to involve themselves in decisions of length of treatment, type of treatment, appropriateness of treatment, and place of treatment for some health insurance plan members. These changes in health insurance plan management and philosophy did not have a significant impact on health expenditures, and were not likely to keep premiums and out-of-pocket expenditures from increasing substantially. These changes did not significantly impact rapidly rising prices of health care goods and services, nor did they affect the significant year-to-year increases in national health expenditures and health insurance premiums. Faced with the likelihood of severely disappointing employers and employees by substantially increasing premiums and out-of-pocket expenditures, and reducing benefits covered by the Indemnity and Service Plans, the major insurers faced a collapse in the health insurance system which had prevailed since the 1930’s, with a resulting threat to the welfare of employees and the viability of the private group health insurance industry. Blue Cross and Blue Shield health insurance plans, all the plans managed by commercial insurers, and the newer insurance companies which focused more heavily on providing Managed Health Insurance Plans, worked with employers to transition most Americans with employer-based health insurance to Managed Health Insurance Plans between 1988 and 1996. It was believed that only Managed Health Insurance Plans would allow those companies to continue offering generous packages of health insurance benefits, and would enable them to control the growth in personal health care expenditures, prices, and the volume of services produced. The price of maintaining the private group health insurance industry’s viability would be the wholesale movement of employer-based group health insurance enrollees to Managed Health Insurance Plans. Between 1988 and 1996 the relative significance of Indemnity/Service Plans and Managed Care Plans in the lives of American employees and their families was reversed. By 1996 73% of American workers with employer-based group health insurance were enrolled in those Managed Health Insurance Plans. By 2000 92% of those workers and their families were in Managed Health Insurance Plans – HMOs, Point of Service Plans, and Preferred Provider Organizations. This massive change in the type of health insurance most Americans relied upon to ensure their access to affordable health care services was dramatic and for many Americans a shock. Previously, access to acute care services, diagnostic services, specialty services including consultations, and the full array of personal health care services involved minimal interference from the health insurance plans. Now most Americans would face limits on that access, especially in the form of having to access most services with approval either from an assigned Primary Care Practitioner, or from medical management personnel associated with the respective insurance plans. IV. THE PHILOSOPHY OF MANAGED CARE – A FOCUS ON CONTINUOUS, COMPREHENSIVE, COORDINATED HEALTH CARE FOR INSURANCE PLAN ENROLLEES: READINGS 4.A., 4.B., 4.C. – REQUIRED READINGS AND CRITICAL STUDY QUESTIONS FOR FEBRUARY 18, 20, 24. Kaiser Permanente’s philosophy of Managed Care, which focuses on the primacy of Primary Care and the necessity for highly coordinated efforts by insurers and providers, was a major inspiration for the types of Managed Health Insurance Plans implemented throughout the 1990s. Essential to the Kaiser Permanente philosophy was the belief in the primacy of Primary Care within the system by which personal health care services were delivered in the United states. This belief, championed from the 1960’s and thereafter by policy makers such as Barbara Starfield, asserted that reasonably priced quality health care could only be delivered on a routine basis if patients worked closely and routinely with assigned Primary Care Physicians (individuals and/or teams). At the heart of this belief in the centrality and primacy of Primary Care was a belief that Primary Care Practitioners were best equipped to ensure that patients and their families received Continuous, Comprehensive, and Coordinated patient care. V. THE PRINCIPAL TYPES OF MANAGED CARE PLANS IMPLEMENTED IN THE 1990s – HEALTH MAINTENANCE ORGANIZATIONS (HMOs), POINT OF SERVICE PLANS (POS), AND PREFERRED PROVIDER ORGANIZATIONS (PPO). By the late 1980s the primary kinds of Managed Care Health Plans had been developed, and were offered to employers and employees throughout the period of the great health insurance plan transitions between 1988 and 1996. HMOs, Point of Service Plans, and PPOs varied in the extent to which the particular type of insurance plan regulated key aspects of the process by which enrollees, advised by doctors, accessed personal health care services covered by those plans. Key areas in which Managed Care Plans differed in the intensity and extent of their control of medical management, and physician and plan enrollee choice, included the following: Managing limited networks of individual and institutional providers, and requiring that plan enrollees only used those provider networks to access care. Requiring plan enrollees and their families to access most personal health care services with the approval of a “gatekeeper” or Primary Care Practitioner (individual or team.) Aggressively negotiating payment rates for provider services, often using capitation for Primary Care Practitioners, and negotiating lower payment rates for Specialty Care Practitioners. Requiring PCPs to take on extensive risk. Implementing extensive Utilization Management, Case Management, and Disease Management programs. Subjecting critical decisions on selected hospital admissions, access to diagnostic imaging, and access to specialty physician consultations to approval not only from PCPs, but from medical management staff within the plan. HMOs and POS plans were most controlling forms of Managed Health Insurance, and PPOs were much less so. In the 1990s HMOs and POS plans had the highest levels of enrollment, unlike the post Managed Care Backlash experience in the post- 2000 era when PPOs predominated (and continue to do so). Understanding the various types of Managed Care Health Insurance Plans, their relative levels of enrollment, and the different ways they impacted on providers, employers, and plan enrollees in the 1990s is key to understanding the successes and failures of these plans in the 1990s, and understanding the Managed Care Backlash. 6
Good day, I would love to get assistance with my assignment.
HSA 312 XT81/H01/01 MANAGED HEALTH CARE SPRING 2020 L. EITEL READING 1.C. THE CRISIS OF THE PREVAILING EMPLOYER-BASED INDEMNITY/SERVICE PLAN, THE MASSIVE SHIFT TO MANAGED HEALTH CARE PLANS 1988-1996, AND THE MANAGED CARE BACKLASH          HEALTH INSURANCE IN THE UNITED STATES: CRISIS AND TRANSITION – LATE 1960s THROUGH EARLY 1990s CHALLENGES TO THE SUSTAINABILITY OF THE EMPLOYER-BASED GROUP HEALTH INSURANCE MODEL FROM THE 1960’S THROUGH THE EARLY 1970S. The influx of Medicare and Medicaid recipients making demands on the U.S. Health Care services system beginning in the late 1960s interacted in a variety of complicated ways with other changes going on in that system to produce substantive and unprecedented increases in the portion of Gross Domestic Product allocated to health care services, and in sustained year-to-year increases in National Health Expenditures. These substantive increases in price and expenditure started to threaten the stability of the prevailing system of Indemnity and Service health insurance plans – would premiums become unaffordable for workers and their employers? How would that impact on the accessibility and affordability of health insurance for a large percentage of the American population? For Details: See Reading 3 in the Required Readings for February 18, 20, and 24. Managed Care and HMOs began to be seen by some politicians, policy makers, academicians, and advocates of the primacy of Primary Care as a quality-oriented answer to the prevailing health insurance system’s inability to address massive, sustained price and expenditure increases. President Nixon and Congress in 1973 approved the HMO Act of 1973, which played a major role in the 1970s and 1980s in starting the spread of Managed Care Health plans beyond their East and West Coast strongholds and breaking down local resistance to the previously marginalized Managed Care health insurance plans. II. THE MASS MOVEMENT OF AMERICANS WITH EMPLOYER-BASED GROUP HEALTH INSURANCE FROM INDEMNITY AND SERVICE PLANS TO MANAGED CARE HEALTH PLANS 1988 – 1996. Throughout the late 1970s through the 1980s, Blue Cross and Blue Shield health insurers, and large commercial health insurers, tried to maintain and save the Indemnity and Service plans in which the vast majority of Americans with employer-based insurance were enrolled. (As late as 1988 73% of American workers and their families who were covered by employer-based private group health insurance were enrolled in those Indemnity and Service plans.) Indemnity and Service Plans had originally been thoroughly opposed to the idea and practice of Managed Care (as exemplified in the Kaiser-Permanente Model). These plans followed the principles of non-interference in the practice of medicine, unrestricted consumer choice of a health care service provider, and non-interference in the decisions of patients and physicians about the preferred place of and treatment for a given medical condition. In part inspired by Federal government experiments in Utilization Review and Management, these plans started to adopt some aspects of Managed Health Plan/HMO practice in order to constrain annual expenditure increases for Personal Health Care Services. They adopted Large Case Management programs, Utilization Review programs, and used other medical management tools traditionally uses by Managed Health Insurance plans, and thus started to do just what physicians and hospitals had feared prior to 1930 – they started to involve themselves in decisions of length of treatment, type of treatment, appropriateness of treatment, and place of treatment for some health insurance plan members. These changes in health insurance plan management and philosophy did not have a significant impact on health expenditures, and were not likely to keep premiums and out-of-pocket expenditures from increasing substantially. These changes did not significantly impact rapidly rising prices of health care goods and services, nor did they affect the significant year-to-year increases in national health expenditures and health insurance premiums. Faced with the likelihood of severely disappointing employers and employees by substantially increasing premiums and out-of-pocket expenditures, and reducing benefits covered by the Indemnity and Service Plans, the major insurers faced a collapse in the health insurance system which had prevailed since the 1930’s, with a resulting threat to the welfare of employees and the viability of the private group health insurance industry. Blue Cross and Blue Shield health insurance plans, all the plans managed by commercial insurers, and the newer insurance companies which focused more heavily on providing Managed Health Insurance Plans, worked with employers to transition most Americans with employer-based health insurance to Managed Health Insurance Plans between 1988 and 1996. It was believed that only Managed Health Insurance Plans would allow those companies to continue offering generous packages of health insurance benefits, and would enable them to control the growth in personal health care expenditures, prices, and the volume of services produced. The price of maintaining the private group health insurance industry’s viability would be the wholesale movement of employer-based group health insurance enrollees to Managed Health Insurance Plans. Between 1988 and 1996 the relative significance of Indemnity/Service Plans and Managed Care Plans in the lives of American employees and their families was reversed. By 1996 73% of American workers with employer-based group health insurance were enrolled in those Managed Health Insurance Plans. By 2000 92% of those workers and their families were in Managed Health Insurance Plans – HMOs, Point of Service Plans, and Preferred Provider Organizations. This massive change in the type of health insurance most Americans relied upon to ensure their access to affordable health care services was dramatic and for many Americans a shock. Previously, access to acute care services, diagnostic services, specialty services including consultations, and the full array of personal health care services involved minimal interference from the health insurance plans. Now most Americans would face limits on that access, especially in the form of having to access most services with approval either from an assigned Primary Care Practitioner, or from medical management personnel associated with the respective insurance plans. IV. THE PHILOSOPHY OF MANAGED CARE – A FOCUS ON CONTINUOUS, COMPREHENSIVE, COORDINATED HEALTH CARE FOR INSURANCE PLAN ENROLLEES: READINGS 4.A., 4.B., 4.C. – REQUIRED READINGS AND CRITICAL STUDY QUESTIONS FOR FEBRUARY 18, 20, 24. Kaiser Permanente’s philosophy of Managed Care, which focuses on the primacy of Primary Care and the necessity for highly coordinated efforts by insurers and providers, was a major inspiration for the types of Managed Health Insurance Plans implemented throughout the 1990s. Essential to the Kaiser Permanente philosophy was the belief in the primacy of Primary Care within the system by which personal health care services were delivered in the United states. This belief, championed from the 1960’s and thereafter by policy makers such as Barbara Starfield, asserted that reasonably priced quality health care could only be delivered on a routine basis if patients worked closely and routinely with assigned Primary Care Physicians (individuals and/or teams). At the heart of this belief in the centrality and primacy of Primary Care was a belief that Primary Care Practitioners were best equipped to ensure that patients and their families received Continuous, Comprehensive, and Coordinated patient care. V. THE PRINCIPAL TYPES OF MANAGED CARE PLANS IMPLEMENTED IN THE 1990s – HEALTH MAINTENANCE ORGANIZATIONS (HMOs), POINT OF SERVICE PLANS (POS), AND PREFERRED PROVIDER ORGANIZATIONS (PPO). By the late 1980s the primary kinds of Managed Care Health Plans had been developed, and were offered to employers and employees throughout the period of the great health insurance plan transitions between 1988 and 1996. HMOs, Point of Service Plans, and PPOs varied in the extent to which the particular type of insurance plan regulated key aspects of the process by which enrollees, advised by doctors, accessed personal health care services covered by those plans. Key areas in which Managed Care Plans differed in the intensity and extent of their control of medical management, and physician and plan enrollee choice, included the following: Managing limited networks of individual and institutional providers, and requiring that plan enrollees only used those provider networks to access care. Requiring plan enrollees and their families to access most personal health care services with the approval of a “gatekeeper” or Primary Care Practitioner (individual or team.) Aggressively negotiating payment rates for provider services, often using capitation for Primary Care Practitioners, and negotiating lower payment rates for Specialty Care Practitioners. Requiring PCPs to take on extensive risk. Implementing extensive Utilization Management, Case Management, and Disease Management programs. Subjecting critical decisions on selected hospital admissions, access to diagnostic imaging, and access to specialty physician consultations to approval not only from PCPs, but from medical management staff within the plan. HMOs and POS plans were most controlling forms of Managed Health Insurance, and PPOs were much less so. In the 1990s HMOs and POS plans had the highest levels of enrollment, unlike the post Managed Care Backlash experience in the post- 2000 era when PPOs predominated (and continue to do so). Understanding the various types of Managed Care Health Insurance Plans, their relative levels of enrollment, and the different ways they impacted on providers, employers, and plan enrollees in the 1990s is key to understanding the successes and failures of these plans in the 1990s, and understanding the Managed Care Backlash. 6
Good day, I would love to get assistance with my assignment.
HSA 312 – SPRING 2020 MANAGED HEALTH CARE L.EITEL – ADJUNCT LECTURER READING 3: ORIGINS, PHILOSOPHY, AND SPREAD OF MANAGED HEALTH INSURANCE IN THE U.S.          OVERVIEW: MANAGED HEALTH INSURANCE PLANS – LATE 1960s THROUGH EARLY 1990s Until the 1960’s, these types of health insurance plans were called Prepaid Health Services Plans (PHSPs) or Direct Service (as opposed to Indemnity or Service) Health Plans. These plans developed in the 1930’s and in the 1940’s for niche markets on the West Coast (especially California and Washington State), in Washington, D.C., and in New York City (HIP). Risk was seen in terms of a population’s health status or an individual’s health status, and in terms of the quality and appropriateness of services delivered. Related to this philosophy of health insurance, preventive care and wellness services were also seen as a critical concern. Management of the financial risk associated with insuring and paying for the delivery of health care goods and services was not the sole emphasis of this kind of insurance, but was seen as important, and as directly linked to the provision of truly appropriate and high-quality health care services. PHSPs were strongly opposed by the American Medical Association and the State and County medical societies (physician organizations), and both professional peer pressure and state laws inhibited the spread of this form of insurance prior to the development of the formal HMO concept in the 1960’s and the passage of the Federal HMO law in 1973. From the late 1970’s onward, Indemnity and Service health insurance plans began either to disappear, or to transform themselves into insurance entities with a number of Managed Care add-on features. Through the 1980’s and 1990’s, HMO products became more familiar to the public, enrolled larger and larger numbers of members, and evolved and diversified into other forms such as Preferred Provider Organizations and Point of Service Health Plans. To reiterate: This family of health insurance products addressed health risks in a way which was fiscally prudent but which also served the cause of enhanced individual patient health status as well as improved population/community health status. Managed Care Health Insurance Plans focused less on patient cost sharing than did the traditional Indemnity and Service health insurance plans. The individual consumer’s monthly payment to the HMO was supposed to encompass the full extent of a patient’s liability for health service expenditures. They tended to be more regulated by the States, and were limited in their ability to use benefit design (including inclusion and exclusion of health benefits) as a way of managing financial risk. These plans focused on Wellness and Preventive Services, the use of Primary Care Practitioners as coordinators of all of a patient’s health care services (“gatekeeper”), preauthorization and precertification of diagnostic and therapeutic procedures, and other activities which involved the insurance company in decisions about the actual provision of care. Managed Care Organizations also created and maintained specially contracted and more limited networks of individual and institutional health care providers. In the 1990s, these plans often offloaded risk onto physicians (both Primary Care and Specialty Care Practitioners) through a variety of capitation arrangements which were intended to serve as further financial incentives for physicians to act as prudent users of and advocates for particular health care services. Finally, these health plans sometimes shared management responsibilities by subcontracting with specialized “carve-out” Managed Care Organizations to manage financial risk as well as quality and appropriateness for services such as Behavioral Health Services, Pharmaceutical Services, and Dental Services. MANAGED CARE – THE BEGINNINGS: The idea of Managed Care was originally born in the activities of the following TYPES OF health insurance plans in the 1930’s, 1940’s, and early 1950’s: These plans developed in the 1930’s and in the 1940’s for niche markets on the West Coast (especially California and Washington State), in Washington, D.C., and in New York City Kaiser Permanente (mainly though not exclusively centered in California). Kaiser started as a series of health plans, mainly available to specific groups of workers employed by Kaiser on specific work projects. In the early 1950s Kaiser Permanente became open to the general public; The Group Health Cooperative of Puget Sound in Seattle; The Health Insurance Plan of New York (late 1940’s); Some health insurance plans in Washington, D.C. These Prepaid Health Services Plans (PHSPs), also known as Direct Service Plans – the term Managed Care was not used until the mid 1960’s – integrated the payment of claims for health care services provided by individual and institutional providers with institutional arrangements and mechanisms for influencing patient and provider decisions about the appropriateness and location (level of care) of health care service delivery. PHSPs did not focus on patient cost sharing, as did the traditional Indemnity and Service health insurance plans. The individual consumer monthly payment to the PHSP was supposed to encompass the full extent of a patient’s liability for health service expenditures. These plans focused on Wellness and Preventive Services, the use of Primary Care Practitioners as coordinators of all of a patient’s health care services (what was later, in the 1990s, called the “gatekeeper” function), preauthorization and precertification of diagnostic and therapeutic procedures, and other activities which involved the insurance company in decisions about the actual provision of care. They also tended to limit a member’s provider choice by having limited and integrated networks of providers dedicated to serving just their patients. PHSPs were strongly opposed by the American Medical Association and the State and County medical societies, as well as state hospital associations, and both professional peer pressure and state laws inhibited the spread of this form of insurance prior to the development of the formal HMO concept in the 1960’s and the passage of the Federal HMO law in 1973. Thus, the PHSP philosophy and model of health insurance and health care service delivery, in essence Managed Care, was at odds with the form of employer-based private health insurance and the health care services delivery system that predominated in the United States from 1945 through 1975. In fact, for reasons we will discuss below, from the late 1970’s onward Indemnity and Service health insurance plans began either to disappear, or to transform themselves into insurance entities with a number of Managed Care feature add-ons. The great crisis of health care price and expenditure inflation which started in the late 1960s, and which grew into an unmanageable problem for employers, insurers, and workers by the late 1970s, caused insurers of all kinds to reconsider their opposition to Managed Care. Through the 1980’s and 1990’s HMO health insurance plans became more familiar to the public, enrolled larger and larger numbers of members, and evolved and Managed Health Insurance diversified into other forms such as Preferred Provider Organizations and Point of Service Health Plans. This family of health insurance products addressed health risks in a way which was fiscally prudent but which also served the cause of enhanced individual patient health status as well as improved population/community health status. Finally, in the late 1980s, the Blue Cross/Blue Shield plans and the major private commercial health insurance companies, along with a number of medium-sized and rapidly growing Managed Health care insurance companies, with support from a number of large employers, made the decision to move the vast majority of employees with private health insurance from traditional Indemnity and Service plans to the three (3) major forms of Managed Health Insurance plans. Whereas in 1988 73% of workers with employer-based health insurance were enrolled in Indemnity or Service plans, by 1996 73% of those workers were enrolled in an HMO, a PPO, or a Point of Service plan. The great shift from unmanaged to Managed Care was made. MANAGED CARE – THE GROWTH OF NATIONAL INTEREST IN A REGIONAL PHENOMENON – THE 1960s AND 1970s: The experience of the Prepaid Health Service Plans came to the attention of the rest of the United States in the mid 1960s through the early 1970s. PHSPs would soon to be called Health Maintenance Organizations, and their distinctive form of paying for and delivering care would be dubbed Managed Care. This national awareness was sparked by two sets of events: Advocacy of all or part of the PHSP approach to medical practice by certain health policy experts, medical schools, schools of health administration, and advocates for the urban poor and working poor in certain cities – this advocacy was focused on the Quality of care aspects of PHSP practice; limiting health care expenditures was seen as a secondary concern. The Federal government, early on recognizing the beginnings of a real crisis in health care expenditures and pricing, embraced the idea of Managed Care in order to encourage the spread of a form of health insurance which could actually control health care expenditures. The Advocates: In the 1960’s, a variety of advocates in various sections of American society began to make a strong case for changing key aspects of the U.S. Health Care system of insurance and service provision. They admired the emphasis of PHSPs (now renamed Health Maintenance Organizations, or HMOs, or Managed Care Plans) on Continuous, Coordinated, Comprehensive Care, as opposed to fragmented Acute Care. The image of Managed Care Plans started to change. Paul Ellwood was a Midwestern health care policy expert who coined the term HMO (Health Maintenance Organization). He championed HMOs as vehicles for quality and reasonably priced health care, with an emphasis on the quality aspects of Managed Care. Academics such as Barbara Starfield, and institutions like the Albert Einstein College of Medicine Social Medicine Program in the Bronx (New York City), researched and advocated for the critical role of Primary Care Physicians, working in teams, as the best guarantors of good quality patient care. They saw such Primary Care Teams as the best organizations for promoting Comprehensive, Continuous, and Coordinated patient care meeting all an individual’s and family’s health care needs throughout the course of their lives. Political advocacy groups in some cities, such as Health PAC in New York, were concerned that the flight of the middle class, including many physicians, to the suburbs (beginning in the post-war era, and accelerating in the 1960s) was negatively affecting the opportunities for good quality health care for the poor and working poor in urban areas. The poor and working poor increasingly relied for their medical care on fragmented specialty clinics, often associated with research-oriented academic medical centers, and did not receive the kind of Comprehensive, Continuous, and Coordinated patient care that Ellwood and the other academics and researchers believed was critical for good health status. These different individuals and groups helped to make critical ideas of Managed Care known to the public at large outside of the PHSP strongholds on the West Coast and the East Coast. Federal Government Support for the Spread of Managed Health Insurance in the Early 1970s: The HMO Act of 1973 The Federal government, early on recognizing the beginnings of a real crisis in health care expenditures and pricing, embraced the idea of Managed Care in order to encourage the spread of a form of health insurance which could actually control health care expenditures. The Federal government, through the 1973 HMO Act broke down barriers to the spread of Managed Health plans throughout the U.S., laying the groundwork for the slow but steady expansion in Managed Health plan enrollees in the 1980s. This Act preempted individual State laws which prevented the spread of Managed Health Insurance Plans outside of their strongholds in Washington State, California, New York City, and Washington, D.C. This Act provided grants and start-up funds to encourage the spread of Managed Health Insurance Plans. This Act required all Employers who offered health insurance to their Employees, and who employed a certain minimum of Employees, to offer at least one (1) Managed Health Insurance Plan as one of the health insurance options they offered to their Employees. HEALTH INSURANCE IN THE UNITED STATES: CRISIS AND TRANSITION – LATE 1960s THROUGH EARLY 1990s CHALLENGES TO THE SUSTAINABILITY OF THE EMPLOYER-BASED GROUP HEALTH INSURANCE MODEL FROM THE 1960’S THROUGH THE EARLY 1970S. SEE READING 3.: THE CRISIS IN NATIONAL SPENDING ON PERSONAL HEALTH CARE GOODS AND SERVICES. The influx of Medicare and Medicaid recipients making demands on the U.S. Health Care services system beginning in the late 1960s interacted in a variety of complex ways with other changes going on in that system to produce substantive and unprecedented increases in the portion of Gross Domestic Product allocated to health care services, and in sustained year-to-year increases in National Health Expenditures. These substantive increases in price and expenditure started to threaten the stability of the prevailing system of Indemnity and Service health insurance plans – would premiums become unaffordable for workers and their employers? Managed Care and HMOs began to be seen by some politicians, policy makers, academicians, and advocates of the primacy of Primary Care as a quality-oriented answer to the prevailing health insurance system’s inability to address massive, sustained price and expenditure increases. President Nixon and Congress in 1973 approved the HMO Act of 1973, which played a major role in the 1970s and 1980s in starting the spread of Managed Care Health plans beyond their East and West Coast strongholds and breaking down local resistance to the previously marginalized Managed Care health insurance plans. Indemnity and Service Plans, in part inspired by Federal government experiments in Utilization Review and Management, started to adopt some aspects of Managed Health Plan/HMO practice in order to constrain annual expenditure increases for Personal Health Care Services. They adopted Large Case Management programs, and Utilization Review programs, and thus started to do just what physicians and hospitals had feared prior to 1930 – they started to involve themselves in decisions of length of treatment, type of treatment, appropriateness of treatment, and place of treatment for some health insurance plan members. THE MASS MOVEMENT OF AMERICANS WITH EMPLOYER-BASED GROUP HEALTH INSURANCE FROM INDEMNITY AND SERVICE PLANS TO MANAGED CARE HEALTH PLANS 1988 – 1996. As indicated in IV. above, throughout the late 1970s through the 1980s Blue Cross and Blue Shield organizations, and large commercial insurers, tried to maintain and save the Indemnity and Service plans in which the vast majority of Americans with employer-based insurance were enrolled. As late as 1988 77% of those American workers and their families were enrolled in those health insurance plans. Utilization Management, big case management, and other medical management tools used and inspired by Managed Health Insurance Plans (and in some cases by Medicare) had been adopted by those organizations for their Indemnity and Service Plans, but were not having a significant impact on health expenditures, and were not likely to keep premiums and out-of-pocket expenditures from increasing substantially. Those organizations faced the likelihood of severely disappointing employers and employees by substantially increasing premiums and out-of-pocket expenditures and reducing benefits covered by the Indemnity and Service Plans. The welfare of employees and the viability of the private group health insurance industry were literally at stake. Blue Cross and Blue Shield health insurance plans, all the plans managed by commercial insurers, and the newer insurance companies which focused more heavily on providing Managed Health Insurance Plans, worked with employers to transition most Americans with employer-based health insurance to Managed Health Insurance Plans between 1988 and 1996. It was believed that only Managed Care would allow those companies to continue offering generous packages of health insurance benefits, and would enable them to control the growth in personal health care expenditures, prices, and volumes of services produced. The price of maintaining the private group health insurance industry’s viability would be the wholesale movement of employer-based group health insurance enrollees to Managed Health Insurance Plans. Between 1988 and 1996 the relative significance of Indemnity/Service Plans and Managed Care Plans in the lives of American employees and their families was reversed. By 1996 77% of American workers with employer-based group health insurance were enrolled in those Managed Health Insurance Plans. By 2000 almost 100% of those workers and their families were in Managed Health Insurance Plans – HMOs, Point of Service Plans, and Preferred Provider Organizations. This massive change in the type of health insurance most Americans relied upon to ensure their access to affordable health care services was dramatic and for many Americans a shock. Previously, access to acute care services, diagnostic services, specialty services including consultations, and the full array of personal health care services involved minimal interference from the health insurance plans. Now most Americans would face limits on that access, especially in the form of having to access most services with approval either from an assigned Primary Care Practitioner, or from medical management personnel associated with the respective insurance plans. THE PHILOSOPHY OF MANAGED CARE – A FOCUS ON CONTINUOUS, COMPREHENSIVE, COORDINATED HEALTH CARE FOR INSURANCE PLAN ENROLLEES: READINGS 4.A., 4.B., 4.C. Kaiser Permanente’s philosophy of Managed Care, which focuses on the primacy of Primary Care and the necessity for highly coordinated efforts by insurers and providers, was a major inspiration for the types of Managed Health Insurance Plans implemented throughout the 1990s. Essential to the Kaiser Permanente philosophy was the belief in the primacy of Primary Care within the system by which personal health care services were delivered in the United states. This belief, championed from the 1960’s and thereafter by policy makers such as Barbara Starfield, asserted that reasonably priced quality health care could only be delivered on a routine basis if patients worked closely and routinely with assigned Primary Care Physicians (individuals and/or teams). At the heart of this belief in the centrality and primacy of Primary Care was a belief that Primary Care Practitioners were best equipped to ensure that patients and their families received Continuous, Comprehensive, and Coordinated patient care. THE PRINCIPAL TYPES OF MANAGED CARE PLANS IMPLEMENTED IN THE 1990s – HEALTH MAINTENANCE ORGANIZATIONS (HMOs), POINT OF SERVICE PLANS (POS), AND PREFERRED PROVIDER ORGANIZATIONS (PPO). By the late 1980s the primary kinds of Managed Care Health Plans had been developed, and were offered to employers and employees throughout the period of the great health insurance plan transitions between 1988 and 1996. HMOs, Point of Service Plans, and PPOs varied in the extent to which the particular type of insurance plan regulated key aspects of the process by which enrollees, advised by doctors, accessed personal health care services covered by those plans. HMOs and POS plans were most regulated, and PPOs were much less so. In the 1990s HMOs and POS plans had the highest levels of enrollment, unlike the post Managed Care Backlash experience in the post- 2000 era when PPOs predominated (and continue to do so). Key areas in which Managed Care Plans differed in the intensity and extent of their control of medical management, and physician and plan enrollee choice, included: Managing limited networks of individual and institutional providers, and requiring that plan enrollees only used those provider networks to access care. Requiring plan enrollees and their families to access most personal health care services with the approval of a “gatekeeper” or Primary Care Practitioner (individual or team.) Aggressively negotiating payment rates for provider services, often using capitation for Primary Care Practitioners, and negotiating lower payment rates for Specialty Care Practitioners. Requiring PCPs to take on extensive risk. Implementing extensive Utilization Management, Case Management, and Disease Management programs. Subjecting critical decisions on selected hospital admissions, access to diagnostic imaging, and access to specialty physician consultations to approval not only from PCPs, but from medical management staff within the plan. Understanding the various types of Managed Care Health Insurance Plans, their relative levels of enrollment, and the different ways they impacted on providers, employers, and plan enrollees in the 1990s is key to understanding the successes and failures of these plans in the 1990s, and understanding the Managed Care Backlash. 11
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HSA 312 XT81/H01/01 MANAGED HEALTH CARE SPRING 2020 L. EITEL OVERVIEW 2: FEBRUARY 25, 27, AND MARCH 2 TH MANAGED CARE IN THE 1990s: KEY POINTS The New Managed Care Plans: how they worked: By the 1990s, Managed Care health insurance plans existed in three principal forms: HMOs (health maintenance organizations), POS (point of service plans), and PPOs (preferred provider organizations). HMOs and to a certain extent POS plans were the most restrictive forms of Managed Care health plan, and PPOs were the least restrictive. The restrictive aspects of Managed Care in these newly minted, large Blue Cross/Blue Shield and commercial Managed Health plans (as well as in the plans administered by the newer regional managed care organizations) were the following: The insurers created and implemented limited networks of individual, group, and institutional health care service providers. They implemented extensive case management, disease management, and inpatient and outpatient utilization review programs. Using significant market share and the threat of limiting provider network size and composition, the insurers negotiated low provider payment rates with individual, group, and institutional providers. This was one of the main reasons that yearly National Health Expenditure and health insurance premium increases significantly slowed and decreased in the mid-1990s. It was also one of the reasons that the late 1990s and early 2000’s saw the rapid development of large integrated provider health care delivery systems. (As a protective reaction to the way in which managed health insurance plans had exploited their size and market advantage.) These insurers implemented their own mass-produced and simplified version of the complex, subtle, and consensual patient/Primary Care Provider relationship that had been developed by the PHSPs, and especially by Kaiser Permanente. As part of the massive shift to Managed Care in the 1990s, Managed Health Plans instituted the role of Primary Care Provider or Primary Care Provider Team as “gatekeeper.” PCPs/PCP teams were given the responsibility for regulating the flow of inpatient admissions, limiting the use of Specialty Care Practitioners, and limiting the utilization of unnecessary diagnostic tests and expensive medical procedures. In some Managed Health Insurance Plans, PCPs were actually expected to bear financial risk for the level of use, not only of primary care services, but also of hospital, testing, and specialty care services. For certain selected procedures and tests PCPs and Specialty Care Practitioners were required to get approval from centralized health plan medical and other utilization review staff. PCP responsibility for the prudent use of health care goods and services was reinforced by the extensive use of Capitation (fixed per-patient payments) to pay PCPs and PCP teams. (However, Capitation rates were based on estimated averages of per person utilization of health care services: PCPs who had an especially unhealthy mix of patients were underpaid for their services.) Even in the best of circumstances PCPs and PCP teams were paid relatively low Capitation rates. The original idea of Managed Care was that PCPs and PCP teams were especially important for providing optimal Continuous, Comprehensive, Coordinated Care to individuals and their families: it was assumed that PCPs would have a relatively stable panel of patients. They would be able to get to know those patients and their families over time, would develop a personal relationship with them, and would have a deep understanding of all their acute, preventive, and other health care service needs (including, as they aged, palliative care and hospice care). However, the sheer volume of patients assigned to individual PCPs and PCP teams by the various Managed Care Plans, and the constant changes in the composition of those panels, made that critical personal connection infeasible. POSITIVE IMPACTS OF MANAGED HEALTH INSURANCE PLANS IN THE 1990s: Managed Care health insurance plans had a number of positive impacts: They significantly slowed the growth of National Health Expenditures for the first time in almost 15 years. They significantly reduced cost sharing for insurance plan enrollees. In the 1990s the majority of those covered by Managed Care plans were covered by HMOs and POS plans. The philosophy of those plans, especially HMOs, was that the enrollee’s premium was all the enrollee should pay. It would be up to the insurance plans and networks of providers to work to make high quality affordable health care available to most people. The focus on enrollee cost-sharing which would characterize Consumer Directed Health Plans in the early 2000’s was the exact opposite of the philosophy of the major health insurance plans that covered most people in the 1990s. It is very likely that the mass implementation of Managed Health Insurance plans in the 1990s had a significant impact on the unnecessary utilization of health care goods and services in the U.S. However, at this point this is speculative – largely because the most recent estimates of unnecessary health care utilization in the U.S. have been done several years after the years when HMOs and POS plans dominated the health insurance marketplace. Clearly the reduction in annual increases in National Health Expenditures in the mid-1990s was not simply from constrained payments to providers, nor from the denial of needed care. They emphasized the use of Preventive Health Care Services and of exercise and Wellness programs, which had never been an emphasis of Indemnity and Service plans when they were the predominant form of private employer-based health insurance in the United States. 4
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HSA 312 – SPRING 2020 MANAGED HEALTH CARE L.EITEL – ADJUNCT LECTURER READING 3: ORIGINS, PHILOSOPHY, AND SPREAD OF MANAGED HEALTH INSURANCE IN THE U.S.          OVERVIEW: MANAGED HEALTH INSURANCE PLANS – LATE 1960s THROUGH EARLY 1990s Until the 1960’s, these types of health insurance plans were called Prepaid Health Services Plans (PHSPs) or Direct Service (as opposed to Indemnity or Service) Health Plans. These plans developed in the 1930’s and in the 1940’s for niche markets on the West Coast (especially California and Washington State), in Washington, D.C., and in New York City (HIP). Risk was seen in terms of a population’s health status or an individual’s health status, and in terms of the quality and appropriateness of services delivered. Related to this philosophy of health insurance, preventive care and wellness services were also seen as a critical concern. Management of the financial risk associated with insuring and paying for the delivery of health care goods and services was not the sole emphasis of this kind of insurance, but was seen as important, and as directly linked to the provision of truly appropriate and high-quality health care services. PHSPs were strongly opposed by the American Medical Association and the State and County medical societies (physician organizations), and both professional peer pressure and state laws inhibited the spread of this form of insurance prior to the development of the formal HMO concept in the 1960’s and the passage of the Federal HMO law in 1973. From the late 1970’s onward, Indemnity and Service health insurance plans began either to disappear, or to transform themselves into insurance entities with a number of Managed Care add-on features. Through the 1980’s and 1990’s, HMO products became more familiar to the public, enrolled larger and larger numbers of members, and evolved and diversified into other forms such as Preferred Provider Organizations and Point of Service Health Plans. To reiterate: This family of health insurance products addressed health risks in a way which was fiscally prudent but which also served the cause of enhanced individual patient health status as well as improved population/community health status. Managed Care Health Insurance Plans focused less on patient cost sharing than did the traditional Indemnity and Service health insurance plans. The individual consumer’s monthly payment to the HMO was supposed to encompass the full extent of a patient’s liability for health service expenditures. They tended to be more regulated by the States, and were limited in their ability to use benefit design (including inclusion and exclusion of health benefits) as a way of managing financial risk. These plans focused on Wellness and Preventive Services, the use of Primary Care Practitioners as coordinators of all of a patient’s health care services (“gatekeeper”), preauthorization and precertification of diagnostic and therapeutic procedures, and other activities which involved the insurance company in decisions about the actual provision of care. Managed Care Organizations also created and maintained specially contracted and more limited networks of individual and institutional health care providers. In the 1990s, these plans often offloaded risk onto physicians (both Primary Care and Specialty Care Practitioners) through a variety of capitation arrangements which were intended to serve as further financial incentives for physicians to act as prudent users of and advocates for particular health care services. Finally, these health plans sometimes shared management responsibilities by subcontracting with specialized “carve-out” Managed Care Organizations to manage financial risk as well as quality and appropriateness for services such as Behavioral Health Services, Pharmaceutical Services, and Dental Services. MANAGED CARE – THE BEGINNINGS: The idea of Managed Care was originally born in the activities of the following TYPES OF health insurance plans in the 1930’s, 1940’s, and early 1950’s: These plans developed in the 1930’s and in the 1940’s for niche markets on the West Coast (especially California and Washington State), in Washington, D.C., and in New York City Kaiser Permanente (mainly though not exclusively centered in California). Kaiser started as a series of health plans, mainly available to specific groups of workers employed by Kaiser on specific work projects. In the early 1950s Kaiser Permanente became open to the general public; The Group Health Cooperative of Puget Sound in Seattle; The Health Insurance Plan of New York (late 1940’s); Some health insurance plans in Washington, D.C. These Prepaid Health Services Plans (PHSPs), also known as Direct Service Plans – the term Managed Care was not used until the mid 1960’s – integrated the payment of claims for health care services provided by individual and institutional providers with institutional arrangements and mechanisms for influencing patient and provider decisions about the appropriateness and location (level of care) of health care service delivery. PHSPs did not focus on patient cost sharing, as did the traditional Indemnity and Service health insurance plans. The individual consumer monthly payment to the PHSP was supposed to encompass the full extent of a patient’s liability for health service expenditures. These plans focused on Wellness and Preventive Services, the use of Primary Care Practitioners as coordinators of all of a patient’s health care services (what was later, in the 1990s, called the “gatekeeper” function), preauthorization and precertification of diagnostic and therapeutic procedures, and other activities which involved the insurance company in decisions about the actual provision of care. They also tended to limit a member’s provider choice by having limited and integrated networks of providers dedicated to serving just their patients. PHSPs were strongly opposed by the American Medical Association and the State and County medical societies, as well as state hospital associations, and both professional peer pressure and state laws inhibited the spread of this form of insurance prior to the development of the formal HMO concept in the 1960’s and the passage of the Federal HMO law in 1973. Thus, the PHSP philosophy and model of health insurance and health care service delivery, in essence Managed Care, was at odds with the form of employer-based private health insurance and the health care services delivery system that predominated in the United States from 1945 through 1975. In fact, for reasons we will discuss below, from the late 1970’s onward Indemnity and Service health insurance plans began either to disappear, or to transform themselves into insurance entities with a number of Managed Care feature add-ons. The great crisis of health care price and expenditure inflation which started in the late 1960s, and which grew into an unmanageable problem for employers, insurers, and workers by the late 1970s, caused insurers of all kinds to reconsider their opposition to Managed Care. Through the 1980’s and 1990’s HMO health insurance plans became more familiar to the public, enrolled larger and larger numbers of members, and evolved and Managed Health Insurance diversified into other forms such as Preferred Provider Organizations and Point of Service Health Plans. This family of health insurance products addressed health risks in a way which was fiscally prudent but which also served the cause of enhanced individual patient health status as well as improved population/community health status. Finally, in the late 1980s, the Blue Cross/Blue Shield plans and the major private commercial health insurance companies, along with a number of medium-sized and rapidly growing Managed Health care insurance companies, with support from a number of large employers, made the decision to move the vast majority of employees with private health insurance from traditional Indemnity and Service plans to the three (3) major forms of Managed Health Insurance plans. Whereas in 1988 73% of workers with employer-based health insurance were enrolled in Indemnity or Service plans, by 1996 73% of those workers were enrolled in an HMO, a PPO, or a Point of Service plan. The great shift from unmanaged to Managed Care was made. MANAGED CARE – THE GROWTH OF NATIONAL INTEREST IN A REGIONAL PHENOMENON – THE 1960s AND 1970s: The experience of the Prepaid Health Service Plans came to the attention of the rest of the United States in the mid 1960s through the early 1970s. PHSPs would soon to be called Health Maintenance Organizations, and their distinctive form of paying for and delivering care would be dubbed Managed Care. This national awareness was sparked by two sets of events: Advocacy of all or part of the PHSP approach to medical practice by certain health policy experts, medical schools, schools of health administration, and advocates for the urban poor and working poor in certain cities – this advocacy was focused on the Quality of care aspects of PHSP practice; limiting health care expenditures was seen as a secondary concern. The Federal government, early on recognizing the beginnings of a real crisis in health care expenditures and pricing, embraced the idea of Managed Care in order to encourage the spread of a form of health insurance which could actually control health care expenditures. The Advocates: In the 1960’s, a variety of advocates in various sections of American society began to make a strong case for changing key aspects of the U.S. Health Care system of insurance and service provision. They admired the emphasis of PHSPs (now renamed Health Maintenance Organizations, or HMOs, or Managed Care Plans) on Continuous, Coordinated, Comprehensive Care, as opposed to fragmented Acute Care. The image of Managed Care Plans started to change. Paul Ellwood was a Midwestern health care policy expert who coined the term HMO (Health Maintenance Organization). He championed HMOs as vehicles for quality and reasonably priced health care, with an emphasis on the quality aspects of Managed Care. Academics such as Barbara Starfield, and institutions like the Albert Einstein College of Medicine Social Medicine Program in the Bronx (New York City), researched and advocated for the critical role of Primary Care Physicians, working in teams, as the best guarantors of good quality patient care. They saw such Primary Care Teams as the best organizations for promoting Comprehensive, Continuous, and Coordinated patient care meeting all an individual’s and family’s health care needs throughout the course of their lives. Political advocacy groups in some cities, such as Health PAC in New York, were concerned that the flight of the middle class, including many physicians, to the suburbs (beginning in the post-war era, and accelerating in the 1960s) was negatively affecting the opportunities for good quality health care for the poor and working poor in urban areas. The poor and working poor increasingly relied for their medical care on fragmented specialty clinics, often associated with research-oriented academic medical centers, and did not receive the kind of Comprehensive, Continuous, and Coordinated patient care that Ellwood and the other academics and researchers believed was critical for good health status. These different individuals and groups helped to make critical ideas of Managed Care known to the public at large outside of the PHSP strongholds on the West Coast and the East Coast. Federal Government Support for the Spread of Managed Health Insurance in the Early 1970s: The HMO Act of 1973 The Federal government, early on recognizing the beginnings of a real crisis in health care expenditures and pricing, embraced the idea of Managed Care in order to encourage the spread of a form of health insurance which could actually control health care expenditures. The Federal government, through the 1973 HMO Act broke down barriers to the spread of Managed Health plans throughout the U.S., laying the groundwork for the slow but steady expansion in Managed Health plan enrollees in the 1980s. This Act preempted individual State laws which prevented the spread of Managed Health Insurance Plans outside of their strongholds in Washington State, California, New York City, and Washington, D.C. This Act provided grants and start-up funds to encourage the spread of Managed Health Insurance Plans. This Act required all Employers who offered health insurance to their Employees, and who employed a certain minimum of Employees, to offer at least one (1) Managed Health Insurance Plan as one of the health insurance options they offered to their Employees. HEALTH INSURANCE IN THE UNITED STATES: CRISIS AND TRANSITION – LATE 1960s THROUGH EARLY 1990s CHALLENGES TO THE SUSTAINABILITY OF THE EMPLOYER-BASED GROUP HEALTH INSURANCE MODEL FROM THE 1960’S THROUGH THE EARLY 1970S. SEE READING 3.: THE CRISIS IN NATIONAL SPENDING ON PERSONAL HEALTH CARE GOODS AND SERVICES. The influx of Medicare and Medicaid recipients making demands on the U.S. Health Care services system beginning in the late 1960s interacted in a variety of complex ways with other changes going on in that system to produce substantive and unprecedented increases in the portion of Gross Domestic Product allocated to health care services, and in sustained year-to-year increases in National Health Expenditures. These substantive increases in price and expenditure started to threaten the stability of the prevailing system of Indemnity and Service health insurance plans – would premiums become unaffordable for workers and their employers? Managed Care and HMOs began to be seen by some politicians, policy makers, academicians, and advocates of the primacy of Primary Care as a quality-oriented answer to the prevailing health insurance system’s inability to address massive, sustained price and expenditure increases. President Nixon and Congress in 1973 approved the HMO Act of 1973, which played a major role in the 1970s and 1980s in starting the spread of Managed Care Health plans beyond their East and West Coast strongholds and breaking down local resistance to the previously marginalized Managed Care health insurance plans. Indemnity and Service Plans, in part inspired by Federal government experiments in Utilization Review and Management, started to adopt some aspects of Managed Health Plan/HMO practice in order to constrain annual expenditure increases for Personal Health Care Services. They adopted Large Case Management programs, and Utilization Review programs, and thus started to do just what physicians and hospitals had feared prior to 1930 – they started to involve themselves in decisions of length of treatment, type of treatment, appropriateness of treatment, and place of treatment for some health insurance plan members. THE MASS MOVEMENT OF AMERICANS WITH EMPLOYER-BASED GROUP HEALTH INSURANCE FROM INDEMNITY AND SERVICE PLANS TO MANAGED CARE HEALTH PLANS 1988 – 1996. As indicated in IV. above, throughout the late 1970s through the 1980s Blue Cross and Blue Shield organizations, and large commercial insurers, tried to maintain and save the Indemnity and Service plans in which the vast majority of Americans with employer-based insurance were enrolled. As late as 1988 77% of those American workers and their families were enrolled in those health insurance plans. Utilization Management, big case management, and other medical management tools used and inspired by Managed Health Insurance Plans (and in some cases by Medicare) had been adopted by those organizations for their Indemnity and Service Plans, but were not having a significant impact on health expenditures, and were not likely to keep premiums and out-of-pocket expenditures from increasing substantially. Those organizations faced the likelihood of severely disappointing employers and employees by substantially increasing premiums and out-of-pocket expenditures and reducing benefits covered by the Indemnity and Service Plans. The welfare of employees and the viability of the private group health insurance industry were literally at stake. Blue Cross and Blue Shield health insurance plans, all the plans managed by commercial insurers, and the newer insurance companies which focused more heavily on providing Managed Health Insurance Plans, worked with employers to transition most Americans with employer-based health insurance to Managed Health Insurance Plans between 1988 and 1996. It was believed that only Managed Care would allow those companies to continue offering generous packages of health insurance benefits, and would enable them to control the growth in personal health care expenditures, prices, and volumes of services produced. The price of maintaining the private group health insurance industry’s viability would be the wholesale movement of employer-based group health insurance enrollees to Managed Health Insurance Plans. Between 1988 and 1996 the relative significance of Indemnity/Service Plans and Managed Care Plans in the lives of American employees and their families was reversed. By 1996 77% of American workers with employer-based group health insurance were enrolled in those Managed Health Insurance Plans. By 2000 almost 100% of those workers and their families were in Managed Health Insurance Plans – HMOs, Point of Service Plans, and Preferred Provider Organizations. This massive change in the type of health insurance most Americans relied upon to ensure their access to affordable health care services was dramatic and for many Americans a shock. Previously, access to acute care services, diagnostic services, specialty services including consultations, and the full array of personal health care services involved minimal interference from the health insurance plans. Now most Americans would face limits on that access, especially in the form of having to access most services with approval either from an assigned Primary Care Practitioner, or from medical management personnel associated with the respective insurance plans. THE PHILOSOPHY OF MANAGED CARE – A FOCUS ON CONTINUOUS, COMPREHENSIVE, COORDINATED HEALTH CARE FOR INSURANCE PLAN ENROLLEES: READINGS 4.A., 4.B., 4.C. Kaiser Permanente’s philosophy of Managed Care, which focuses on the primacy of Primary Care and the necessity for highly coordinated efforts by insurers and providers, was a major inspiration for the types of Managed Health Insurance Plans implemented throughout the 1990s. Essential to the Kaiser Permanente philosophy was the belief in the primacy of Primary Care within the system by which personal health care services were delivered in the United states. This belief, championed from the 1960’s and thereafter by policy makers such as Barbara Starfield, asserted that reasonably priced quality health care could only be delivered on a routine basis if patients worked closely and routinely with assigned Primary Care Physicians (individuals and/or teams). At the heart of this belief in the centrality and primacy of Primary Care was a belief that Primary Care Practitioners were best equipped to ensure that patients and their families received Continuous, Comprehensive, and Coordinated patient care. THE PRINCIPAL TYPES OF MANAGED CARE PLANS IMPLEMENTED IN THE 1990s – HEALTH MAINTENANCE ORGANIZATIONS (HMOs), POINT OF SERVICE PLANS (POS), AND PREFERRED PROVIDER ORGANIZATIONS (PPO). By the late 1980s the primary kinds of Managed Care Health Plans had been developed, and were offered to employers and employees throughout the period of the great health insurance plan transitions between 1988 and 1996. HMOs, Point of Service Plans, and PPOs varied in the extent to which the particular type of insurance plan regulated key aspects of the process by which enrollees, advised by doctors, accessed personal health care services covered by those plans. HMOs and POS plans were most regulated, and PPOs were much less so. In the 1990s HMOs and POS plans had the highest levels of enrollment, unlike the post Managed Care Backlash experience in the post- 2000 era when PPOs predominated (and continue to do so). Key areas in which Managed Care Plans differed in the intensity and extent of their control of medical management, and physician and plan enrollee choice, included: Managing limited networks of individual and institutional providers, and requiring that plan enrollees only used those provider networks to access care. Requiring plan enrollees and their families to access most personal health care services with the approval of a “gatekeeper” or Primary Care Practitioner (individual or team.) Aggressively negotiating payment rates for provider services, often using capitation for Primary Care Practitioners, and negotiating lower payment rates for Specialty Care Practitioners. Requiring PCPs to take on extensive risk. Implementing extensive Utilization Management, Case Management, and Disease Management programs. Subjecting critical decisions on selected hospital admissions, access to diagnostic imaging, and access to specialty physician consultations to approval not only from PCPs, but from medical management staff within the plan. Understanding the various types of Managed Care Health Insurance Plans, their relative levels of enrollment, and the different ways they impacted on providers, employers, and plan enrollees in the 1990s is key to understanding the successes and failures of these plans in the 1990s, and understanding the Managed Care Backlash. 11
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HMOs and PPOs – KEY CHARACTERISTICS Managed Care – Overview of 2 Key Types of Managed Care Health Insurance Plans. The goal of managed care is to limit the amount and type healthcare services provided to the managed care organization’s members in order to control costs and to ensure that effective healthcare is provided in appropriate clinical settings, thus increasing the quality of the care provided. Managed care is about maximizing resources (effectively managing financial risk) and effectively managing the health of enrollees and in some cases of whole populations. Managed care organizations accomplish this goal through a variety of mechanisms, including provider payment methodologies, and controls on a member’s access to services. There is a wide array of managed care organizations in the United States. Health Maintenance Organizations The term “health maintenance organization”, or “HMO”, is an amorphous term, as HMOs have evolved over time in response to market demands. Generally, however, an HMO is an organization that arranges for or provides healthcare services to members in exchange for a pre-paid payment. HMOs are responsible for providing basic healthcare services, usually with a focus on preventive care. Because HMOs are responsible for “arranging” or “providing” for these services, HMOs are characterized by comprehensive provider networks that cover the full spectrum of healthcare services covered by the organization, including physicians, hospitals, and ancillary providers. Traditional HMOs were characterized by the “gatekeeper” concept, which requires members to select a primary care physician who is responsible for coordinating all of the member’s healthcare and making appropriate referrals to specialists. Coverage is usually not available under an HMO plan unless a service was provided or arranged by the member’s primary care physician. The gatekeeper model became increasingly unpopular through the 1990s, as members felt their HMOs were unduly interfering with provider treatment decisions and patient access to care. Today many HMO offerings provide members with “open access” options in which the member is not required to select a primary care provider, or may seek treatment from a provider who does not participate in the HMO’s network. HMOs use a variety of financial incentives to encourage providers to render services in a cost-efficient, appropriate manner. Some HMOs pay providers a fixed monthly fee to their primary care physicians, called a capitation payment, that covers all of the care the provider is obligated to provide to the HMO member for that month. Capitation payments may reduce costs, but they can also result in under-utilization of healthcare services, if the capitation payment is so low that the provider wrongfully limits or denies treatment. Essentially, capitation payments shift the risk from the HMO to the provider. Some states regulate capitation agreements between HMOs and providers specifically to regulate problems that arise when providers take on more risk than is fiscally responsible. HMOs may also compensate providers on the basis of withhold arrangements, where the HMO retains a portion of the compensation due to the provider, and will return to the provider a specified amount of the withhold depending on whether the provider meets established targets. HMOs may also use percent-of-premium or pooling arrangements to compensate providers. The fundamental characteristic of all of these payment methodologies is a risk transfer between the HMO and the provider. HMOs are also characterized by a variety of medical management techniques in order to control costs. These techniques primarily include prior authorization or pre-certification requirements, concurrent review, and retrospective review. Under this scheme a plan member must seek prior approval before receiving certain types of treatment, and the HMO monitors the member’s course of treatment to ensure services continue to be medically necessary and cost-efficient. HMOs may also use disease management programs to manage patients with complex conditions. There are several types of HMOs that differ primarily on the level of integration between the health care delivery and financing functions of the organization. The five primary types of HMOs are, from most integrated to least integrated: (i) staff model HMO, (ii) group model HMO, (iii) network model HMO, independent practice association HMO, and the direct contract model HMO. Preferred Provider Organizations The defining feature of a preferred provider organization, or “PPO”, is that it consists of a panel of “preferred” providers from whom members may receive healthcare services as part of their health benefits coverage. PPO plan members generally pay lower out-of-pocket expenses if they receive their care from a preferred provider. In contrast to HMOs, members are free to seek care from providers outside of the network without a referral, usually at increased out-of-pocket expense in the form of higher deductibles or coinsurance. Providers who participate in PPOs may be compensated in several ways. The traditional method is a discounted fee-for-service methodology, under which the provider is pay a certain percentage of his or her usual rate for the service, also known as the provider’s usual, reasonable, and customary rate, or “UCR”. Providers may also be compensated a pre-determined flat fee for a particular service or course of treatment. This methodology may be called a case rate payment, per diem payment, or diagnosis-related group payment, depending on what items or services are included in the payment. PPOs that are operated by insurance companies are regulated by the state Department of Insurance. PPOs may operate independently, in which case they may not be subject to state regulation. Approximately half of the states regulate independent PPOs. When PPOs are regulated, the most frequent forms of regulation are provider contract, utilization review, and patient access-to-care requirements. B. Managed Care – Changing Role of the 2 Key Types of Managed Care Health Insurance Plans: HMOs and PPOs. (THE INCREASED POPULARITY OF PREFERRED PROVIDER ORGANIZATIONS (PPOS) OVER CLASSIC HMO MANAGED HEALTH INSURANCE PLANS BEGINNING IN THE LATE 1990’S): 1. We all remember the strong backlash against managed care during the late 1990s.   Although almost 10% of the U.S. population are still served by HMOs, the managed care vision has been largely in exile for more than a decade now.   PPOs are now the dominant model, with relatively small financial incentives to patients to seek their care from providers within relatively large provider networks.  Many PPOs have dabbled in “pay for performance,” but the physician incentives involved have been relatively small and the performance bar set relatively low.  The use of more heavy-handed managed care approaches has declined significantly.  For example, plans usually don’t require a referral authorization by a “gatekeeper” primary care physician before granting access to specialists.  And the use of pre-authorization by health plan staff for many expensive procedures has declined significantly.   Health plans did not drop these heavy-handed approached because they became convinced they were ineffective.  They dropped them because they feared they would face a consumer backlash and lose membership. 2. Rapid growth in preferred provider organization (PPO) participation in the period 1999 through 2004 is both impressive and puzzling. More than half of people with private health care benefits, or more than 100 million people, now (2004) receive their care through these arrangements, far surpassing enrollment in health maintenance organizations (HMOs). Not only has the PPO become the health benefit design of choice for private employers and consumers, it also has emerged as the “private plan” option most frequently touted by proponents of market-based Medicare reform. What is curious about the strong popularity of the PPO is that its definition is fairly amorphous, and the industry itself appears to characterize itself less by what the PPO is than by what it is not—namely, an HMO. Even less clear is what value, if any, the PPO arrangement yields to its customers. The widening appeal of the PPO is generally portrayed as a result of the managed care backlash directed against a discredited HMO product. The PPO benefit option is assumed to offer more choice of providers, less restrictive features for consumers, fewer impositions on caregivers, and lower administrative costs to purchasers. Less apparent is that many employers, increasingly concerned about controlling rising costs, are adopting benefit offerings that are more flexible in terms of customized design and less subject to regulatory strictures. For them, the appeal of PPO options is that they can offer an infinite set of alternative arrangements including broader or narrower networks, richer or more meager benefits, maximum or minimal medical management, and more or less consumer cost sharing. Why PPO participation has grown so rapidly in recent years has not been well documented, and whether PPOs actually control costs, provide active care management, promote quality improvement, and afford a measure of health plan accountability has received little attention.
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HSA 312 XT81/H01/01 MANAGED HEALTH CARE SPRING 2020 L. EITEL REVIEW OF THE MANAGED CARE BACKLASH (LATE 1990s – EARLY 2000’s): KEY POINTS WHY WAS THERE A BACKLASH? who was against managed care IN the 1990S? Providers and Employees/Plan Members, interacting with negative media coverage of the most blatant failings of Managed Health Insurance Plans, placed increasing pressure on the health insurance plans and employers to change their strategy of massively implementing the most restrictive forms of Managed Care (HMOs, POS plans). Each of these groups had their own reasons, sometimes overlapping, for serious opposition to Managed Care as it had been implemented. Provider Concerns: Overall, the Providers reacted strongly to the massive and rapid implementation of Managed Health Insurance plans which, unlike traditional Indemnity and Service plans, presumed to challenge the primacy of physician and hospital medical decision-making, and the previously unchallenged status of those providers. Payment Issues: Late payment; Low payment rates, not adequately increased over a number of years; The sense that payment rates were negotiated with little respect for individual, group, and institutional providers, and that the insurance plans used their sheer market power and threats of provider network exclusion to get those rates; Capitation payments for Primary Care Practitioners. In some plans, forcing Primary Care Practitioners to bear financial responsibility for Plan Member/Patient Hospital utilization, Specialty Physician consultations, Tests and Diagnostic Imaging, even if PCP control over such utilization had practical limits. Many States passed laws (with associated financial penalties) setting common rules and regulations governing timely Insurance plan payment to Providers. Limits on Provider Networks: Either real limits were imposed, or the providers considered the payment and other concessions that were the price of provider inclusion in insurance plan networks too high. In some States the concern of Physicians that they would be left out of the networks contracted and used by Managed Health Insurance plans (specifically HMOs and PPOs) resulted in those States passing Any Willing Provider laws. Limits on Provider Tests and Procedures, Hospital Admissions and Lengths of Stay, Ambulatory Care Services, and Specialty Care Physician Consultations: HMOs and POS Managed Health Insurance plans used Utilization Management, Case Management, PCPs (as “gatekeepers,”) and other centralized health plan controls to reduce and stabilize inpatient admissions, inpatient lengths of stay, selected diagnostic tests and procedures, and Specialty Care Physician consultations. Some Specialty Care Physicians, especially, resented this limitation on their incomes. Affected providers generally opposed what they saw as an uninformed and insulting attack on their clinical skills and judgement, as well as their incomes. These limits affected Individual Physicians, Physician Groups, Hospitals, and other providers. PCP Disenchantment: See the three previous bullet points. employee/PLAN MEMBER Concerns: Employees/Plan Members reacted strongly to the massive and rapid implementation of Managed Health Insurance plans. Although health insurance premium increases slowed, National Health Expenditure did the same, and patient cost-sharing was in some cases significantly reduced, for many Employees/Plan Members these positive benefits were either not visible, were too abstract, or seemed to be an inadequate payoff for what was perceived as massive and unwarranted health plan interference in access to providers, tests, and medical procedures. Making Access Difficult: Routine Care: Perhaps most important was the sense of Employees/Plan Members that they were being denied necessary care, even if that was not true. Central health plan interference, extensive use of PCPs as “gatekeepers,” and the various bureaucratic obstacles to getting certain tests and procedures, and to accessing Specialty Care Providers, all worked to frustrate Employees/Plan Members as well as Providers. For years Employees had been able to access Specialists as they wished, with interference from neither plans nor PCPs. Making Access Difficult: Experimental Care and Life-Threatening Conditions: There was a belief, supported by some high-profile cases, and encouraged by the mainstream U.S. media, that innovative and often life-preserving care was being denied because of Managed Health plan oversight, policies and procedures, and overall interference in the doctor/patient relationship. Concern that HMOs and POS plans were not covering certain clinical services: In the late 1990s, all States passed laws ensuring that HMOs and POS plans included certain services in the core benefits packages offered by those plans. PPOs were usually not identified as problems in these situations, and were often not included in the State laws which were passed. Limits on Provider Tests and Procedures, Hospital Admissions and Lengths of Stay, Ambulatory Care Services, and Specialty Care Physician Consultations: Employees/Plan Members in many cases saw these limits as unnecessary interference in the care process – again, this was entirely different from the Indemnity and Service Health Insurance plan had been. Limits on Provider Networks: This limited the kind of patient choice that Employees/Plan Members were used to under Indemnity and Service Plans, and could negatively impact Continuity of Care. Belief that Health Plans were Not Acting in the Best Interest of Employees/Plan Members: Many Employees/Plan Members felt that the restrictions on choice of provider, tests, and treatment were meant to generate profits for the Managed Health plans, not to improve the quality and affordability of personal health care goods and services. Provider Negativity toward Managed Health Insurance Plans influenced Employee/Plan Member attitudes toward that kind of insurance. PERSPECTIVES ON THE BACKLASH. EXCERPTS: The Managed Care Roller Coaster: THE HEALTH CARE BLOG: JULY 16, 2008 By MAGGIE MAHAR & NIKO KARVOUNIS Paul Ellwood and the HMO Concept as Developed in the 1960’s – The Managed Care Backlash in Context. To understand what is going on, it’s helpful to consider the history of HMOs in the U.S. As originally conceived by pediatric neurologist Paul Ellwood and the “Jackson Hole Group” in the 1960s, HMOs were all about managing care in the truest sense: actively regulating and coordinating medical services to ensure the best marriage of health outcomes and cost. Here’s how Ellwood’s HMOs worked: patients enrolled in a plan that provided access to doctors and hospitals in a specific network of providers.  Providers receive a fixed payment, per patient served, per month, for a particular set of services (this is called capitation). Their goal: to keep these patients well. (This is why they were called “Health Maintenance Organizations,” or HMOs.) In return, doctors have the security of knowing that they will always have customers. These referrals will come from the primary care physicians in the network, who serves as “gatekeepers,” recommending a visit to a specialist when a patient needs it. The idea here is to build the high-quality/low-cost truism into the very machinery of health care plans. First, because patients need referrals to see a specialist, and provider payments are fixed, much unnecessary spending can be curtailed. We know that “fee-for-service” payment provides perverse incentives to “do more.” By contrast, fixed payments encourage more efficient medicine because doctors are getting one lump sum, regardless of what they do, they are not encouraged to undertake unnecessary, labor-intensive, high-cost procedures. Instead, they are motivated to stop sickness before it starts. The emphasis is on preventive care — which in the long run, is less costly for everyone and less time-consuming for the health care provider. Finally, while many patients object to going through a “gatekeeping” primary care doctor to get a referral to a specialist, this is all part of making sure that “the right patient gets the right care at the right time.” More than two decades of work by Dartmouth’s medical researchers have shown us that when patients see more specialists, outcomes are not better; often they are worse. Last, but certainly not least, Ellwood envisioned HMOs as non-profit organizations subjected to strict quality reviews (with these reviews based on medical research). In Ellwood’s mind, plans would compete with each other on quality, not price. The cost-consciousness of managed care is balanced with an emphasis on outcomes. Ellwood’s original model for HMOs is “managed care” in the sense that Paduda talks about. It tries to encourage smart, efficient, and financially sustainable medicine, all in the interest of patients. Yet today, the phrase “managed care” has been besmirched. Conventional wisdom has it that HMOs are among the most heinous villains in the health care field. Yet in theory, HMOs are a perfect marriage of cost-consciousness and quality. So, what went wrong? One word: Profit. Transformation of Managed Health Insurance Plans in the 1980’s and the 1990’s: Some Sources of the Managed Care Backlash. Enter the Profit-Motive As Ellwood lamented in an interview with Time magazine in 2001, ultimately HMO’s have focused on “competition on price alone,” instead of quality. The management of care has become a game of accounting, rather than an exercise in strategic medicine. It wasn’t always this way. The first HMOs adhered closely to Ellwood’s vision. As George Anders notes in his 1996 book, Health Against Wealth: HMOs and the Breakdown of Medical Trust, almost all of the HMOs through the 1960s and 1970s were non-profit, and “they approached their goals of providing affordable medical care and promoting wellness with an almost missionary-like zeal.” The welfare of the patients came first, as “ninety percent of the premiums they collected — and often more — went for patient care.” By the 1980s, Ellwood’s managed care model had gained a lot of momentum. One 1986 Health Affairs article noted that between 1980 and 1984, the percent of insured households enrolled in an HMO increased by one-third. The percentage of corporate employers offering health plans where at least 10 percent of their employees had joined HMOs almost doubled over this period, from 26 percent and 45 percent. Yet as the HMO industry grew, Ellwood’s vision of patient-centered, cost-effective care receded into the background. Quality in health care is hard to measure (so hard, in fact, that a frustrated Ellwood eventually founded a non-profit to push for more clarity and accountability in health outcomes). Sadly, as the market expanded, size — not quality — became the major metric for success. Bigger HMOs could offer a wider network of providers — and consumers like having a broad choice of doctors and hospitals. Meanwhile, nonprofit HMOs were hitting a ceiling in terms of expansion. They couldn’t amass the capital necessary to become huge, because, as Anders notes, the plans “couldn’t issue stock and sometimes had trouble arranging bank loans.” Their solution? Become for-profit corporations and make stock available to the public to create and expandable base of shareholders. President Reagan also had a hand in the shift to for-profit HMOs in the early 1980s. The HMO Act of 1973 had made federal grants and loans widely available to non-profit operations. This is one reason why, in 1981, 88 percent of all HMOs were non-profits. But in the early 1980s, Washington cut off the stream of federal funding — and eliminated a major incentive for nonprofit status. Thus, for-profit insurers took over the HMO industry. In the 1970s, notes Anders, there were “30-odd HMOs, almost all not-for-profit.” By 1997, there were “well over 600, more than three-quarters of them investor-owned.” HMOs became big business. With the advent of share-holder HMOs came a change in priorities. As Anders puts it, “once managed-care companies started entering the for-profit arena, the financial world’s values started seeping in.” Securities analysts and big investors refused to support plans that spent “too much” on members, leaving “too little” for shareholders. “Before long,” says Anders, “HMO bosses regarded boosting stock prices as a major priority.” And that meant maximizing financial gains to ensure a sound investment. Unfortunately, Wall Street isn’t savvy when it comes to medicine. The delivery of care that Ellwood labored so intensively to coordinate was reduced to a line item in a budget and a sunk cost. Increasingly, patient care was viewed as the least desirable of expenses, because it never found its way back to the company. HMOs shifted expenditures away from patients and toward business operations like marketing, administrative overhead, and salaries—expenses that are understood by Wall Street as a cost of doing business. In an indication of how the profit-driven mindset took over managed care, the percent of premiums that insurers actually paid out for patient care was re-christened the “medical-loss ratio.” Reimbursements for medical care were regarded as an undesirable financial loss, regardless of whether the care was necessary or unnecessary, life-saving or totally ineffective. Insurers were not getting smart about health care delivery. According to Anders, in the late 1970s leading nonprofit HMOs spent about 94 percent of premiums on members’ medical treatments; by the late 1990s, leading HMO companies were spending less than 70 percent of their earnings on patients. Plans began rolling back coverage based solely on cost — as opposed to cost-effectiveness — and refused to cover expensive procedures like certain cancer treatments. Preserving the bottom line became a mission divorced from any interest in medical necessity: in one blog post, Paduda notes that insurance giant WellPoint actively canceled coverage for seriously ill people if they actually sought care, and the company HealthNet “paid bonuses based on executive’s success in canceling individual policies” for people with high claims. The clumsy stinginess of private insurers has not escaped the public eye—and it’s helped to fuel the belief that “managing care” equals refusing people treatments they need. As recently as 2004, 61 percent of Americans were worried that their health plan was more concerned with saving money than providing the best treatment. As a result of the backlash, HMOs have moved away from Ellwood’s capitated model. Too many people worried that when doctors were paid a lump sum to keep a patient well, they might skimp on care. And in fact, some for-profit HMOs did encourage doctors to “do less.” But at the same time, many doctors realized that it was in their long-term interest to do everything necessary to keep the patient well, both because they wanted the best for their patients, and because they realized that, if the patient became sick, this would mean more work without additional pay. Nevertheless, patients suspected that if a doctor wasn’t paid fee-for-service, they would be short-changed. “Capitated care” began to disappear. People said it “just didn’t work.” Here the last of Ellwood’s bulwarks against high-cost, low-quality care crumbled. Now too many HMOs offer the worst of both worlds, focused on reducing care even as they adhere to a payment system that encourages high-volume, wasteful treatments. 8