t's no secret that Health Maintenance Organizations, known as HMO's, have made healthcare affordable for many Americans, but at what risks? Most employers offer some type of health care plan that is an HMO. Let's face it, given the choice among insurance coverage through your employer, in which he pays half the costs, or acquiring private insurance coverage outside your employer, most Americans choose to go with employer-provided HMO's. Why then, has there been so much controversy with HMO's?
An HMO is an organization whereby the subscriber, or patient, is allowed to choose a medical provider from a list of doctors within a certain medical group. Each physician has signed a contract to see patients at a reduced rate. This type of plan does not allow the patient freedom to see just any doctor. All referrals to a doctor, other than the patient's primary care physician, must be approved by both that physician, and the insurance company.
Most physicians add HMO's as a supplement to their practices. With HMO's, the patient has little or no co-payment depending on how the plan is set up. Most HMO co-payments range between $5 to $15 dollars per office visit. The doctor, may receive half or less than half of his normal fee from the insurance companies. HMO's are characterized with the tendency to over or under treat patients. HMO's put limitations not only on the income of the provider, but also on the type of treatment that may be done. If a patient is in need of a specialist for a specific ailment, the insurance company has to review and approve a referral and deem it necessary.
The process involves the patient going to his or her general practitioner, also referred to as primary care physician, to obtain referral. After this, the primary doctor submits referral to the insurance company and from there it must approve. This process could take weeks due to cumbersome paperwork and the limited number of specialist per each group or health plan. Again, many doctors only accept these plans to supplement their practices. It is common for them to stop accepting your HMO after only a few years which leaves the patient a choice of either paying cash, or changing doctors or insurance companies. One can see why this might be a frustrating process.
Managed care reduces cost by keeping a pool of doctors and specialist to a minimum, and at the same time keeping the volume of patients high. This often means that a patient may not receive the same amount of attention and care as they should, or were accustomed to. Consumers have long grumbled that HMO's have done too much too keep health costs down by stinting on patient care.
(1). Healthcare expenditures have more than doubled since 1965. Americans spend over a trillion dollars a year on health care. (2). As of 1996, 110 million Americans were enrolled in HMO's. More than three-fourths of all individuals in HMO's are covered by job-based insurance. More than 13 million Medicaid recipients have been put into managed care plans. Managed care and HMO's have been the subject of many negative stories in the press and are constantly being charged with endangering the health and lives of their enrollees. As a result, congressional hearing, state, and federal regulation, and action by the attorney's general has been warranted.
Before we can truly understand what beast may lay before us in regards to HMO's and the state of healthcare in America, let's review its' inception. Managed care was brought forward as a remedy for rising health care costs. The HMO Act of 1973 established federally qualified health maintenance organizations and overruled restrictive state regulations prohibiting HMO's. This act also provided certain grants and loans for the establishment of HMO's, and required employers to offer HMO coverage if the employers was located within a qualified HMO's service area.
It has been cited that the underlying configuration of HMO's rests in third-party payment. This means that someone other than the patient picks up the tab for service. The largest percentage of third-party payment in the system goes for Medicare and Medicaid. These programs were enacted in 1965 and are rapidly growing. To date, there are more than 160 million Americans who have job-based health coverage.
The main technique by which HMO's cut back on costly treatment is through resource constraint. This means that a certain fixed amount of money is assigned to health care and people who provide the services must come within this limit. Methods of this sort can be seen in the health care systems of countries like Canada and England. It has been observed that these systems spend less of GDP in health care than the U.S. (3). HMO's undertake to provide for people's medical needs for a fixed amount of money, then "manage" the care that we receive to stay within the limits. (4). Under Medicare contracts, HMO's agree to take patients off the government's hands for a fixed percentage of per-capita program outlays, regionally adjusted. This amounts to a colossal $5000 per enrollee. HMO's, as a result, have been criticized for "cherry picking" these enrollees.
HMO's want to attract healthier members of the Medicare population. In March of 1995, the Inspector General of the Department of Health and Human Services reported that more than 40% of Medicare HMO enrollees were asked about their health status prior to joining the HMO. A small, but significant percentage of those seeking to join HMO's were given a pre-enrollment physical. This practice is not permitted under current law!
Experience has shown that once enrollees become sick, HMO risk participants tend to get out of the program. This reduces the HMO's costs and drives up costs in the Medicare fee-for-service program. There is an incentive for HMO's to limit access to care for older and sicker enrollees. The sicker Medicare beneficiaries return to the fee-for-service pool, thus relieving HMO of costs associated with providing that patient with advanced or chronic illnesses and necessary equipment for care.
The Medicare HMO program cost the American taxpayers more than $410 million dollars. A 1991 analysis of the managed care industry by Health Care Financing Review estimated that the sickest 5 percent of the American population consume as much as 50 percent of the health care dollars.
(5). United States healthcare delivery is currently in the process of extensive restructuring. This reform movement has been underway for nearly a decade now. It has indeed manifested itself through HMO's and other managed care type delivery plans. Who is really benefiting from HMO's? It's certainly not the doctors.
Instead of the traditional fee-for-service, providers are being pre-paid a flat monthly fee for providing care, known as "capitation." Like the HMO itself, each staff physician is paid a certain sum of money per patient, whether or not that patient comes in for treatment. Some HMO systems incorporate withholds and bonuses, and grading sheets to reward physicians who are most cost-effective. This clearly puts the financial interest of the doctor against the medical interest of the patient! The premise is clear that medical decisions are not being made according to a physician's best medical judgement, but according to the HMO's profit motive.
(6). HMO's assert they have no liability when it comes to claims of medical negligence when injury or death occurs because they are only administering a benefit plan. In contrary, HMO's often determine which tests can be performed, who can have surgery, who can be admitted to the hospital and for how long, which doctor is available to take care of patients, and even what doctor can tell a patient about healthcare options. HMO's continue to claim they do not make medical decisions.
Peter Roam, spokesperson and attorney for Pacificare states: "HMO's normally cannot make decisions about treatment provided to their members. Those determinations must be made by treating physicians under contract with the HMO".
(7). Another alarming fact of HMO's is that under financial pressure, some hospitals are using nurses to fulfill the function normally provided by primary care physicians. As a result of these practices, HMO's have made huge profits and their executives are earning large incomes. These profits and large incomes are the result of funds created by limiting important and necessary medical care. As noted, the negative press associated with HMO's negligence is everywhere. What happens if you really get sick and require long and or expensive treatment in an HMO? HMO's dictate how long you can stay in the hospital and whether or not treatment or surgery is "medically necessary".
Medical necessity rests with the HMO and its' cost- controllers, not with you, or even your physician. Even if your doctor thinks treatment may be needed, pressures can be exerted on him or her to prevent this. Last week Daniel Jones, a 40-year old Long Beach, California man, killed himself on live television. Before he died, he made a grim and very public statement about health maintenance organizations.
HMO's are trying new ways to manage costs and improve care for their sickest and most expensive patients. HMO's only concern with regards to costs is that a very small proportion of their enrollments become extremely sick because most people stay fairly healthy. The premiums HMO's charge however, hasn't kept pace with their costs, and profit margins have dropped shortly as a result.
(8). Kaiser Permanente Group, the largest health maintenance organization in the U.S., reported an operating loss of $92 million in the first quarter. The Group has struggled to cut cost after reporting a $270 million loss just last year. The Oakland based company cites the loss was caused by a need to direct patients away from its' network in California, and pay for them to be treated elsewhere. Governor Pete Wilson, of California, has signed two bills in Los Angeles that will allow easier access to health specialist, and require HMO's to present their costs and benefits to consumers in easier terms.
California joins 15 other states with AB12, in allowing women in HMO's to choose women's health specialist as their primary care physicians, and to seek services from an gynecologists without a referral.
(9). HMO's are indeed big businesses that make a profit, however, they are not free- market institutions. As managed care surges to the forefront of our health care system, something radically new and different is happening. The social and political effects of this remain to be seen!
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