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Managed Care

The Purchaser - a Response to Graeme Samuel's Model.

This page was written to enlarge on my criticism of Graeme Samuel's marketplace model for public health care. It addresses the similarity between Samuel's role of purchaser and the role of managed care. It discusses some of the fundamental problems in managed care. It suggests possible alternatives.

The Purchaser of Medical Services

Graeme Samuel's Purchaser:- One of the economic roles defined by Graeme Samuel in his speech to the world bank was the role of purchaser. This role includes "determining what services will be purchased and in what quantities. It also includes the question of what providers will be engaged to provide those services and on what terms". This is where Samuel considers the "potential benefits of competition are greatest". He sees no impediment to this role being privatised.

Managed Care:- Samuel does not use the word managed care but this is what managed care companies in the USA do. Funders are government (federal medicare and state medicaid programs), corporations which pay for insurance for their employees, and a relatively smaller number who take out medical insurance themselves. The managed care companies sell health care insurance packages. The government, employer or the patient pays the company usually called a Health Management Organisation (HMO) for taking the responsibility and the risk of illness. The HMO then pays for the care when it is needed and does so in terms of contracts competitively entered into by providers. This is what Samuel's purchasers (Health Improvement Agencies- HIA's) will do. This is in fact a type of insurance and large insurance groups like Prudential, Aetna and Cigna have dominated the market.

The problem is that health care is not like a pane of glass which is either broken or not broken. There are many complex issues. It is the doctors who theoretically decide on treatment and they have an ethical committment to do the best for the patient regardless of the cost. The HMO's therefore target the doctors. They have taken control of their incomes and used this leverage in order to limit care and keep the costs down. They vet every clinical decision to decide whether they will allow treatment. The patient who usually has not paid is caught in a process where every other participant is under extreme pressure to limit the care given to him so that they can make a profit. It is little wonder that he is distrustful. His role as a customer is very limited.

Isn't this simply Managed Care:- As I see it Samuel's purchaser is simply a variation on the managed care theme. To escape the odium surrounding managed care he describes his version of cost containment agencies as "corporatised Health Improvement Agencies" or HIAs. The competitive contracts he proposes and the pressures they exert on care have put a brake on rising costs in the USA. They have done so by limiting care sufficiently to reduce costs and also take the profit needed for shareholders, for marketing, and for growth. This presumably is what Samuel intends. If he means something else then he has not indicated this or how it differs although in his speech he claims that what he proposes is different.

The Problem with Managed Care

The Consequences of Managed Care:- This is a system of care which has alienated the whole community in the USA. It has occasioned so much concern that laws have been passed to protect citizens from its excesses. The most successful lawyers in the country are now pursuing HMO's for denying care to the people they have undertaken to care for. There are now laws preventing HMO's from denying needed care. Governments have been forced to introduce laws which stop the HMO form forcing the patient to move from their own doctor, the one selected from a limited list supplied by the HMO, to one of the HMO's choosing right in the middle of an episode of care simply because it is cheaper for the HMO. This practice disrupts the whole clinical process.

Competition and Profit:- Any common sense assessment must reach the conclusion that what is happening in the USA and what has forced the government to step in to protect patients is a direct result of the competitive pressures for profit. Samuel ignores all this. Instead he claims that the benefits of competition are greatest when the purchasers - ie HMO's are competitors. The only people who have benefited from corporations in the USA have been the directors and shareholders of the HMO's.

Managed care is promoted by international health care consultants as giving consumers more choice. In fact it restricts choice. They market HMO's across the world. Samuel supports them by promoting this model at the World Bank. If I fall ill when I travel then I pray that it be in a country which has retained a National Health Service!

The Uninsured:- In the USA there is a very large rump of people who cannot afford insurance. They only seek care when acutely ill. They must pay themselves and have little choice. Because as individuals they have no bargaining power these less privileged citizens usually pay much more for care.

One of the claimed benefits of managed care is greater emphasis on preventive medicine. This group gets no preventive medicine and little care. Almost any cooperating integrated system could provide equal or better and more equitable preventive care than one based on Macmedicine style corporate providers.

Privatised Purchasers:- Samuel suggests that government purchasing could be delegated to private purchasers. This is exactly what the US federal government did quite recently. Until quite recently medicare did not diferentiate between the roles of funder and purchaser. It acted as both. During the last few years medicare recipients have been encouraged to select an option to join an HMO for which medicare paid or contributed.

HMO's initially competed for these patients but after a while there was reluctance and many contracts were dropped. Medicare patients like our public hospital patients proved to be generally less healthy and more often sick. They were unprofitable. An investigation also showed that HMO's failed to properly inform and educate medicare patients so that they did not know what they were entitled to and did not claim. HMO's are now dropping medicare contracts as quickly as they can.

Cherry Picking:- Cherry picking, the selection by an HMO of patients on the basis of wellness or sickness is illegal in the USA. For an insurer sick patients are profitable, the sick costly. There are reports that indicate that cherry picking by most HMO's occurs in subtle ways which cannot be prevented. Inquirers are for instance asked about their health and illness before they are given information and advice. This can be tailored to encourage or discourage. HMO marketing is concentrated in fitness centres and gyms where the elderly are healthy and do not drink or smoke. Pubs and nursing homes are a no no!

The consequence is that medicare has paid the HMO's to care for the healthy and they make a big profit. Medicare is left paying for the care of the less healthy and the sick - the big costs. While cherry picking is illegal regulation, as is so often the case simply cannot cope with the intricacies of the real world. These things happen when the pressures generated in a social system are not congruent with the outcomes desired. It is a design fault. This is exactly the problem with Samuel's model.

Patching the system:- When a leak occurs it has to be patched by regulation and this has been done repeatedly in the USA. Instead of addressing the fundamental design flaws Samuel is including the patches in his model. These are the same patches which have failed to stem the disintegration of health care in the USA.

Doctors and Costs

The Health Care Professional:- Samuel carefully skirts around one of the central problems in cutting costs in health care.

Doctor's are the people who spend the money. They admit patients to hospital, they order the investigations, prescribe the treatment and say when the patient can go home. Their signatures are required for this. They are trained to do this and their right to do so in the interest of the patient is enshrined in law. They will do as much for their patients as they possibly can with the resources they can lay their hands on. If they are there they will use them. Managed care has cut costs and made large profits by preventing or dissuading doctors from acting primarily for their patients.

Another problem is the volume of knowledge. No doctor can really claim to know enough or to be fully up to date. To know all the tests or all the drugs. There are always gaps and uncertainties. When to do tests or prescribe drugs is a matter of judgement. There is strong pressure from the companies doing tests or selling drugs. They all promote the advantages of their products. The doctor will always err in the interests of the patient and will give them the advantage of any possible benefit from the products. These pressures from the market and their consequences in Australia are addressed in depth by Ray Moynihan in his book "Too much medicine".

Doctors will not want to miss a diagnosis so will do tests when they have the slightest doubt. The threat of litigation helps the process along. It is easy for drug representatives to play on this when marketing their drugs. Drug representatives play down complications. Because of the pressures of a busy practice they are often the main source of information.

It is not surprising then that there is overservicing and excessive use of drugs. The pressures are that way. It is easy to accuse doctors of being greedy and as in all walks of life some are. In practice most of the vast sums of money tied to their signatures goes into somebody else's pocket, usually a corporate group. Doctors are about spending some one else's money on something which someone else is selling. Not surprisingly those with the money don't like this and those receiving the money encourage it.

To make more money or to reduce the costs of care the cooperation of the profession must be obtained one way or another. Their commitment to do all they can for their patient makes this difficult. This fundamental right of doctors to act for their patients stands in Samuel's way and is perhaps one reason why he is so critical of professionalism. If his model is to reduce the costs which he is so critical of then he must address the way doctors spend it in some way. He does not tell us so we must look at the way the market has addressed this problem elsewhere. What choices does he have?

Care for the Patient Becomes Care for the Corporation:- The market meets its objectives by buying doctors compliance. Califano in 1994 indicated that doctors were no different to other citizens who had careers and families. They could be controlled if you controlled their incomes and their careers. This is how the market and economic theory works - a sort of carrot and stick approach. We know it works well on rats, and we also know that it works on all animals including humans. By controlling doctor's incomes and their careers they are bound to the corporate mission.

Economic theory ignores the fact that as humans we also have higher faculties which reason and think. We have motives, values and cognitive systems. When these are ignored so that we are driven in ways which are not congruent with our values and beliefs then we experience "dissonance". People become alienated and angry at the situation in which they find themselves. This can be considerably sweetened when people are rewarded and made comfortable.

A few years ago Queensland health responded to anger about care in public hospitals by giving doctors a pay rise. It worked! If we look at the market system in the USA then it is clear that the cognitive systems and values of the community, the doctors and the nurses are being challenged. Even when they go along with the system most are angry and alienated. There is too much resentment to buy compliance.

Buying Doctors:- In the USA direct economic pressures on doctors in return for services or referrals has been prohibited by anti-kickback laws. They compromise the care patients receive. The market has either ignored this legislation or circumvented it in some way. Economic success is dependent on influencing the way doctors provide care. Almost all of the numerous multimillion dollar fraud actions against hospital corporations and laboratories have included allegations that kickbacks were paid for referrals or for other money generating activities.

Tenet/NME entered into golden handshake agreements paying for doctors rooms, secretarial assistance, research and even giving home loans for which they did not always seek repayment. These could be withdrawn at any time. The agreements became golden handcuffs binding the doctor to the corporate mission. The company effectively purchased the use of the doctor's MD degrees. The consequences are described on this www site.

Columbia/HCA also found ways of rewarding doctors for their support, principally by using the opportunities provided by their integrated system. An administrator alleges she was required to pay kickbacks. Reports indicate that since the fraud investigation Columbia/HCA are reviewing their contracts with doctors and are calling in the money which they are owed by doctors. The justice departments have not yet revealed their charges publicly but the company is dangling US $1 billion as a carrot to entice the government into a settlement. These matters are also described on this www.

Managed Care Controls Doctors:- Managed care achieves most of its money saving effect by contracts with doctors. These link the doctors income to reduced spending in a number of different ways. The classical way is to use the doctor as a gatekeeper and give her a large interest in keeping costs down. She is funded for caring for the patient. Every time she orders a test or X-ray or refers the patient to a specialist this comes out of her income. She is effectively screwed into the market and the conscience decision. If she neglects her patients she can make a fortune. If she cares for them properly she will starve. This will bring out the worst in some doctors. The same fund holding system was introduced into the National Health System in the UK. It has now been abandoned.

Samuel does not make it clear whether the purchaser will be contracting with doctors individually, or with doctors forming themselves into corporate groups. In the next paragraph he hints at individual doctors but it is difficult to see them fulfilling Samuel's objectives or competing successfully in the environment he plans to create. Alternately he may see the doctors as being employed by big provider corporations or else contracting with them in turn. All of these have been employed in the USA. They are variations on the managed care theme. They all have the same objective. What Samuel proposes can only be a variant of what has been happening in the USA. If he has some other way around the problem we would like to know.

The Market and People

Ignoring the Way People Think:- One of the great problems with market theory is that it does not factor the human component into its arguments. The "way" and "what" of thinking which develop in and contribute to understanding social context are not considered. What I am referring to is the way in which the marketplace makes people think and what they conclude about their situation - essentially the culture which develops and the form which it is given as individuals externalise it in their actions.

Peter Berger, writing about the nature of reality and the way in which it is defined socially addressed this problem in social theory. He was talking about sociology. He claimed that it is unhelpful to deal "with such social phenomenon as if they were, in actual fact, hypostases independent of the human enterprise that originally produced them and keeps on producing them. There is nothing wrong, in itself with the sociologist's speaking of institutions, structures, functions, patterns, and so on. The harm comes only when he thinks of these, like the man on the street, as entities existing in and of themselves, detached from human activity and production. One of the merits of the concept of externalisation, as applied to society, is the prevention of this sort of static, hypostatizing thinking."

In referring to understanding social structures he stresses that it "ought always to be humanizing, that is, ought to refer back the imposing configurations of social structure to the living human beings who have created them"

(Peter L. Berger, in "The Sacred Canopy: Elements of a Sociological Theory of Religion", 1967. Adapted from Peter Berger and Thomas Luckman, in "The Social Construction of Reality - a treatise in the Sociology of Knowledge", 1966.)

Is there a Better Way

If doctors are to cooperate in reducing costs and in being more efficient then in a system built on cognitive understanding rather than behaviourist economic practices we would try to create a situation where doctors are personally involved with the community and the patients in the decisions.

I am suggesting an integrated community based system where the citizens representing the community's interests and the doctors looking after patients will look together at scarce resources and see how they can be best distributed.

In an integrated system built around a continuously growing data base it should be possible for each service to instantly provide doctors with a cost benefit analysis of a test or drug in a particular situation as they work. The community and doctors can decide what risk of missing a diagnosis is acceptable and this will provide legal protection as inevitably diagnoses will be missed. Even when the risk of doing so is small. A few patients will die as a result.

Policy decisions can be made by each integrated community service in the full knowledge of and the actual experience of the consequences. These will be monitored. The individual doctor will still act for the patient but may have to justify her actions before colleagues and the community which will include past and present patients. Because the overall process will be monitored overuse and underuse will be apparent and the reasons for each explored. This would not be a policing exercise in the sense proposed by Samuel. It will be a support system which brings the full resources and the experience of the whole service including the support of the community to the doctor and her patient.

I like to think that by harnessing the community, patients and the doctors to the common purpose of stretching resources as far as they can we will create a system which avoids many of the problems of the market. If there is medical and community support it makes it much easier to ration.

The Internet Savvy Patient

I am speculating about possible alternatives to the marketplace solution. One of the major changes thrust at the profession is increasing patient self education. It is promoted in support of a health care marketplace. This is a good place to address this issue.

Doctors even specialists have a broad training and it is not possible to have an expert see every patient. Patients will research their diseases and will frequently come to have considerably more knowledge but probably not more judgement than their doctors. In a system of distrust they are going to find their doctors wanting - and this is happening increasingly often. There may also be patients who will be caught up in all sorts of weird theories and treatments marketed on the web. The medical services are going to have to handle and help these people. Rather than trying to sell them a product we need to be helping them to empower themselves and guide them towards decisions.

For many doctors care of intelligent educated patients able to understand and discuss the issues is very rewarding. It becomes more like treating a colleague. This is why specialist private practice is so personally rewarding for the doctor. I see the doctor as becoming much more of a facilitator and trusted friend, discussing and learning together with the patient. They will share and swap internet sites. The internet can play an important part. Some doctors will clearly need to step off their pedestals. What I am describing is the very opposite of the distrustful patient shopping around for a health care "product". These people can be very difficult to help.

Supporting the patient and his doctor will be the resources and knowledge base of the service. This will include specialists with a particular interest in the patients condition. Video conferencing makes it possible for the patient and the doctor to quickly include a specialist authority in their discussions. With the possible exception of psychiatry a lot can be done here. Simple problems can be answered or a key test ordered. A consultation can follow or be avoided. The GP in a small rural town will have the full support and access to specialist advice from all the services. These patients will have access to the information and the knowledge needed to examine the risks of missing a diagnosis if a test is omitted. If the benefit is small and this is something which the service does not cover then they may decide to pay for it themselves.

Central Map ..... Initial Map ..... USA Map ..... Australian Map ..... International Map ..... Corporate Practices Map..... (to print)
  Home Page .......... US Corporate page ........ Access to Managed Care 
This page created April 2000 by Michael Wynne