Changing Perceptions, Changing Reality
Rashi Fein
It should come as no surprise that Americans are deeply troubled about the ways in which we receive health care. We are worried about what analysts call "health care delivery and finance," that is, where, from whom, under what conditions, and with what financial implications we obtain health care services. We have all been participants in, as well as witnesses to, a revolution in the ways we intersect with an important social service, one that has significant implications for our well-being and carries with it extensive emotional baggage. It is understandable that, finding ourselves in the midst of a revolution, we would be confused and frightened.
We wonder what will happen when we turn to the modern replacement for the traditional and familiar Blue Cross-Blue Shield plan or similar arrangements we thought we understood. We do not really grasp the changes in Medicare, such as the differences between "Original Medicare" and "Medicare+Choice" and the various arrangements possible under the latter, such as health maintenance organizations (HMOs), preferred provider organizations (PPOs), provider sponsored organizations (PSOs), private fee-for-service plans (FFSs), medical savings accounts (MSAs), and religious fraternal beneficiary plans (RFBs). We are concerned about the development of new, merged, sometimes for-profit, hospitals. We are troubled about the fact that our physician, now an employee of an HMO and subject to its rules and regulations, seems busier and more rushed. [End Page 985]
Put simply, we neither fully understand what has transpired nor have any real feel for what may still occur. We do not understand why the changes are taking place or what is and will be forcing them. We do have a suspicion, sometimes more a nagging awareness, that the various changes are interrelated and are driven by economic forces. We believe that somehow "bottom line" concerns have replaced concerns about patient care. We fear that the individual patient no longer counts and that the day may come when we or our friends or relatives will not be able to compete in the marketplace. We wonder what will happen if insurance administrators or physician managers determine that the costs of diagnostic tests and interventions on our behalf exceed the revenues we generate.
That it is difficult to adapt to rapid change is clear. Yet, to say that the problem is only one of adjustment to rapid change is to paint far too rosy a picture. To argue that such change (even when beneficial) will be accompanied by a degree of confusion and trepidation, if not fear--that is, that our "growing pains" are to be expected and are justified--is true, but misses the point. Were that the whole story, all we would need to do is wait for today's "victims" to become wiser. Armed with that knowledge, we, the participants in this drama, would come to recognize that we were not really victims but witnesses, persons who had been present at the creation of a better health care system. We would understand that our complaints and fears had been temporary and the inevitable accompaniment to the upward march of progress.
That, however, is not the whole story. I believe that the American public's misgivings, misgivings that at various times and in various places have turned into a backlash, are real. Much of the anger relates to the overall health care and financing environment rather than to the behavior of a particular managed care entity. Nevertheless, managed care and the health sector environment are intertwined. Managed care is more than just a scapegoat. Nor are the misgivings simply the product of media exposés or sensationalism. It is true that America is preoccupied with medicine in its broadest dimensions (my local newspaper summarizes articles from the Journal of the American Medical Association and the New England Journal of Medicine, which in many cases are written for the profession and report on little more than early hints of future possible successful interventions). It is also the case that the journalistic endeavor may overemphasize the human-interest anecdote at the expense of the social science analytic generalization. Nevertheless, it would be a grievous error to dismiss the public's complaints as simply "overreporting" and to assume that the embers of disquietude among [End Page 986] those who receive and those who provide care (patients and caregivers) are being fanned into flame only by the zeal of journalists. The fears are justified. There is something real going on.
What are the significant problems that lead to public concern and, because they are not automatically corrected through self-regulating processes, call for public action? Although the managed care environment of the American health system affects both patients and caregivers, I shall focus on the issues confronting and as perceived by the former. I will ask what are the various things that trouble patients and potential patients--that is, all of us.
I believe that the public is angry about a real shrinkage of what has
come to be known as "choice." In the past, employers who contributed (in
whole or in part) to health insurance premiums selected the insurer, but
the insured and the care deliverer were separate and apart. Subscribers
selected their physician and that was the meaningful choice they
sought. That was the case because subscribers tended to view insurers
as undifferentiated: in large measure insurers behaved in a generally
permissive manner, bowing to the behavior of physicians whose judgments,
presumably, were based solely on their views of what was and what was
not good medical practice. Today, we ask in which plan our colleague
is enrolled; then, we asked who was his or her doctor. If choice was
simply taken for granted before the early 1990s, Harry and Louise
"educated" us about its importance as we were invited to listen in on
their kitchen-table conversation about the Clinton universal health care
program. "Choice"
--no longer to be taken for granted--was given an emotional overlay.
Yet most employees who are enrolled in managed care organizations selected by their employer (who contracts with the managed care entity or insurer, but who frequently provides less, sometimes substantially less, than 50 percent of the premium) have no choice among plans and, therefore, only restricted choice of physician. Only a small minority of employees can choose from among more than two plans. Furthermore, employees who prefer to enroll in a plan not selected by their employer may discover they are not permitted to do so. Thus, for example, in order to prevent employees from "gaming the system" and searching for plans with lower risk subscribers and lower premiums, Massachusetts does not permit employees with "employer provided" insurance to purchase their own plan even as an individual subscriber. Some choice!
The irony, of course, is that the Clinton plan, whatever its strengths and weaknesses, would have permitted the individual to choose: "purchasing alliances" notwithstanding, each of us would have been offered [End Page 987] at least one plan in each of three prototypical arrangements (from fee-for-service to HMO without out-of-network options). One does not have to remember the Clinton plan's characteristics to understand the anger that many Americans feel toward today's arrangements. This anger has little to do with the performance of a particular managed care organization: we may prefer a black car, but resent being told that that is all that is available and we cannot choose another color; we do not like dictatorships even when they are "benign." The problem is felt to be especially real and acute--not simply one of theory--since the choices we cannot exercise are perceived as important and meaningful because we do not believe the "dictatorship" is benign.
We should not be misled by the fact that most subscribers will not be able to document incidents around which they have specific complaints. Most subscribers are healthy most of the time and do not have a meaningful intersection with the health care system in any given year. We dare not dismiss the significance of unease by focusing on the rate of complaint. That is especially the case if we use the wrong denominator in calculating that rate, in other words, the number of subscribers rather than the number of individuals with meaningful encounters. Subscribers do generalize: if it can happen there, it can happen here; if it has happened to the person in the newspaper story, it can happen to the reader as well.
The frustration with the lack of choice is exacerbated by the fact that when choices are offered, employers often provide equal contributions toward premiums regardless of differences in rates charged by the various managed care organizations. As a consequence, effective choice is often constrained by the employee's economic circumstances. Of course, this kind of price rationing is basic to the distribution of most goods and services. CEOs live in better housing than do their secretaries; they wear finer clothes, take more expensive vacations, and drive more luxurious automobiles. They have more disposable income, face fewer monetary constraints and, as a consequence, can exercise more choices.
The problem is that Americans have come to believe the rhetoric that surrounds medical care. On the one hand, television has imbued medical care with high drama and has led to the perception that medical care frequently (rather than seldom) involves life and death situations. On the other hand we are told that matters of life and death should not be rationed through normal market mechanisms. Multiple levels of quality are found and are explicitly accepted in most spheres of activity, but that has not been the case in medicine. Most Americans believe that the differences [End Page 988] in quality of care (rather than in the level of amenities) are minimal and feel that is appropriate. The intrusion of economics into our decision-making process in selecting insurance coverage and, thus, in the delivery of care is disquieting. We had come to believe it was and would remain otherwise.
We had also been told--and had come to believe--that economics in general and economic disparities between individuals did not and would not intrude into the caregiver's decision-making processes and selection of therapies. While we may not fully understand the ways that physicians are paid and the role that capitation plays, we are increasingly aware that, in the new health care environment, clinical options and decisions are constrained by the particular managed care entity with which we and our physician have an affiliation or relationship. Thus, how we fare today may turn out to be dependent on an earlier economic calculus by us or by our employers.
We view managed care organizations with (justified) misgivings, if not suspicion, when we cannot distinguish between the insurer and the deliverer of care because both functions are combined in one organization. We cannot help but wonder whether the financial imperatives of those who manage the insurance function will not overpower the medical imperatives of those who deliver the care.
Old established ways and organizations are changing. Mergers and acquisitions, phenomena that (along with downsizing) have dominated the business news during the 1990s, have become commonplace in the health sector. The news stories about hospitals and HMOs are now found in the business pages, where they vie for attention with the latest economic reports from insurance companies and pharmaceutical houses, as well as non-health-related institutions. It should, therefore, not come as a surprise to find that, reading and hearing the language of the marketplace applied to the health organizations they intersect with, more and more Americans find managed care entities indistinguishable from other parts of the economy.
To fully appreciate Americans' misgivings requires that we note one additional important change that has occurred: the entry of for-profit firms into the delivery of personal health care services. Surely, the shift from not-for-profit community-based organizations (hospitals and prepaid group practices) to for-profit firms whose stocks are traded on Wall Street, further fans the suspicion and fear that economic imperatives associated with the "market" are replacing what we believed to be dominant, patient-oriented medical values. While there is much evidence that [End Page 989] Americans believe market competition confers many benefits, Americans do mistrust bigness and fear that the interests of "big business"--and health care increasingly is big business--run counter to those of the small consumer. We believe in competition and, yet, are leery of a health care system that is organized around the profit motive. Put simply, we want to believe that health care delivery is organized to help patients, not stockholders.
There are those who would argue that these various fears are exaggerated and that, as indicated earlier, the problem is simply one of temporary dislocation caused by rapid change and exposure to the unfamiliar. I disagree. Economic theory can illuminate the possible future; we can judge the possible and likely outcomes of the new arrangements. We can ask whether we are likely to find sufficient real (even if not pure or perfect) competition when adequate consumer information and ease of entry by new firms--preconditions for effective competition--are absent. We can ask what protections the consumer has when there is insufficient competitive behavior. We can ask (and fear that we know the answer) whether a for-profit sector would be willing (or able) to continue to engage in cross-subsidy financing that has enabled the uninsured and those with inadequate coverage to receive medical care. The answers to those questions about the long run must come from theory since, at present, the data available for analysis are place and program specific, reflect short-run behavior, and--given the rapid changes taking place--are quickly outdated. Yet, given the level of competition, economic theory provides little comfort. It is for this reason that I believe we must look to regulatory and legislative actions for our protections.
I believe that the federal government and the various states need to exercise closer scrutiny of mergers, acquisitions, and conversions, especially, but not limited to, those with for-profit entities. Government has considerable power to investigate and approve or disapprove if such changes reduce competition. Furthermore, the various attorneys general can set many of the terms of acquisitions and can make certain that in conversions from not-for-profit to for-profit status charitable assets are appropriately valued and "community benefit" programs are protected. The federal government can assist state regulatory agencies by gathering and analyzing data and by increasing the exchange of information (especially about national companies).
I believe that government(s) should enact meaningful "consumer bills of rights" as well as "patient bills of rights" that strengthen accountability [End Page 990] and provide effective consumer and patient protection as well as legal recourse and remedies for inappropriate insurance/provider behavior. 1 Furthermore, recognizing that since government tax arrangements confer substantial benefits on those who pay for health insurance (as well as on the insurance industry), government should exercise more authority and responsibility in defining health insurance arrangements that merit favored tax treatment. Deductibility of premiums should not be possible when the insurance that is purchased fails to meet Internal Revenue Service (and state tax authority) standards and criteria. For example, the government could define acceptable payout ratios that, if not met, would render the coverage unacceptable for IRS and state tax deductibility. Similarly, government could require that employers offer their employees meaningful choices from among the various managed care options available in the geographic area. Finally, it is time to begin a comprehensive reassessment of appropriate changes in the federal Employee Retirement Income Security Act (ERISA). Enacted to deal with pension issues, it makes it more difficult to regulate employers, insurers, and HMOs. By making them less accountable and by circumscribing available legal protections that employers, subscribers, and patients would otherwise have, it creates a set of perverse effects.
I recognize that many might argue that all this is unfair, that were such measures enacted, managed care would be subject to closer scrutiny and tighter regulation than once was true for fee-for-service insurers. I find the counterargument compelling. Prepaid group practice, HMOs, and managed care organizations have long maintained that they offer an advantage over existing arrangements because they are organizations that can assume responsibility and accountability. In proclaiming their advantages they have argued that they have helped lead the "cottage industry" of medicine into the modern world and that now they provide a "complaint address." They should not be permitted to claim they are accountable while behaving in a manner that provides little or no recourse for the subscriber and the patient.
There is much that government can and should do to increase the many benefits that managed care can bring and to reduce its perceived and real negative impacts. Nevertheless, important as it is to improve the performance of managed care, in my judgment the nation faces an even [End Page 991] higher priority. It is time--and has been for many decades--to provide for universal health insurance. We need to act on behalf of the over forty-three million Americans who are uninsured and underinsured (and whose number is increasing even though the economy is strong). It would be irresponsible if legislatures devoted so much time and thought to increasing the rights of those who have coverage that they neglected the needs of our neighbors who lack even the most basic protections. Americans deserve action on both agendas.
Harvard Medical School
Rashi Fein is professor of the economics of medicine, emeritus, at the Harvard Medical School. He received his Ph.D. in political economy (and watched JHU lacrosse) at the Johns Hopkins University. While at the University of North Carolina at Chapel Hill he wrote his first book, The Economics of Mental Illness (and watched UNC basketball). Subsequently, he served on the staff of President Kennedy's Council of Economic Advisers (where he was too busy to watch anything). Later, at the Brookings Institution, he wrote The Doctor Shortage (and watched two Wilburs, Cohen and Mills, bring Medicare and Medicaid into being). At Harvard he has continued writing and, with increasing distress, watching the transformation of our health care system.
Note
1. For an excellent discussion of the distinctions between consumer and patient protection, see W. K. Mariner, "Going to Hollywood with Patient Rights in Managed Care," Journal of the American Medical Association (1999): 281(9): 861.
