A Criticism of Managed Care

Managed Health Care has become the dominant system for health care delivery and financing in our country. Under this system, health care professionals and hospitals form structured networks in order to manage the expenses, quality and access to health care. Managed Care Organizations (MCO’s) account for the coverage of millions of health care consumers, yet they have not resolved the prevailing crisis of high cost and low access to health care. If the health care crisis is to be resolved, careful attention should be given to the history of MCO’s, their approach to health care administration and their consequent repercussions to consumer interest and physician autonomy, moreover, to their stand-point towards health as either a basic right or as a commodity.

MCO’s promote a unique approach to health care delivery and financing that differs from the common fee-for-service system. Traditional fee-for-service plans involve an insurance company that covers most medical fees, and allows patients to freely choose their providers (Birenbaum, 455). Since the third party payer (in the fee-for-service system) will ultimately cover the medical fees, such coverage has two additional effects:

1) It increases doctor-patient contact,

2) and creates opportunities for doctors to perform additional diagnostic tests for their financial gain and benefit to their patients (Birenbaum, 464).

In contrast to fee-for-service plans, MCO’s provide health care coverage based on capitation (a fixed fee per person), and exercise different forms of control over providers and consumers alike. These controls comprise of a fixed salary for physicians based on capitation, and stipulate patient restrictions on which doctors they can request for treatment. In the last few decades, managed care has become more popular among health care consumers and employers because capitation fees are typically lower than most common indemnification insurances (Birenbaum, 456). Yet, recent trends suggest significant increase in coverage fees, which has led to consumer dissatisfaction with managed care and the desire for health care reform.

Since its introduction, managed care was marked by strong support from the fiscal government due to their reasonable fees based on capitation and their emphasis on reaching high levels of cost-effectiveness. In fact, three decades ago, Congress enacted The HMO act of 1973, which required employers to offer their employees HMO’s as part of their health coverage, and granted millions of dollars to promote the establishment of HMO’s (Light, 492). In addition, Medicare and Medicaid, which are forms of managed care, were also ratified by US governments. Today, HMO’s have prevailed in the health care industry and their membership has grown significantly (Birenbaum, 458). Nonetheless, today most forms of managed care have been criticized for their policies on health coverage.

MCO’s have invested interests in cost-effectiveness and profit making; that distinguishes them as businesses seekers who compete and promote health care delivery under an industrial framework. MCO’s pursuit of financial gains leads them to complete annual “utilization reviews,” allowing them to evaluate doctors, patients or practices that are financially unattractive to their organization (Weitz, 230). This review helps them root out problems involving excessive spending, and openly establishes their system of check and balances on health care providers. Initially, health maintenance organizations were non-profit; today most are profit-seeking organization (Birenbaum, 461). Consequently, Birenbaum states that HMO’s function according to “standard business practices” and parallels the popular philosophy of American manufacturing in which managers “exhibit autocratic behavior in the workplace” (Birenbaum, 462). Managed care has become a business enterprise that has turned health care into a purchasable commodity; a fact that is associated with popular notions of U.S health care as an industry rather than a cause.

In comparison to the fee-for-service systems, MCO’s competitive moderate fees allow them to exercise significant control over consumers. They emphasize primary care treatment first, and then apply a referral system for patients who require medical specialists or expensive treatments. These referrals require the approval of the organization, and promotes the “gatekeeping” role of primary care physicians to high cost care (Birenbum, 455). These physicians, working under corporate influence, are encouraged to avoid unnecessary resource utilization and are often rewarded financially when they adhere to such practice (Birenbum, 457). Patients may desire special care or treatment from a specific specialist, but the standard coverage of managed care may impede such privilege. The gate-keeping role of the physician implies that only he can order, arrange and provide the patient’s overall health care. MCO’s may also place restrictions on out-of-state coverage (Weitz, 252) and affect the quality of care by limiting particular aspects of health coverage. To consumers, Managed Care raises issues of emergency coverage, restriction of services, specialized care options, overall quality of care and other central matters that affect consumer satisfaction with overall health care coverage.

MCO’s are also marked by their unique level of control over physicians. Their influence on physician autonomy is an important issue to analyze because it imminently affects the quality of health care provided. If you recall, MCO’s pay physicians on a capitation basis, and they also scrutinize their practice through a systematic review (aka, utilization review) that analyzes their performance on cost effectiveness to the organization – hence, a physician may request an expensive diagnostic test, at the risk of being investigated by the organization and perhaps censured for his utilization of resources. Physicians owning their personal diagnostic equipment are more likely to perform tests than those who do not own their equipment (Birenbaum, 465). This may be attributed to the fact that doctors practicing under MCO’s experience considerable, subjective restrictions. Birenbaum states that primary care providers “are encouraged to see the patients with as little frequency as possible, to limit testing, and to make as few referrals to specialists as they can” (Birenbaum, 461). The effect of Managed Care and physician autonomy is an aspect of the system that is often associated with consumer complaints and criticism. Here is one heartbreaking example:

Among all the industrialized nations in the world, the US is the only country that does not offer universal health care coverage to its citizens (Weitz, 253); this leads to fundamental concerns regarding MCO’s and their role in citizen’s health rights. The facts indicate that health care in the U.S is a commodity rather than a basic right. For example, today more than 40 million Americans are uninsured, underinsured or precariously insured (Weitz, 241). Although the US is the nation that applies a higher portion of its GDP into health among the 119 countries in the World Health Organization, it ranks thirty-seventh in quality of care (Weitz, 283). Managed Care is perhaps the most central element of the large and complex US health care system, thus playing a pivotal role in the crisis; although managed care aims at providing superior care at low cost, the present crisis suggest that MCO’s may actually contribute to the problem of reduced access and elevated costs of health care. Although MCO’s aim at achieving a cost effective system with equitable distribution of health care services, they are obviously not achieving the desired objective. Effective reform requires awareness of the principal elements, which characterize MCO's and their approach to health care delivery and financing. Understanding these effects that providers and consumers encounter in such system is also crucial for suitable health care legislation. By focusing our attention on MCO's and their role in the current crisis the nation may prevent futile reform efforts and create a system that embodies the desired effects of cost-effectiveness, equitable distribution of services, and high quality of care.

-Michael Garcia