Health Maintenance Organization

by Melanie Roth

Health care before the existence of HMOs:

The failure of the President's health care reform proposal was due in part to a lack of public understanding about how a managed competition based system would work. Even if many Americans understood the concept easily, most would not be able to identify how such a system would affect their interactions with health care providers.

Understanding how managed competition is supposed to work does not necessarily mean understanding how it will affect our lives. Americans had many questions about the President's managed competition concept. Can I keep my doctor? Will I be able to see a specialist when I need one? Will my taxes increase? Will I have to join an HMO? There were no specific answers to these questions. The President structured health care reform around a valid concept but details describing how this concept was to be applied were lacking.

Opponents of managed competition gladly provided Americans with answers to these questions; answers biased against the reform proposal for political and business reasons. Congressional Republicans described managed competition as a means by which the Democrats would exert more control over American's lives. The pharmaceutical industry spent over seven million dollars on public relations explaining how governmental price controls would decrease new drug discovery. The American Medical Association told how increased government involvement would result in less freedom for health care consumers. The claims made by these groups and others added to the confusion surrounding the President's plan. There certainly was a lack of understanding about how managed competition would work and most available information was emanating from the proposal's opponents.

It was difficult for the President to defend his plan against these attacks because the task force had not yet decided upon many details regarding how managed competition would work. Other details that were agreed upon were not released. In order to defend the plan, proponents would need access to specific details about how it would work. By the time these details were made available Americans had been bombarded with over a year‘s worth of information from interest groups condemning health care reform.

Competitive market forces reduce costs and eliminate waste from the health care system. We know however, that simple economic models are insufficient when applied to the market for health care services. Sometimes the market fails and government must intervene for the greater good of its citizens. The Medicare program resulted from such a market failure. The elderly are the largest consumers of health care resources yet are the least able to pay for these services. This combination of qualities would normally result in a lack of insurers willing to enroll elderly members. Because society believes (rightly) that all senior citizens should be provided with health care, the government ensures access to care through subsidization.

What is an Health Maintenance Organization?

An HMO is a group that contracts with medical facilities, physicians, employers and sometimes individual patients to provide medical care to a group of individuals. This care is usually paid for by an employer at a fixed price per patient. Patients generally do not have any significant "out-of-pocket" expenses.

An HMO is usually a for-profit corporation with responsibilities to its stockholders that take precedence over its responsibilities to you. The HMO directly and indirectly controls the amount of health care that the doctor is allowed to provide to you.

Conditions or Standards for inclusion in a HMO:

The health maintenance organization shall provide, in the organization's proposed contract,specific release and indemnification of

1. any liability arising from unpaid medical and hospitalization claims, including any and all services furnished by providers upon prescription by a participating organizational physician;
2. any liability involving medical malpractice claims.

The health maintenance organization must specify whether the organization's request is for inclusion to offer for a specific institution and must include evidence that the organization is capable of enrolling and servicing all employees, retirees and dependents of that institution. The health maintenance organization will not limit or discourage enrollment of any employee, retiree or dependent of an institution by "quota" or other enrollment restrictions. The health maintenance organization will not practice discriminatory selection or encourage segregation of the total group of eligible employees, retirees or dependents of any institution by excluding, seeking to exclude, or otherwise discriminating. The health maintenance organization shall provide in the organization's proposed contract a "Hold Harmless and Indemnity" clause regarding any and all claims, demands or judgments which might result from discriminatory organizational practices. The health maintenance organization shall not limit the choice of any employee, retiree or dependent or any component institution by denying treatment by any type of physician or other health care practitioner authorized to treat such covered individuals and shall not deny the covered individual access to treatment by any class or category of such physicians or practitioners which would have been provided the covered individual under the insured group health insurance plan.

The health maintenance organization must certify, with appropriate evidence, that it is qualified to do business as a health maintenance organization under federal or state statutes and regulations.

The health maintenance organization must state whether it has achieved financial stability and has remained solvent for the last three organizational fiscal years immediately preceding the date on which employees are to be offered enrollment.

The health maintenance organization must provide all information required for the request for inclusion of the health maintenance organization‘s option in a health benefits plan required, including the health maintenance organization's most recently audited annual financial statement.

The health maintenance organization must agree to provide annual audited financial statements and other financial information as may be reasonably requested.

What are the advantages of an HMO?

The first and most attractive advantage of an HMO is that people pay low premium or no premium at all, to belong to a managed-care company. In return, they receive all the medical care and Medicare, along with a full menu of extras such as drugs, vision and dental services. Overall, 55.7 percent of about 40 million managed care members surveyed say they are "completely" or "very satisfied" with their plans. When healthy people are surveyed, HMO plans typically come out with higher ratings than do fee-for-service health plans, says Robert Nielsen of the Gallup Organization in Princeton, New Jersey, mainly due to cost savings. But in polls of patients who have been hospitalized, HMOs are generally rated less favorably, he says, with respondents citing dissatisfaction with access to specialists, among other complaints. Even those who are very satisfied, however, have definite opinions not only about what HMOs do right but also what areas could use improvement.

"What HMOs have done is they have made health care more affordable," Dr. Alan R. Zwerner, senior vice president and chief medical officer of Health Net, a large California managed care plan. In 1996, employers with 10 or more workers paid $3,185 per worker for HMO coverage, a saving of $554 over fee-for-service coverage. In 1996, families with children saved up to $500 per year by choosing HMO coverage; those without children up to $440, according to a study by the Levin Group, a research and consulting firm.

In fact, the cost savings to some extent offset a member's dislike about the system, some researchers say.

Study after study has shown that preventive care is more extensive in managed care plans than in fee-for-service plans. One study of cancer screening among women found, that women in HMOs are more likely to obtain mammograms, Pap smears and clinical breast exams. According to AAHP's survey, virtually all HMOs cover flu shots and adult immunization and require minimal copayments for well-baby care, prenatal care, well-child care and childhood immunizations. HMO members can often access support groups, or educational programs that enlighten them about a specific condition such as diabetes for little or no cost.

What are the disadvantages of HMOs?

Once you are a patient in an HMO, your relationship with your doctor may be restricted. For example, if the doctor is a specialist, you probably cannot continue to go to that doctor. Many HMOs require you to choose a primary care doctor, usually a family practitioner, from their list. The primary care doctor, sometimes called a "gatekeeper," controls your access to medical care within the plan. Unless the "gatekeeper" decides, your medical problem is outside his or her own sphere of expertise, you will not get approval to go to a specialist.

Even if your original doctor is a family practitioner, you may still notice a change in your relationship. The doctor may not be as free to order special tests for you, may not be able to refer you to a specialist, or allow you to go to an emergency room.

You may also find that there is considerable turnover at the HMO, especially if it has "gatekeeper" doctors. Such doctors frequently feel frustrated because of the conflict of interest engendered by their position.

If you prefer to go to a particular hospital, you probably cannot still go there if you join an HMO. It depends on the plan. Many HMOs limit you to selected hospitals where they have arranged discounts. If your hospital is not on the list, you're out of luck. Moreover, if you need care when you're away from home, be prepared to pay for yourself. Unless your situation fits the HMO's definition of an emergency, the HMO will probably not pay your bill.

Many doctors are unsatisfied with managed care by HMOs, because they feel financial incentitives and pressures of HMOs that are hurting patient care, in the opinion of doctors. The majority of doctors asked, say that they feel pressure from HMOs to see more patients and to limit the number of referrals they make to specialists. Managed care is interfering with care for patients, so many doctors say. HMO contracts with doctors include bonuses to see more patients and curtail care. This clearly compromises the care given to patients. "Doctors are rewarded for the less money that they spend", says one doctor. "The best compensation system for cost reduction poses the greatest threat to quality. And above all, HMOs have so-called "gag rules". That means, they pay doctors if they do not tell their patients about certain expensive treatment options.

Most HMOs can dismiss doctors without cause, rendering the lifting of gag rules meaningless. HMOs also reward doctors who keep their costs in line -- for example, by limiting referrals or tests -- with a year-end bonus. As a result, patients are sometimes not offered the care they need. HMOs use silent rationing. They use less costly and less effective methods of treatment. The patient will never know (because the doctor may not tell the patient about all the options).Doctors go along with this to avoid being "booted out of the HMO."

Another problem is that HMOs, in an effort to cut expenses, often contract with low-cost providers for medical services, such as lab tests, which can lead to inaccurate diagnoses. A recent survey and report sponsored by the Patient Access to Specialty Care Coalition including Physicians Who Care has indicated a high level of patient concern over the practices of managed care providers. . The survey found that 95.1% of respondents felt they should have access to more information about whether an HMO offers financial incentives to physicians to restrict care for cost containment purposes. More than 90% surveyed would not trust a doctor if they knew he/she was forced through "gag" clauses and incentives to limit care. Over half of the survey respondents indicated they did not have enough information about managed care practices. In one of the more telling revelations, the survey respondents indicated they viewed both the Federal government and auto repair shops as more trustworthy than their managed care provider.

"Physicians in HMOs are ethically compromised," said Dr. Seth G. Spotnitz, President of Physicians Who Care. "Patients have a right to know this. Their health and even their lives are at risk. Managed care companies must be forced to divulge to patients how they reimburse their physicians."

Another very serious problem that came up in the past few weeks, is the fact, that many HMOs are pulling out of market, leaving those who were enrolled, with no health care at all. As HMOs are private companies, they can go out of business. Social Security generally can’t go out of business, but HMOs can. The number of HMO patients who are affected is substantial, even by the government’s estimates. President Clinton is trying to work out a plan that shall ensure each HMO patient that they are not left with no health care, but can return to their former medicare plan. Yet, many Americans, especially elder ones, fear that they will be left with no health care.