Albert Francis E. Domingo, MD

my flight of ideas

Health as Wealth: Managed Care

Posted on | June 3, 2006 | No Comments

(Part 7 of Stateside Healthcare: Art, Science, and Commerce?)

Coming from that issue on medical malpractice and physicians practicing defensive medicine, it then becomes important for someone to be able to pay for all services rendered. This is where healthcare insurance comes in, and managed care systems such as the one KSC is practicing takes center stage.

Managed care in the US has a history dating back to 1929 when the first health plan in the country was established for farmers in Oklahoma. Baylor Hospital in Texas followed in the same year, providing care to teachers on a prepaid basis. Health Maintenance Organizations (HMOs) then began operations in the 1940’s. The first Independent Practice Associations (IPAs) followed in 1954, wherein individual physicians would join a group to provide medical care with a health plan.

With the Federal HMO Act legislated in 1973, government then provided financial assistance to start up new HMOs, and federal law pre-empted local State laws that restricted HMOs. Furthermore, employers with over 25 employees were required to offer two federally qualified HMOs (a statute that was rescinded in 1975). Through this concept of “capitation”, the US health industry was shifted from a cost plus environment to that of a market environment, where competition and accountability for cost versus quality control governed.

The years between 1985 to 1997 saw a paradigm shift from traditional methods of care to managed care. A continuum of care was established between inpatient and outpatient facilities. The care of the individual was undertaken to prevent episodes of illness in high-risk populations, a primary prevention practice. The fragmented care system was integrated: from the absence of quality measures, outcomes became monitored. Collegial relationships between healthcare professionals turned into contractual relationships bound in law.

Lately in the US national perspective however, Preferred Provider Organization (PPO) growth has been greater than HMO growth. This may have had an impact on primary care, because PPO members are not required to get referrals from a PCP (acting as gatekeeper) for specialty consultations .

Nongovernmental/private payers in the meantime have been consistently demanding quality medical care for less cost. With healthcare purchasing coalitions forming to achieve more economic leverage and physicians responding in turn by forming alliances to compete for managed care contracts , healthcare has definitely become market forces-driven.

Because they cater towards patients seeking to avoid all the confusing and costly aspects of US medical care as discussed above, health insurance companies themselves have had leverage in the healthcare decisions of individual patients. As may be gleaned in patient interviews parallel with this paper, patients do not care any more on their preference of PCP type – be it an internist, family practitioner, or pediatrician in the case of children – so long as their healthcare insurance will cover the costs and they get well. The same goes with selecting a generalist versus a specialist – whatever the insurance company dictates is followed.

Even the therapeutic aspect of healthcare – pharmacotherapy in particular – is influenced by insurance; certain drugs prescribed may not be covered by insurance plans, and the pharmacist is forced to dispense cheaper drugs that may be generics of the prescription or in some cases, equivalents. Where a brand-name medication is deemed to be medically necessary yet still not covered by insurance, the patient is left with no recourse but to pay for the drugs or have another consultation with his/her physician for alternative therapy options.

It is therefore not surprising that physicians must have a basic grasp of the healthcare insurance system, because patients usually ask outright during the consultation if the treatment plan determined by the physician is covered by their insurance.

This intense interaction of healthcare and economics has even been used as a tagline to the advantage of a US Air Force advertisement recruiting doctors, because military physicians do not deal with insurance. The probable frustration of physicians over this complexity is highlighted by the said tagline: “No one goes through medical school to practice insurance.” The advertisement further states: “Today’s financially driven managed care environments make having a practice difficult. Hurrying patients in and out of the office to make a quota and going into negotiations to prescribe treatments that don’t coincide with a patient’s policy aren’t practicing medicine.”

Next: Synthesis

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