MANAGED CARE: Not Living Up To Expectations

      A front-page story in today's New York Times reports that "managed care has lost its luster as an industry and as the answer to the nation's health care needs." Chronicling the ingress of managed care into the American health care market, the Times says managed care "has so far served as a different way to pay for medical care, not a better way to provide it." And while it has contributed to significant cost savings, those savings "are likely to prove temporary" as coverage is becoming more expensive for small employers. Managed care also "has shifted many consumers' concern from cost to quality."

Still Not Happy
      Dr. Leo Henikoff, CEO of the Rush-Presbyterian-St. Luke's hospital system, said, "Four and a half years ago, the country was at a watershed and didn't know it. One option was a highly government-regulated system. That was the Clinton plan, and the country abhorred it. They took the other option, to throw health care to the marketplace, and four years later, people don't like what they're getting." Consumers' changing attitudes toward health care in general and managed care in particular were exemplified in a Times poll conducted in July. The survey found that 85% of respondents "said the health care system needs fundamental change," just "barely below" the 90% who said the same thing in a Times/CBS News poll conducted in 1994. About a third of the respondents said they were dissatisfied with "the quality of their family's health care," up from the 19% who said the same in 1994. Further, about the same number of people said they were not satisfied with health care costs -- 46% this year compared with 47% in 1994. Fifty-eight percent of respondents said HMOs had thwarted doctors' decision-making, compared with 17% who said HMOs improved it. The poll also found a "sharp reversal" in how consumers thought about HMOs' ability to improve quality of care, with the majority thinking optimistically just two years ago, compared to half of the respondents in July who believed "care would be harmed" by HMOs.

The Wrong Man
      The Times reports that "for all the populist vilification of managed care companies," the industry operates "within constraints set by other, often mightier businesses" -- large corporations who purchase the health care coverage for their employees. "Corporations with tens of thousands of employees know they can break an HMO by terminating its contract, so they can draw the line on what they will pay," according to the Times. Dr. Paul Ellwood said there is "a misperception about who's in charge" of the health benefit equation. "It's not the HMOs. It's the large corporate buyers of medical care," he said. But while many large corporations are using "their leverage to obtain a good mix of care and prices," the Times reports that small businesses aren't so lucky. According to a Health Affairs survey, monthly premiums for employees of small businesses (less than 200 workers) soared from $34 in 1988 to $175 in 1996. Premium increases are likely for all companies though, "because in their race to enroll the work force, 49% of the nation's 650 HMOs lost money through September last year," according to Interstudy Publications. "Ominously for the economy, employers and subscribers," the Times notes, "HMOs are trying to rebuild their profits with higher premiums."

Any Good News?
      The Times also reports on the move within the managed care industry to implement "evidence-based medicine," an aggregate medical data system which experts say will "enable doctors to make better decisions on treatment." But this effort "will require immense investments in computers and great changes in how HMOs and doctors do business." Princeton economist Uwe Reinhardt cautioned that the "benefits of evidence-based medicine will be awhile coming." The "best hope" he said, is "[t]hat after two or three years of premium increases, business and government will say, 'This doesn't work,' and that will wake us up" (Kilborn, 10/5).