American College of Physicians: Internal Medicine — Doctors for Adults ®


12 fundamental problems

Why for-profit managed care fails you and your patients

From the November 1996 ACP Observer, copyright 1996 by the American College of Physicians.

By Gordon Schiff, ACP Member

  • Previously published ethics case studies are available online.
  • For additional ethics resources, visit the College's Center for Ethics and Professionalism

On May 1, 1990, I read ACP's position paper on universal health insurance in Annals of Internal Medicine and immediately decided to become a member of the College. Like many colleagues, I was convinced that ACP could be an important voice advocating for a better U.S. health system.

Much has happened since then. Health reform has come and gone from the politicians' rhetoric. More significantly, U.S. health care has undergone a corporate transformation that is incompatible with our goals of universal access.

Patients and physicians yearn for a system that is accessible, coordinated, high quality, cost efficient, prevention-oriented and free of financial barriers and hassles. While managed care purports to fulfill these goals, for-profit HMOs and health plans actually exacerbate many of the problems they claim to cure.

I believe physicians must address the following 12 fundamental problems with for-profit managed care so we can get back to caring and advocating for our patients.

1. Medical loss ratio. The fact that managed care corporations define the money they spend caring for patients as the "medical loss ratio" epitomizes how the needs of sick patients are pitted against the profit-seeking nature of these plans. Health resources should be used to serve people, not siphoned off for multimillion dollar corporate salaries and profits.

2. Denied care. More than 70% of health dollars go to care for the ill. In a for-profit environment, the quickest route to financial success is to attract healthy patients and screen out high-risk groups. Another trick is to limit services that attract the sick and disabled, and obstruct care for members who get sick. It's impossible to regulate all of the ways plans can do this. Despite Medicare regulations against "cherry picking," for example, Medicare HMOs have continued to recruit healthy patients. Researchers have shown that Medicare HMOs select patients who use an average of 12% fewer resources than elderly patients in fee-for-service plans.1

3. Report cards. Health plans are busy creating report cards that include information from individuals who have had few medical problems and little contact with the system. When we stop diluting this data and look at sick patients who use the system, dramatic quality differences emerge. Recent reports from the Medical Outcomes Study and the Robert Wood Johnson Foundation show significantly worse access, satisfaction, and outcomes for the poor, sick and elderly in managed care. These figures warrant careful scrutiny before we push more patients—particularly vulnerable Medicaid and Medicare patients—into managed care plans.2,3

4. Confusion and waste. A frequent patient complaint with fee-for-service medicine was the fragmentation of care, with too many specialists who knew too little about the whole patient. Managed care, however, confuses restricting care with coordinating care. Primary care physicians' relationships with patients and specialists are repeatedly disrupted. Patients with a definable disease risk being "carved out" to an asthma, diabetes or a schizophrenia "disease management" factory.4 Physicians dealing with armies of corporate utilization managers spend millions of hours chasing approvals, correcting inappropriate denials and dealing with conflicting formularies, all of which leads to skyrocketing administrative costs. As each plan develops its own electronic medical records, billions of dollars are wasted on incompatible information systems.

5. Wrong incentives. While managed care advocates correctly point out that fee-for-service medicine has more than its share of abuses and incentives to overtreat, capitation is not simply an inverted fee-for-service system. It is more akin to an illegal kickback arrangement. Giving financial rewards to physicians who order or deny tests and referrals allows bribes to influence their decision making.

6. Eroded trust. Primary care needs to be structured to preserve the physician's role as a trusted patient advocate. How can patients feel reassured by their physician's decision not to order a CT scan for a headache when they know he is being paid to deny the test? Turning patients and physicians into adversaries generates intense antagonisms that undermine the trust needed for health care to work.

7. Disgruntled patients, harassed doctors. Because most patients and providers have been forced into managed care arrangements under duress, exam rooms are increasingly filled with angry patients and stressed physicians. Knowing that they lose money every time a patient walks into their office makes physicians loathe sick patients. When you combine this with doctors' frustrations over inability to choose treatments and make clinical judgments, a decline in compassion and communication is inevitable.

8. Distraction from clinical challenges . My HMO colleagues say, "We never sit around and talk about medicine and challenging patients any longer. Now our obsession is with managed care deals, marketing and survival tactics." It's easy to engage in mergers and buy hospitals and practices; the real challenge is providing more scientific, effective, high-quality clinical care.

9. Wasted public funds.Managed care plans receive federal dollars to train residents, but few actually provide any training. Typically, 20% of Medicare and Medicaid payments go to HMO profits and overhead. HMOs eschew the most complex patients and dump them back onto the public sector—to be cared for at public expense.

10. Disempowered patients. Restricting patients' options takes away their strongest quality leverage—choice. The business ethic makes managed care organizations accountable to corporate stockholders, not the public or patients. It's hard for a patient—much less a physician—to go head-to-head with these increasingly powerful organizations.

11. Professional abdication. Physician organizations are less and less often confronting the contradictions of managed care and are instead fearfully scrambling for the best deals. Academic medical centers have compromised their leadership role in medicine to become players in this new game.

12. The uninsured. Finally, for-profit managed care offers no solution to the major problem motivating health reform—the uninsured. Recent data from the Employee Benefits Research Institute recently found more than 61 million non-elderly uninsured.5 By diverting revenue away from the hospitals and clinics that serve the indigent, managed care exacerbates the problem of access.

Gordon Schiff, ACP Member, is director of the Clinical Quality Research Unit at Cook County Hospital and past president of Physicians for a National Health Program.

1. Weissenstein E. Study: Medicare overpaying HMOs. Modern Healthcare, July 22, 1996:25.
2. Ware JE, Bayliss MS, Rogers WP. Differences in four-year health outcomes for elderly poor, chronically ill patients treated in HMO and fee-for-service systems. JAMA. 1996; 276:1039-1047.
3. Donelan K, Blendon RJ, Benson J, Leitman R, Taylor H. All payer, single payer, managed care, no payer: patients' perspectives in three nations. Health Affairs. 1996;15 (2): 255-265.
4. Gerson V. Chomping at the health care system. Business and Health, August, 1996: 29-33.
5. Fronstin, P. Health Insurance Portability: Access and Affordability. Employee Benefit Research Institute May 1996 Issue Brief #173.

This is a printer-friendly version of this page

Print this page  |  Close the preview




Internist Archives Quick Links

Not an ACP Member?

Join today and discover the benefits waiting for you.

Not an ACP Member? Join today and discover the benefits waiting for you

ACP offers different categories of membership depending on your career stage and professional status. View options, pricing and benefits.

A New Way to Ace the Boards!

A New Way to Ace the Boards!

Ensure you're board-exam ready with ACP's Board Prep Ace - a multifaceted, self-study program that prepares you to pass the ABIM Certification Exam in internal medicine. Learn more.