The system of managed care began in the United States in the early 1900s, in an effort “to provide coordinated health care in a cost-effective way”(Amer.
Assoc. of Retired Persons). Until recently,” managed care has emerged from the shadows to become the dominant form of health insurance and delivery,” succeeding the older fee-for-service program (Zelman and Berenson 2). Today, about 160 million Americans are enrolled in some kind of managed care plan.
Managed care “has made health care more affordable andmore accessible for Americans. But sometimes cost cutting can lead to lower standards” (Clinton 1). Because managed care plans provide medical care to their members at a fixed rate, there is a substantial limit to the medical care each member can receive. Under this system of prepayment, managed care organizations (MCOs) can profit off every dollar of revenue that is not directly spent on patient care.
This produces the problem of incentives, or temptations for MCOs not to provide sufficient medical care to their members, all too often resulting in tragedy (Fox, et al. 56). This problem explicitly impacts the estimated 125 million Americans who receive health insurance through MCOs that are provided by their employers. A federal law known as the Employment Retirement Income Security Act of 1974 (ERISA) governs these self-insured plans.
Under the Employment Retirement Income Security Act, ERISA-regulated MCOs are not legally held accountable for their actions. Until Congress passes The Patients’ Bill of Rights, MCOs will continually and wrongfully deny patients from quality care. Health costs have continually risen over the last decade. The average-income American family now spends an estimated $5,000 per year on health care alone, an amount that more than doubled from 1988-1996 (Maciejewski).
In an effort to relieve working Americans from this burden, Congress devised a federal tax law that would enable employees to obtain tax benefits for health insurance through their employers. Today, the vast majority of insured Americans acquire their health insurance through the workplace. ERISA governs the employer-based health system to protect employees from the potential abuses from their health plans (Amer. Psych. Assc.).
Although both the tax code and ERISA were concocted to help and protect employees, they play an indirect role in shaping the inefficiencies that envelop the employer-based system of health care. Subsequently, regulations imposed by managed care organizations (MCO) on physicians also Under today’s tax code, Americans can receive a discount on health insurance, granted that they attain it through an employer. The reason for this stems from a single provision of the Internal Revenue Code, “which excludes employer premiums from the employee’s taxable income” (Goodman). This means that health benefits provided by insurers are exempted from an individual’s earnings, treating them as if they were expendable to the actual income.
This tax alleviation “can reduce the cost of health insurance by 30 percent or more for an average-income family” (Goodman). By calculation, “an extra dollar of earnings can be used to buy a dollar’s worth of health insurance as an alternative to 70 cents of take-home pay” (Goodman). In contrast, individuals who purchase their own health insurance receive no tax benefits; therefore, most employees choose to join their employer-based health Many employers want to ensure that their workers have good access to health care so that they are more likely to stay healthy. Despite having to provide health insurance for their employees, employers also have to worry about the competition in the market. Because of this added obstacle, “employers will strive to push their employees into the least expensive insurance program in order to cut costs and remain competitive” (Gervais).
Employers tend to favor managed care organizations because of their cost-cutting strategies. Doctor Robert P. Gervais, member and Board of Director of Physicians Who Care, explains MCOs’ cost-cutting approach: “…managed care instruments promise to rein in medical costs by paying doctors, hospitals, and nurses more money to do less for patients…When fewer health care services are provided, health care costs should go down. It is clear that patients lose under a managed care system” (Gervais). Employees are also usually limited to the choice of one health plan—that which their employer chooses to provide (The Center for Patient Advocacy).
This is unfair to employees because they cannot shop around to find a health plan that would best suit The whole medical system becomes inefficient. The tax code neglects that individual choice is ruled out in the employer-based health system. How could quality care be insured in the health care system if individual choice does not exist? Furthermore, the tax code fabricates health care as an invisible benefit, “seemingly free to employees” because costs are directly deducted from their paycheck (Maciejewski). As a resulting effect, employees become less cost-conscious, overpaying for unnecessary coverage and services “that could have been purchased more efficiently out of pocket or might not have been In sum thus far, Congress has inadvertently placed the health of working Americans in the hands of their employers, which in turn is overseen by the physicians of the managed care plan.
Because of strict regulations and policies imposed by managed care plans on their physicians, they represent yet another factor in the inefficient system of managed care. Physicians are attracted to Managed care plans under the premise that they would be guaranteed an abundant number of patients. Once enrolling, physicians are prompted to sign a contract. Provisions or “gag clauses” in physician contracts prevent them “from giving patients information about treatment options that may not be covered by their health plans” (Cooper).
This is a clear violation of the informed consent requirement that Congress has dictated as law. Moreover, gag clauses may also limit physicians from referring patients to specialists outside their health plans. Some managed care organizations and insurance companies retaliate against doctors who send their patients to specialists too many times, or too soon, or order expensive tests that the doctor feel is necessary but the MCO does not. They retaliate by firing doctors who do not follow their rules even if their rules may be dangerous to patients.
The pre-determined budget or utilization target that MCOs establish and their physician payment system affix more problems. The system of capitation that physicians are paid accordingly to, provides physicians a fixed amount, not per service, but per enrollee on a monthly basis. Because physicians are given a utilization target that limits how much they could spend on patient care, they can be put in a financially insecure situation. If the utilization target is surpassed, the physician must pay for the extra services himself.
Therefore, instead physicians are tempted to provide less service to their patients. Providing fewer services can be detrimental to patients but can be rewarding for physicians. Bonuses are given to physicians from the unspent fund when services of their patients’ are lower than the utilization target. The expressed concern that MCO policies and regulations have in interfering with the doctor-patient relationship is keenly expressed by Dr. Bruce Rushbaum, who practices internal medicine: “The plans have swung so far against what is good for the patient and what is fair for the physician that it has impacted most negatively on the quality of health care If physicians are making negligent decisions that are jeopardizing the health care of patients, why don’t they file a claim for damages against their physician or their health plan? Congress has passed patient protection acts that would allow patients to be compensated for damages caused to them, however, this does not apply to everyone. Those patients that are enrolled in employer-based health plans, governed by the Employment Retirement Income Security Act, don’t have the same protections.
ERISA, which was ratified by Congress in 1974, was “intended to protect employees from potential abuses by their benefits plans. However, with the evolution of the health care system from a fee-for-service to a managed care system, ERISA has evolved into a shield of immunity that protects MCOs from potential liability for their negligent denial of health benefits (Amer. Pysch. The main reason for ERISA’s failure is its “preemption clause”. This loophole requires that “federal law override state laws relating to employee pension and benefits plans. When applied to managed care health plans, the clause creates an incentive to deny care because it removes (“preempts”) state law protections for patients, while federal law offers them virtually no effective remedy” (Hoffman and Hiepler A19).
This unfortunately puts workers and their families much at risk. In a Louisiana case, Corcoran v. United Healthcare, Inc., 965 F .2d_1321 (5th Cir. 1992), Florence Corcoran was insured through her employer which administered United Healthcare as the utilization reviewing agency.
Mrs. Corcoran was deemed to have a high-risk pregnancy because of her history with pregnancy-related problems. Taking this into careful consideration, “her doctors recommended hospitalization so that the fetus could be monitored as the due date approached, and another obstetrician (who was used for a second opinion) concurred” (Pollack). Despite her doctor’s request, United Healthcare insistently denied the hospitalization, but appointed an in-home nurse to attend Mrs. Corcoran ten hours a day.
While the nurse was off duty, the fetus developed complications and died. Mrs. Corcoran and her husband brought their litigation to court, alleging that the MCO’s decision not to provide her with the hospitalization caused the death of their unborn child. Despite the obvious injustice, the courts ruefully ruled in favor of the MCO because of the ERISA preemption clause. Sadly, but true enough, the haplessness of this situation can be best put in the words of Bob Herbert of the New York Times, “Insurance companies are not in the business of curing people, they are in the business of making money. They will use any excuse to deny payment of what they perceive as more expensive therapy” (qtd.
in Zelman Under ERISA, patients are entitled to equitable relief. This means that a patient can recover the value of the denied service, which sometimes comes far too late. However, ERISA restricts patients from obtaining monetary damages or “compensation to make him or her whole from the benefit denial, even in an event of loss of life because of the health plan’s improper denial” (Pollack). The Corcoran family only received in compensation, the value of the denied hospitalization, an insignificant amount compared to The Patients’ Bill of Rights, supported by the American Medical Association and the American Nurses Association to name a few, would ensure an end to MCOs’ wrongful conduct. Should Congress enact this bill, the Patients’ Bill of Rights would provide patients an independent authority where they can appeal their managed care plan’s decisions. Patients would also have the right to hold health plans accountable when things go wrong.
Another important aspect of the bill is that it would allow patients to get emergency services when the patient thinks he or she needs them. Had this bill been approved in previous legislative reforms, Troy Benoit would still be walking today. In Benoit v. WW.
Grainger, Inc. et al., No. 98-1315, 1998 U.S. Dist. LEXIS 16988, 7 (E.D.
La. Oct. 21, 1998), Mr. Benoit’s health insurer, Aetna, refused to provide the emergency services he needed. After sustaining serious neck and spinal injuries from a motorcycle accident, hospital physicians urgently recommended that he have surgery immediately.
Aetna formally refused to fund the procedure, but eventually certified it. Despite the reversed decision, Mr. Benoit was left paralyzed with little or no chances of ever walking again (Amer. It is evident that the tax code unintentionally limits the choice of health plans that employees can choose from, sometimes being limited to only one choice. Employees are wrongfully compelled to join a health plan that is not in their best of interests. Regulations imposed on physicians also add to inadequate health care.
The failure of the intended role of ERISA, to protect employees, predominantly adds to the inefficiency of the managed care system. The working American, thus, is truly a victim of a non-ending cycle of negligence and irrationality embedded in the lawmaking by Congress. Yet opponents in Congress and the managed care industry, especially self-insured employers, have reasons to believe that expanded liability will force insurers and employers to pay for unnecessary health care, encouraging employers to drop health coverage. Also, the Patients’ Bill of Rights will increase health plan costs, which would ultimately increase the The managed care industry fears that the Patients’ Bill of Rights would have a reverse effect. The opponents of legislative reform argue that expanded liability on ERISA-regulate MCOs (mainly the employer-based system) would force insurers and employers to “practice ‘defensive utilization review’—paying for unnecessary or inappropriate health care to reduce their risk of even more costly litigation” (Arg. Against Liability).
Patients would have the incentive of taking advantage of health care services causing an unbalance in the health care budget. If managed care legislation passes, it would further more encourage employers to drop health coverage. If employers were to be discouraged from providing health insurance, this would force insurance companies to downsize their networks and eventually consumers would “have substantially less choice among available types of coverage” (Arg. Against Liability). Another point that opponents of the Patients’ Bill of Rights want to clarify, is the effect that managed care reform will have on the costs of health insurance. Because the health system is so competitive, insurers “cannot afford to absorb the increased cost of expanded liability” (Arg.
Against Liability). These costs would be passed on to employers, who also cannot afford to absorb the costs. Unfortunately, these costs are eventually passed on to employees, “either directly or indirectly lowering their pay or decreasing the amount of benefits they receive” (Hoffman 17). Moreover, expanded liability could escalate the costs of health care.
Increased costs of health plan coverage would have a chilling effect in increasing the number of uninsured Americans. This negative aspect of managed care reform is supported by the general counsel of the Self Insurance Institute of America, Brian Davenport, who also practices law in Franklin, Indiana: “If you substantially increase the cost of providing the benefits, I think there’s a strong possibility that you will substantially increase the number of people The supporters of the managed care industry and the employer-based health care system have brought into perspective, rational arguments. Despite their contrasting viewpoints, they fail to realize that employers are not the ones making the medical decisions, managed care plans are. Managed care reform protects employers from liability when they are not involved in the medical decision that results in harm. The principle that we should be held accountable for our own actions is universally accepted. The bottom line is that managed care plans should be held accountable, just as everyone else is.
Congress can improve ERISA by explicitly removing the “preemption clause” that currently limits states’ abilities to establish accountability for wrongful denials of MCOs’ to their patients. If ratified, the Patients’ Bill of Rights would amend the loophole in ERISA. Congress should do its part to protect the welfare of those Americans that are affected by ERISA-regulated MCOs. Three of the top managed care organizations in the industry, including Kaiser Permanente, are calling for legally enforced standards.
Clearly, “when respected leaders of an industry are calling for standards to be placed upon themselves, it is a sure sign that Congress should act” (Managed Care Reform: Fact vs. Fiction). Clinton, Bill. “The President’s Radio Address.” “ERISA Managed Care Organizations Should Be Held *http://www.apa.org/practice/erisa.html* Fox, Peter D., et al., eds. Determinents of HMO Success. Office of Health Maintenance Hoffman, Ronald F.
and Mark O. Hiepler. “An Easy Out Washington Post. 4 April 1998: A19. “Managed Care Reform Legislation: Fact vs. Fiction.” *http://www.patientadvocacy.org/main/managed “Managed Care: What Consumers Need to Know.” 3 August *http:www.aarp.org/monthly/managedcare/home.html* (21 Pollack, Ron.
“Current Problems with the Federal Security Act of 1974.” 14 May 1998. *http://www.familiesusa.org/erisa2.htm* Zelman, Walter A. and Robert A. Berenson.
The Managed Them. Washington D.C.: Georgetown Press, 1998. __________________________________________________ Talk to your friends online with Yahoo! Messenger. Works Cited Clinton, Bill.
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Office of Health Maintenance Organizations. January 1998: 56. Hoffman, Ronald F. and Mark O. Hiepler.
“An Easy Out for Managed Care.” The Washington Post. 4 April 1998: A19.”Managed Care Reform Legislation: Fact vs. Fiction.” 1 January 1999. http://www.patientadvocacy.org/main/managed care/mcrl_fvf.html (21 April 1999). “Managed Care: What Consumers Need to Know.” 3 August 1998.
(21 April 1999). Pollack, Ron. “Current Problems with the Federal Employment Retirement Income Security Act of 1974.” 14 May1998. (21 April 1999).
Zelman, Walter A. and Robert A. Berenson. The Managed Care Blues and How to Cure Them. Washington D.C.: Georgetown Press, 1998.