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A strong political momentum in Congress to reform managed care. Our Dan Schorr talked about that with Susan Pisano from the American Association for Health Plans in Washington, DC, and out in Los Angeles, Jamie Court, the advocacy director for the Foundation for Taxpayer and Consumer Rights.


Let me ask first a kind of a threshold question, and I’ll address you first, Jamie Court. I wrote a book in 1970 about health care, in the course of which I hailed the advent of this new institution called the health maintenance organization, the HMO, and I wrote that this is going to be a solution to a lot of problems. I even went back to 1938, when the industrialist Henry J. Kaiser offered to look after his workers’ health with a group of doctors, for which his workers would pay 5 cents a day. Where did now the HMO go wrong?

Mr. JAMIE COURT (Advocacy Director, Foundation for Taxpayer and Consumer Rights): Well, I think the HMOs of the ’70s and ’80s were far different than the HMOs of the ’90s. And I wrote a book in 1999 called “Making a Killing: HMOS and the Threat to Your Health,” and it told hundreds of stories about exactly where they went wrong. You know, we used to have community medicine, we used to have not-for-profit HMOs run by doctors on a basis where you had one-stop shopping–you had the doctor, you had the clinic, you had the hospital, they were salaried positions.

And in the mid-’90s, after the failure of the Clinton health care plan, we had for-profit corporations come in and buy up these community-based HMOs, centralized decision-making, inject the for-profit corporation into the doctor’s office and really change the doctor-patient relationship fundamentally. And suddenly doctors had to get approval to let patients into a hospital, to administer tests or procedures. And now we have about eight managed care companies that control the health of the nation, and they’re not in those communities.

So I think what went wrong was profit motive. What went wrong was the for-profit corporation trying to turn the healing arts into a money machine, and largely they have, but it’s been at the expense of the patients I talk about in my book.

SCHORR: Susan Pisano, corporations with money motives?

Ms. SUSAN PISANO (American Association for Health Plans): Well, I would disagree with that. I think what happened in the mid-’90s was that employers were looking for different ways to introduce workers to managed care. So we have a different kind of plan than might have been the case years ago, many different variations on the managed care principle, but all with the same goal, which is that you prevent what you can, you screen for, detect early and treat comprehensively what you can’t. And the idea is that, in the long run, this kind of good health care saves money for the health care system, but results in better care. And I think the debate aside in Washington, if you look at the results that are shown in the literature, in the studies that are being done, what they suggest is that that goal is on its way to being achieved.

SCHORR: And so, Jamie Court, can managed care, as it’s now called, HMO as was called in my time–can it be saved? Can it be made into something that serves the American insured?

Mr. COURT: I think it can if it had the same legal accountability as every other industry in America, from credit card companies to car manufacturers. That’s what saved these other corporations. And one real interesting thing is from 1976 till 1987, if you had health care through a private employer, you could sue them for damages. Now, because of a legal decision in 1987, you cannot sue these HMOs for damages. The most you can ever recover from any corporation, no matter what they do to you, any managed care corporation, is get the cost of the benefit you were denied. That’s kind of like you have a bank robber and all they have to do is give back the money. You’re not going to deter bank robbing. And I think what these corporations did was natural. They made as much money as they could, they did it at patients’ expense because that’s what the market allowed, but that’s because the market never included the type of accountability we’re talking about in the United States Senate.

And I’ll tell you, if you look at where HMOs are today, you’ll see this week there was a study released that found that five CEOs of the leading HMOs made tremendous amounts in compensation. The top guy at United HealthCare, William McGuire, made $ 54 million. This is not something that the HMOs of the ’70s, even early ’80s, would have allowed. These were doctors in communities. These were not moguls like other corporate America chieftains. And I think the reason the industry went wrong is because they had the motive to do so and not the laws to make sure that they didn’t.

SCHORR: I think, Susan Pisano, you may not agree with all of that?

Ms. PISANO: Well, I don’t agree with it. I think there’s been some look at this question of for-profit and not-for-profit, and we haven’t really found a difference in terms of issues relating to quality of care. And, in fact, I think that the not-for-profit plans themselves would say that they want to be judged on something other than their tax status. I would also disagree that the issue here is, how many ways can you be sued? Really what we have is a malpractice system in this country that’s run amuck, and if you ask physicians, what they will tell you is that more lawsuits don’t make people do better medicine. The few physicians who do practice bad medicine are undeterred and the rest of the health care system pays the price in terms of the practice of defensive medicine.

Mr. COURT: Well, I think it’s interesting that the American Medical Association supports the McCain-Kennedy legislation, which has full unlimited liability for HMOs. So I think what the doctors are saying is, ‘HMOs aren’t respecting our treatment calls, and they need the same liability that we in the hospitals have.’

Ms. PISANO: What we’re saying is that if you look at the studies, what they tell you is that in so many of the cases where there is an award against a doctor, and a large amount awarded, the research says there wasn’t malpractice committed. What we want to do is get the focus off of this question of how much malpractice, how many ways can you sue and get it on what can we do to reassure patients that decisions are being made in tune with the best medical science and not with the bottom line, and how can we make sure they get the care that they need when they need it? So that’s why we have favored an approach that would permit a patient who disagrees with the health care plan’s decision to go to an external panel of doctors and have that decision revisited. And we want that to be binding on the health plan, we want it to be at arm’s-length distance from the health plan and we want it to be done as fast as the patient’s condition warrants. So…

SCHORR: I know, Jamie Court, you have an answer to that, too, but I’d like to take this discussion a little further than what’s being battled on the Senate floor. However this comes out, whichever version of the Patients’ Bill of Rights comes out, what will it do for 43 million Americans who don’t have insurance?

Ms. PISANO: Well, my view of this is that to the extent that we have runaway malpractice costs that drive the cost of health care up, we’ll have more uninsured people. And what we know about the advent of managed care is that there would be more people uninsured today if we hadn’t had the introduction of managed care and we had the runaway costs of the old fee-for-service system. But, in fact, managed care has helped keep the number of uninsured people lower than it otherwise would have been.

Mr. COURT: Yeah, I would disagree with that. I mean, we’ve had managed care for a decade. They promised to keep the costs down and quality high, and they’ve failed on both accounts. And part of that has been we’ve seen only this year a slight dip in the uninsured, but it’s climbed steadily since the advent of the for-profit HMO. And I, frankly, think that if we can get accountability for this industry, the 20 to 30 cents of a premium dollar that these HMOs are spending on overhead and profit, paying CEOs tens of millions of dollars, we’ll come under control. And the more we can regulate this industry, including the rates they charge and what they do with their money, the more ways we can free up money for medicine, for more patients and for health insurance coverage rather than simply administrative and executive compensation waste, which doesn’t help cover people.

SCHORR: Thank you, Jamie Court, and thank you, Susan Pisano. And I guess now you can see why they’re having so much trouble getting agreement on this subject on the floor of the Senate, let alone the House. This is Daniel Schorr.

Consumer Watchdog
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