Path: bloom-picayune.mit.edu!snorkelwacker.mit.edu!news.media.mit.edu!americast.com!usa-post Newsgroups: usa-today.bonus From: usa-post@AmeriCast.Com Organization: American Cybercasting Approved: usa-post@AmeriCast.com Subject: bonus Mon, Apr 27 1992 Date: Mon, 27 Apr 92 05:41:46 EDT Message-ID: 04-27 0000 BONUS: Health plans shift strategy USA TODAY Update April 27, 1992 Source: USA TODAY:Gannett National Information Network Combatants in the war against soaring health-care costs are counting more heavily every day on one weapon - managed care. The past five years, employers have been changing en masse to managed care - the broad term for any health-benefits system that combines insurers, doctors and hospitals in a network and manages them with an eye toward cost-effectiveness. Enough companies using managed care have declared victory over health-care inflation that many politicians and think tanks are starting to tout managed care as the cure. IS MANAGED CARE A CURE-ALL? For all the good managed care might do employers, it comes up short as a panacea for soaring health-care costs. "Managed care is all well and good, but it does not get at the perverse economics and the relentless technology costs that are really driving health-care inflation," says William Schwartz, professor of medicine at Tufts University. "To the extent that policy makers are counting on managed care alone to control costs, they're making a mistake." WHAT'S WRONG WITH MANAGED CARE? One sobering aspect of managed care is that it has yet to produce consistent results. Earlier this month, benefits-consulting company A. Foster Higgins released a study of health-care costs at 2,400 employers of all sizes. The difference in cost between managed care and traditional insurance varied widely. In some cities, traditional coverage costs less. WHERE IS MANAGED CARE WORKING? In Philadelphia, for example, managed care works as advertised. Health costs there averaged $3,528 per employee last year under traditional health insurance. Costs in Philadelphia were 18.3% less, $2,882 per employee, under health-maintenance organizations. The cost dropped 23% to $2,715 for a newer type of managed care called a preferred provider organization, or PPO. Insurers organize PPOs by compiling a list of local doctors and hospitals who agree to treat PPO enrollees at discounted fees and agree to the insurer's supervision and standards in their treatment decisions. WHERE IS MANAGED CARE NOT WORKING? In metropolitan New York, while HMO costs run 25% below traditional health insurance, PPO costs are only 0.5% less. In Cleveland, HMOs cost 1.7% more than traditional coverage and PPOs cost 22.4% more. WHY THE SPOTTY RESULTS? First, managed care is a broad concept covering a dozen or so variations on the HMO and PPO models. And networks vary in how they approach the ways they have of saving money: cutting doctor and hospital fees, cutting waste and cutting unnecessary care. Not all those approaches are healthy - or geared toward long-term savings. Some networks go for steep discounts and end up with questionable doctors and hospitals desperate for patients. Some seek to cut unnecessary care by raising barriers - administrative hassles, second-guessing by out-of-town case reviewers - to all care, needed or not. WHAT DOES THE SURVEYOR HAVE TO SAY ABOUT THE RESULTS? John Erb, the Foster Higgins principal who oversaw the study, blames poor management for much of managed care's uninspired record. "We're at that awkward adolescent stage of managed care where some networks are performing well and some aren't," he says. Employers often have trouble spotting the difference because poorly run networks can match or exceed the first- and second-year savings of good ones. Not until the third or fourth year do employers see costs edging back up because their network doesn't have its priorities straight. HOW DO INCONSISTENT RESULTS AFFECT MANAGED CARE? The inconsistent results are why the growth of managed care stalled last year, Erb says. At year's end, 75% of all employers surveyed offered at least one type of managed care - 60% an HMO, 31% a PPO - all virtually unchanged from 1990. Overall, 45% of their employees were covered under managed care. "Still, it's the only private-sector solution to health-care costs left," Erb says. His survey showed that 14% of employers plan to adopt some type of PPO this year. HOW CAN THE GOOD DRIVE OUT THE BAD AS MANAGED CARE GROWS? A study also out this month by benefits-consulting firm Towers Perrin confined itself to 81 large employers. Their experience was considerably better. The more highly evolved networks toward which large employers are gravitating are correcting some of the managed-care industry's youthful mistakes. HOW ARE THE NETWORKS GETTING BETTER? They seek doctors and hospitals with best records and don't micromanage their decision-making on every case. They hire local physicians and nurses to oversee providers instead of using reviewers several states away. They stress primary and preventive care to catch potentially costly illnesses while still easy - and cheap - to cure. Most importantly, they collect and analyze treatment information, then adjust their standards toward what tests and treatments work best and which doctors and hospitals get the best results. WHAT ELSE ARE THE ENLIGHTENED NETWORKS DOING? They are starting to downplay cost control as a selling tool. Instead, they emphasize quality. "Quality is really what managed care can do," says Charles Bell, head of managed-care marketing for Aetna. On the cost front, "it can take a 25% growth rate and make it 12%. But the cost of medical care is driven by a lot of things outside managed care's purview." IS THAT TRUE? ALCOA Chief Executive Paul O'Neill agrees. The managed-care network ALCOA designed five years ago with insurer CIGNA has cut its health-cost growth rate from about 16% a year to about 11%. "But I don't think that as a consequence we have reduced the national health-care bill. We've just shoved it off on someone else," O'Neill says. "It's ludicrous to think that managed care alone will control national health-care costs. We need a fundamental reorganization of the economic dynamics of our health-care system." WILL MANAGED CARE WORK ITSELF OUT? Many academicians argue that managed care will bring those fundamental changes once the bad versions have been driven out and once it has spread to near-universality. Donald Moran and Patrice Wolfe of private health-policy research firm Lewin:ICF recently wrote, "We should investigate the proposition that managed care has failed to live up to its cost-containment potential because, as with communism or supply-side economics, the `real thing' has never been tried widely enough." WHAT'S THE BOTTOM LINE? "The bottom line is that managed care, done right, is a good and sensible way to deliver health care, and we should be all for it," says longtime health-policy expert Drew Altman, head of the Kaiser Family Foundation. "But we'll never get costs under control unless there's some overall control on the resources going into the health-care system." That's something managed care hasn't dealt with - so far. Bonus Editor: Michele Coleman. (1-919-855-3491) Making copies of USA TODAY Update (Copyright, 1992) for further distribution violates federal law. This article is copyright 1992 Gannett News Service. 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