Savings and Quality in the Era of Managed Care

This discussion deals with some of the details and evidence (or lack thereof) for a cost-savings that supposedly ocurred from having HMO’s or managed care, rather than Fee For Service health care. The discussion evolves to a discussion about implications for the quality of care during the managed care era.

Dr. Uwe Reinhardt:

We are agreed that, relative to keeping the elderly in the traditional Medicare (enhanced by a drug benefit), funneling the same tax dollars through private health plans will either not buy the elderly the same  health care services or the elderly have to put extra money on top. Thus, for the health plans or anyone else to sell that idea, they would have to convince us that for the same money, we will get different services that will represent higher quality care (e.g., through disease management). That is a hope but not a reality.

However, on the role of managed care during the 1990s, I am struck that when I plot real health spending per capita from 1965 to 2000, how smooth that line basically has been, in spite of insurance cycles and preemptive lying-low in the face of cost-containment talk in the past several decades. There has never been such a dramatic bending down of that curve as occurred during 1922-1997-8. Furthermore, I find it hard to believe that the discounts the plans wrung out of providers and the reduction in ALOS did not yield at least some savings.

Thus, I conclude that this argument is not settled and that the data allows us each to our maintain hypotheses.

Luft and Miller recently presented a detailed revisit of their earlier study at a conference. Once again, the results were inconclusive. I will not accept it as a working hypothesis that managed care lowered the quality of the patient’s health care, although it did probably lower the quality of some providers’ life.

Kip Sullivan responds:

Do you know if Luft and Miller’s new review excluded studies that didn’t control for coverage differences? If it did not, why do you give its conclusions any creditability?

The most galling of the studies cited by Miller-Luft in their 1994 and 1997 reviews were studies that compared doctors treating Medicare patients in HMOs with doctors treating patients in FFS Medicare without controlling for coverage differences. The complete scam works as follows:
(1) Taxpayers overpay Medicare HMOs,

(2) Medicare HMOs use the subsidy to pay for better coverage (e.g., cancer screens),

(3) researchers with a fondness for HMOs come along and examine whether Medicare HMO docs are better than Medicare FFS docs on process measures (e.g., use of cancer screens) and outcome measures (e.g., stage of cancer at diagnosis) likely to be affected by the coverage difference and,

(4) lo and behold, the HMO docs come out looking better.

I think the scholars who wrote these studies, the editors who accepted them for publication, and others like Miller and Luft who describe them as unusually good studies, are guilty of thought processes so flabby their behavior rises to the level of malpractice.

Evidence-based medicine is now the new religion within the American health policy community. But the health policy community has yet to apply the same standard to itself. If a group of doctors conducted a study comparing the effectiveness of Drug A to Drug B, and they deliberately set it up so that the group getting Drug A took drug A on schedule because they had excellent drug coverage, while the group getting Drug B took Drug B erratically because they had no health insurance, they would be laughed out of the profession. Not so in the health policy community. Health policy analysts who design such shabby experiments are held up as scientists par excellence.

Do you agree with my statement that studies that compare doctors treating uninsured or under-insured FFS patients with HMO docs treating fully insured patients are studies so flawed they shouldn’t be published, much less held up by Miller-Luft as among the 54 best studies published between 1980 and 1997? Can you tell me if Miller-Luft’s new review examined only those studies that controlled for coverage differences?

Dr Ellen Shaffer:

Just for the record, a slight wrinkle to some of Kip’s earlier comments on oligopolies in health care. HMOs, and the 1973 Act promoting them, were not destined to become large or competitive. Group practices flourished for over 50 years, including Kaiser, without having this effect. The reason consolidation occurred in the mid-1980s, and not the mid-1970s, was because of laws permitting selective contracting: for the first time purchasers (employers and others) were encouraged and permitted to choose providers based on price, and health plans and other providers were compelled to compete based on price. Hence consolidation, for-profit conversions, the whole ball of wax. HMOs aren’t necessarily a bad idea. and group practice still makes sense. Managed competition, on the other hand, turns out not to work if you leave out the “managed” part.

Dr. Sullivan:

What laws permitting selective contracting are you referring to? I’m not aware of any such laws in Minnesota, for example. I am aware that there was a great to do about such a law in California. But did any state other than California pass such a law?

Dr. Shaffer:

California’s law was 1982; the turn to selective contracting by MediCal in particular, as well as by private purchasers, greatly accelerated HMO enrollment in the 1980s, and shifted leverage to purchasers. Would have to look back at related legislative history to see if other states or the feds followed, or if the snowball just rolled.

Dr. Sullivan:

A second issue I’d like to raise with you is the question of whether prepaid group practices were any better at providing medical care than fee-for-service doctors were. I don’t know of any evidence to indicate they were. I do know the founders of some of the early prepaid practice groups were very altruistic people, and they insisted that their docs emphasize prevention. But that’s evidence only of what a founder, or an altruistic board, can achieve. It’s not evidence that capitation and other managed care tools inevitably lead to better medicine.

Dr. Shaffer:

I don’t think that any reimbursement method leads inevitably to better care, nor would I suggest that managed care has grown because it offers better quality. I think financial incentives have totally distorted clinical practice, and propose in a recent paper that we switch to salaries for all clinicians, and work back to adding in whichever financial as well as organizational incentives seem to make sense. Again, we’d have to go back and see what kind of outcomes research was done on Group Health of Seattle, MN and DC, Mayo Clinic, and Harvard Health Plan (research tools weren’t as good then) before they were corporatized. (I do not include Kaiser in this group, though some would; it was never controlled by patients, as the Group Healths were, nor were the MDs driven by any particular mission).

I seem to recall a fair amount of favorable analysis in the 1970s. I think energized professionals practicing in teams, who are accountable to patients, do provide better medicine, and research into quality improvement efforts that rely on this model show promising results (see , e.g.). Since early FFS medicine was driven by reimbursement for acute care, in order specifically to finance hospitals and later drug companies, it did make a difference that group models covered prevention. The same thing could be accomplished under FFS or salaried systems, but was not for historical reasons.

Dr. Sullivan:

If I’m right, and the pioneering HMOs were no better at taking care of patients than FFS doctors, then, regardless of how widespread selective contracting laws were, I’m back to my original argument about the oligopolies, which was that HMOs were destined to “compete” with size rather than “health maintenance” because HMOs couldn’t do health maintenance any better than traditional doctors could. And since they couldn’t, they had no way to cut premiums other than to ration and extract discounts, and both of those tactics are much easier to execute for huge HMOs than for little ones.

Dr. Shaffer:

I agree with your central argument that HMOs have grown due to muscle and financial clout, not quality. I was just trying to raise a few historical points of analysis regarding how and when that concentration and growth came about. It was not inevitable, nor the result primarily of the 1973 Act, since most growth and consolidation occurred in some areas in the 1980s (CA and MN in particular) and in most of the US after 1994. The intentional shift by purchasers, particularly by employers, was decisive in events after 1994. I agree that larger Managed Care Organizations have prevailed due to their ability to extract discounts from providers. As premiums rise once again, employers will rely on defined contribution plans to control their costs. Our argument is, however, that this financial finagling is not a long term solution, and that in fact universal coverage is possible and affordable; we may need to reconsider both organizational factors and methods of financial reimbursement, to suggest what will produce good quality of care, as well as affordable care.