Overdosed America (13 page)

Several weeks later, I moved from Cleveland to Massachusetts to begin my career as a family doctor. Initially, the health insurance that most of my patients had, besides those with Medicare and Medicaid, did not cover my services in the office. A few people had very expensive “Cadillac” health insurance that paid for all of their medical care and drugs. An equally small number were insured by the sole, recently started HMO in eastern Massachusetts, and were charged only a $3 co-payment for office visits. The people who had chosen to enroll in this plan agreed to access nonemergency medical care through their primary care (or covering) doctor only.

Over the next two decades, of course, all this changed: HMOs and managed care plans swept the country. Each year, more and more patients enrolled in these programs. It wasn’t long before nearly all of my patients who weren’t on Medicare or Medicaid were covered by some form of HMO or managed care plan.

What happened to health care costs?
Per-person health care expenditures
, adjusted for inflation, more than quadrupled over the following 20 years. Starting in 2001,
premiums rose a whopping 43 percent
over the next three years alone.
Health care costs now account
for one-seventh of the total GNP, up from 9 percent in 1980 to an estimated 15.5 percent in 2004. What seemed like a major crisis in 1982 now looks trivial. And as we have seen, all the while our health outcomes are lagging further and further behind those of the other wealthy industrialized countries.

How is it that those sweeping changes, adopted to control health care costs and improve the quality of care, had precisely the opposite effect? People tend to point a finger at one of two culprits: Many blame the HMOs and managed care companies for wresting control of medical decisions away from doctors and unreasonably restricting care in order to save money. Others blame the excessive power of the medical industries and particularly the drug companies, with their exquisitely honed marketing techniques, for the commercialization of medical practice.

Looking for
the
single cause of the poor performance of the American health care system is futile. The truth is closer to Pogo’s discomforting epiphany: the enemy is us. We all have a relationship to the health care system: patients and potential patients, doctors and other health care professionals, researchers, workers in health care industries, health policy experts, government officials, lawmakers, and investors. We have all been pulled into this enormous and complex system by our hopes and fears, our myths and ideologies, our dedication and pursuit of scientific knowledge, and our personal and institutional aspirations. As the interests and energies of all these elements keep merging into an ever larger and more powerful system, a perfect storm is gathering that is producing enormously expensive and disturbingly ineffective health care, American style.

Nothing has had more impact on the practice of medicine in the United States than the rapid transition from traditional indemnity insurance to HMOs and managed care plans. And nothing could have produced more profound unintended consequences.

Prior to the era of managed care, indemnity insurance simply paid a contracted percentage of the bills for covered services, which rarely included office visits or prescription drugs.
HMOs, on the other hand, offered
to provide virtually complete health care coverage for a predetermined price. In return for this more complete coverage, patients who were enrolled in HMOs agreed to access medical care only through the HMO, usually through their primary care doctor. The burden of cost control is placed on the health care providers, whose responsibility, in addition to providing medical care, is to keep the cost of care within a defined budget.
Managed care plans differ from HMOs
in that the burden of cost control is not put directly on health care providers. Doctors are not prepaid and do not work on a fixed budget, but agree to accept a fee schedule for their services and participate in oversight of the quality and utilization of care—thus “managing” the care.

HMOs and managed care plans quickly came to dominate health insurance in the United States. They appealed to employers because of their promise of holding down insurance costs, which were
increasing between 10 percent and 18 percent per year
in the late 1980s and early 1990s. And they were attractive to patients because, unlike indemnity insurance, HMOs covered most medical services and drugs with relatively small co-pays—similar to the very expensive Cadillac indemnity plans. In addition, by paying for primary care and preventive services, and with long-term incentives that favored illness prevention, these plans held out the promise of actually improving people’s health. The prospect of a win-win insurance arrangement providing better care for less money, like the early HMO I studied in Cleveland, catalyzed the rapid change in U.S. health insurance.
In the late 1970s, almost all
employer-sponsored health insurance (95 percent) was the traditional indemnity type.
By the end of the 1990s
, HMO and managed care plans accounted for 92 percent of employer-based health insurance.

The period of the late 1980s and early 1990s was the golden era of HMOs and managed care plans. They appeared to have solved the problem of rising health insurance costs in a uniquely American way. Health care spending budgets that would have been unacceptable coming from the government were created by competing independent health plans, with employers choosing which to offer and employees usually (but not always) given a choice of several from which to choose. Positive coverage of the new plans by the media contributed to the enthusiasm.
In 1990, stories about the new types
of health insurance were twice as likely to be positive than negative. This market-based approach successfully tamed the double-digit percentage increases in health insurance premiums of the late 1980s and early 1990s, bringing the annual rate of increase down from a peak of 18 percent in 1989 to
less than 2 percent by 1996
.

Almost all of my patients welcomed the new plans. The broader insurance coverage meant that they no longer had to pay for their office visits or go through a lot of paperwork to collect from their indemnity insurance. And because family doctors take care of a broader range of problems than other primary care physicians, most of my patients already expected to discuss most of their medical problems with me before going to a specialist anyway. Besides the additional administrative burden of processing referrals to specialists, the added responsibility of functioning as the medical gatekeeper had little impact on my practice.

Despite the discounted fees, I preferred taking care of my patients on the new insurance plans. I could provide better care because patients were more willing to come in for routine exams and follow-up visits. Money was removed as an impediment to the doctor-patient relationship. True, the low co-pay for office visits contributed to some nonessential patient-generated visits, but most of these served to increase the patients’ trust and enhanced my ability to provide good care.

Patients were also grateful for the prescription drug coverage that was usually part of the new insurance plans. In 1965, prior to the advent of managed care,
93 percent of the cost
of prescription drugs was paid directly by patients; by 1998 this was down to 25 percent.
Between 1990 and 1997
, out-of-pocket expenditures for prescription drugs by people who were covered by employer-based health insurance went down by 8 percent. During those same years, the actual per-person inflation-adjusted cost of prescription drugs in employer-based insurance plans tripled.

At the same time that the patients’ out-of-pocket medical costs were going down, Americans’ faith in the benefits of the latest medical science was high. Surveys done between 1992 and 2000 showed that
half again as many Americans as Europeans
described themselves as “very interested” in new medical discoveries (66 percent versus 44 percent), and almost twice as many Americans over the age of 65 were “very interested” in new medical discoveries as were European seniors (79 percent versus 42 percent). Almost half of Americans believed that health insurance or the government should “pay for all new medical technologies.” One-third of Americans believed that “modern medicine can cure almost any illness for people who have access to the most advanced technology and treatment.” And given their strong interest and faith in medical progress, Americans were overwhelmingly of the opinion that
more rather than less money
should be spent on “improving and protecting the nation’s health,” by an 11-to-1 margin.

Medical information was becoming available on the Internet, and the increasing media coverage of the latest “breakthroughs” in medical science further heightened public enthusiasm about the latest developments. (There was little awareness that most of this information had been made available to serve commercial interests; one study showed that the focus of
80 percent of Internet sites that address back pain
is advertising, and only 12 percent of the sites were rated as “highquality.”)

The stage could not have been set more perfectly for prescription drug advertising to become a major force in American medicine. And so it did.
In 1991 the drug companies spent
a paltry $55 million on advertising drugs directly to consumers. Over the next 11 years, this increased more than 50-fold to
over $3 billion in 2003
. The ads appeal to viewers as independent decision makers—capable of forming their own opinions about which drugs they need—and resonate with the growing concern that HMOs and managed care plans tend to withhold the best care to save money.

Largely freed of concerns about out-of-pocket costs, enticed by advertising and media coverage of developments in medicine, and emboldened by a sense of autonomy, patients began requesting, and then demanding, specific tests, drugs, and procedures. Indeed, it became nearly impossible to convince many patients that more medical care was not necessarily better. Rather than adopting lifestyle changes that could prevent illnesses, many people began to believe that the latest “medical breakthroughs” were all that was needed to keep them healthy. Ethicist Daniel Callahan in his book
False Hopes
sums this up beautifully:
“The market sells dreams and hopes
as well as things.” To exactly the same extent that a person is seduced by the false hopes and dreams offered by the medical industry’s marketing efforts, the ability to trust his or her doctor, especially a primary care doctor, is eroded.

It wasn’t long, however, before the enthusiasm about HMOs and managed care plans started to wane.
News stories about HMOs unreasonably withholding care
became a dominant theme, and by 1997, critical stories were outnumbering positive ones by a seven-to-one margin. The health insurance industry added grist to the mill by imposing one-day obstetric hospitalizations for normal deliveries, selectively contracting with doctors so that long-standing doctor-patient relationships were disrupted, and trying to save money by avoiding high-cost patients like those with HIV/AIDS. Patients’ rights legislation emerged as a major political issue as the public focused on restricted access to care.
The public’s esteem for managed care companies
plummeted. In 1997, 51 percent of those surveyed said that managed care companies were serving patients well; that figure was down to 29 percent just four years later.

The data about the actual effect of managed care tell a very different story.
The quality of care neither improved nor deteriorated
under managed care. The stories about patients being rushed through doctors’ offices turned out not to be true (like the myth of the estate tax causing the loss of the family farm). An article published in the
New England Journal of Medicine
showed that between 1989 and 1998, the
frequency with which people saw their doctors
did not change. There was no shortening of visits for managed care patients for either primary or specialty care visits; in fact, the duration of doctor visits actually increased by one to two minutes. Even the public anger at the withholding of care by overly aggressive or financially greedy “gatekeepers” turned out to be largely a myth: a study conducted by a nationwide managed care company, United Healthcare, showed that
fewer than one in 100 requests for referrals
were being denied, leading the insurer to drop its requirement for primary care approval of referrals. Still, as an American researcher observed in a Canadian medical journal,
“Regardless of the evidence
, there is a strong sentiment among both physicians and patients that managed care is harming quality of care.” So what was the real problem?

Initial cost savings had come fairly easily. Doctors, hospitals, and other health care providers had little choice but to accept discounted fees in order to be included in the newly formed networks of health care providers; otherwise they risked losing access to their patients. These so-called volume discounts controlled prices during the transition to managed care, but the apparent solution was short-lived. Once the discounts had been factored in, this apparently exquisite solution to controlling costs—local health care budgets set by the marketplace instead of the government—became the problem. When there were no more cost savings to be squeezed out of the fees paid to health care providers, HMOs and managed care companies had only one avenue open: they had to start to really “manage” care, that is, control costs by eliminating unnecessary or wasteful care. (Of course, cutting down on advertising, executive salaries, and profits would have helped, too.)

Almost overnight, the hyperbolic hopes for managed care and appreciation of the greater coverage quickly turned into hyperbolic vilification.
In one survey, 59 percent
of the people expressed negative feelings about HMOs and managed care in general, but 69 percent of the same people were satisfied with the actual care they were receiving from their own HMO or managed care plan. Of course there were abuses and mistakes on the part of the health insurers, but why the change in public opinion?