Why Managed Care can Threaten Rationing

"Managed care denies needed treatment, no doubt about it at all in my mind. And it happens all the time."
--Neurologist Dr. Michael Schlitt, quoted in Investor's Business Daily, 7/14/94

Managed care is "a cost-cutter's invention that coerces doctors in certain types of health maintenance organizations to undertreat patients. ... [P]hysicians are increasingly put at personal risk for the cost of treating their patients' illnesses."
--Dermatologist Dr. Harry M. Goldin in Los Angeles Times 7/11/94

Traditionally, health insurance has consisted of so-called "fee for service" plans that reimburse patients for the cost of treatment ordered by a doctor and agreed upon by the patient, as long as the doctor's rates were considered "reasonable and customary" for the particular type of treatment provided. Under "managed care," however, insurance companies either supervise what care doctors are allowed to give or bind them in contracts that create strong financial incentives to limit treatment.

How do "managed care" health plans supervise what care patients are allowed to receive?

Some adopt "practice guidelines" (like those that would have been governmentally imposed under the Clinton plan) which specify when treatment may--and may not--be provided. Very common is "utilization review" under which a medical provider must first obtain pre-authorization from the insurance company before giving a patient many forms of treatment. Another method is to require that patients with any form of ailment first seek a "gatekeeper" primary care physician and only go to aspecialist if referred by the gatekeeper.

How do managed care plans create financial pressures to deny treatment?

Typically, managed care plans require that patients either go to doctors directly employed by the plan (as in a "staff model health maintenance organization") or select from a limited number of "preferred providers" who operate their own offices but apply to be on the plan's list. Through so-called "economic profiling," plans periodically drop from their list of preferred providers any doctors who significantly exceed an average targeted cost per patient. Some plans give financial bonuses to physicians who manage to care for patients at less than the average cost. Writes Dr. Goldin, "A conflict of interest is established between the physician's role as the patient's advocate and the physician's drive to make a profit."

Managed care has resulted in numerous
concretely documented cases of denial
of life-saving treatment.

According to her husband, Joyce Ching died at the age of 34 in the spring of 1994 because for three months her HMO failed to authorize critical tests that could have detected her colon cancer earlier in time to save her life.
-- Los Angeles Times, May 5, 1995, p. A1.

     "Only after Dave Ching confronted [the HMO doctor] and refused to leave his office until he received a referral to ... a specialist in treating stomach disorders, was Joyce Ching's cancer found."
     By then it was too late; a Ventura County jury "was unanimous in deciding that [the HMO doctor] was negligent, and that his poor treatment of Ching led to her death."
     The lawyer for the Chings commented, "This sends a clear message that when you mix incentives and money with medicine it equals death."
--Los Angeles Times, 11/16/95

When Nelene Fox's breast cancer spread to her bone marrow, her managed care insurance refused to authorize a bone marrow transplant. A jury concluded the denial caused her death.
-- Investor's Business Daily, July 14, 1994, p. 1.

According to her family, Sharon Cave's HMO company repeatedly denied her access to a specialist and necessary tests. Although she reported her symptoms in November of 1992, her HMO finally agreed to refer her to a gynecologist only in April 1993. By then it was too late to treat the cervical cancer that had progressed undetected for months and she died at the age of 29, on May 22, 1993.
-- Ft. Lauderdale, Florida. Sun Sentinel, reprint of a five-part series published Dec. 11-15, 1994. p. 2.

Ruth MacInnes belonged to a Medicare HMO. According to her daughter, she developed end stage cardiomyopathy. After multiple periods of hospitalization, during which the HMO doctors misdiagnosed and refused to perform specialized tests, Mrs. MacInnes went into a semicoma. HMO doctors thereupon incorrectly declared that Mrs. MacInnes' heart beat was "incompatible with life" and pressured her daughter to agree not to give her mother a feeding tube. Only after being switched from the HMO was she given assisted feeding. Within 12 hours Mrs. MacInnes began talking, and thereafter resumed writing her name, and eventually walking. Had she stayed in the Medicare HMO, she would have starved to death.