The quest began in the early 1970s, when the cost problem surfaced, partly because the new and very popular Medicare program was significantly more expensive than anticipated. Then there was a realization that integrated health maintenance organizations like the Kaiser plans could deliver quality care more efficiently than other providers. In short, they did less without compromising the health of their patients.
Basically the experts agree that the public is getting a lot of care that it simply doesn't need. And while the public is sympathetic to efforts to cut paperwork and eliminate duplicative tests, it isn't convinced that many of the tests and procedures done today aren't improving our health.
There's a continuing tension between poll results showing that a majority of Americans are willing to accept some limits on coverage or choice of providers in return for paying less, and continuing complaints from individuals who believe they're being unfairly denied care that they and their providers believe appropriate.
And there were a number of reasons why Kaiser was able to do less without compromising patient health. One was that they had different economic incentives because they were both insurers and care providers. That distinguished them from other providers who could earn more by doing more. HMOs could prosper by doing less - and doing the right thing at the right time.
They had an economic incentive to do so. They received a single, flat fee regardless of what they did, so they would actually lose money if they routinely did too much.
Coordination was a real possibility since nearly everyone providing care had the same employer, which created rules or protocols in an effort to optimize care. That meant the treatment for any given problem would be the same, regardless of what doctor was seen. These protocols were worked out by the doctors and reflected their experience about what worked best.
The Nixon Administration came up with a plan to expand HMOs, but it wasn't possible to simply replicate Kaiser, where most doctors were salaried employees. Most physicians didn't want to become employees and insurers were understandably reluctant about spending the capital required to become healthcare providers.
The challenge lay in finding a new way to deliver HMO-like care without taking the time and money to replicate organizations like Kaiser.
The result was a new invention called a preferred provider organization where insurers contracted with hospitals and doctors who they had reason to believe would do a job cheaply, well - or both.
Given a choice between selecting providers who would live by rules on what was appropriate (who were simultaneously hard to find and a challenge to physician autonomy) or simply cutting the price paid in return for volume, the latter strategy was easier. A study comparing
If you were a cardiologist or dermatologist who was only one of a dozen in a given city named a preferred provider, the result would be a rush of new patients and this volume would justify a cut-rate price.
Because such plans relied on a relatively small number of preferred providers, the Federal HMO law explicitly overrode state laws that required insurers to include all providers who wanted to participate in their plans.
Hovering in the background was a quiet realization that if providers did a job badly that required subsequent expensive care; the anticipated savings would be eroded. But that was a problem for another day. At minimum, preferred provider organizations made it possible to quickly offer managed care widely.
Meanwhile, early in the Reagan years, Medicare attempted to control hospital costs by replacing a reimbursement system reflecting an institution's cost - which encouraged doing a lot - with a flat payment (a diagnostic-rated group or DRG) irrespective of how much the hospital did or what it cost.
Embedded within DRG's were expectations about how long a hospitalization was required for the average patient with the particular problem. This accelerated a trend toward shorter hospital stays and introduced the first consumer backlash as patients were told they were being discharged from the hospital - perhaps over physician objections - because Medicare simply wouldn't pay for a longer stay.
At best this distorted the policy which anticipated an average stay with patients staying for longer or shorter periods depending on their unique situation.
These developments didn't please those providing care. Hospitals were confronted with circumstances where they could chronically lose money on Medicare patients if they weren't as efficient as the government assumed they were.
And doctors, hospitals and pharmacies were threatened by the creation of preferred provider organizations which had the option of simply leaving them of the list.
If one of three hospitals in a community was excluded, this could lead to significant patient and revenue loss. And logic dictated that at least one such hospital be excluded; so as to drive up the volume at the hospitals making the list enough to offset the discounted prices they had offered to make the list. If all hospitals were all on the list, that logic would be destroyed.
A similar, albeit less stark, logic applied to doctors.
The worried unpreferred responded by going into politics under the ever-popular flag of choice. They demanded - and often succeeded - that state legislatures enact so-called "any willing provider" that required plans to include on their list any provider willing to make the deal the insurer was offering. In other words, if an insurer was paying $450 per day for hospital care in
Of course, there could have been quality rules as well, but few existed and they would have been much harder for insurers to enforce.
Tensions bubbled to the surface in the early 1990s when health was viewed by some as a major issue in the election of Bill Clinton. The ill-fated plan that resulted was another effort to mandate greater efficiency without telling the public that involved squeezing out massive amounts of overconsumption (an expert researcher subsequently estimated 30% of Medicare dollars were wasted)
In yet another debate of the deaf, the Administration promised that everyone would get all the care that they needed while voters and providers properly worried that they'd be denied the care that they wanted.
One strategy that killed the
Some powerful providers, particularly successful physicians, didn't join preferred provider organizations because they already had large patient populations willing to pay higher prices.
Among the patients bothered by the new regime were high-income executives who preferred expensive and comprehensive insurance because of the tax consequences, who began to put pressure on human resources managers to provide plans that didn't limit provider choices. Human resources personnel began to voice worries that such plans were an impediment to recruiting, although there's no evidence documenting this problem.
With the exception of some unconvincing insurance company rhetoric, there was never a serious attempt to educate the public that the managed care movement was an effort to optimize care rather than merely constrain costs. But insurers were taking a more aggressive role in managing care, partly to make good on their promise of a voluntary effort to constrain costs they had made during the Clinton healthcare debate.
By the middle of the 1990s, there was good news - the rising health costs had moderated and were actually rising more slowly than other prices - and bad news - increasing public complaints about managed care policies that were perceived as compromising quality.
The media amplified these complaints (as did the entertainment industry in As Good as It Gets, released in 1997, featuring a waitress played by Helen Hurt who does repeated riffs on how her HMO simply won't do the right thing for her son's chronic condition) and politicians responded.
A 1997 survey found that a majority of Americans had an unfavorable view of managed care. Two years later, more than a third of Americans polled complained that the quality of their care had declined over the previous five years. Many people had been put in situations they found uncomfortable or even scary, but the sum of their anecdotes never added up to compelling evidence that the quality of care was declining.
Public debates that ultimately allowed several major Blue Cross plans to abandon their non-profit status doubtless fed a public perception that insurers were more interested in making money than in providing patients with needed services.
Politicians responded. Congress enacted The Newborns' and Mothers' Health Protection Act of 1996 which required that maternity coverage guarantee at least a 48-hour inpatient hospital stay for normal births and a 96-hour stay for C-sections, which immediately grew in popularity.
States enacted hundreds of laws mandating specific coverage to guarantee access to specific services like infertility aid or bone marrow transplants. More than a dozen states required the option of an inpatient stay after a mastectomy. And costs again began to rise much more quickly than broader inflation.
A lot has happened since the Nixon years. But the gulf between the public - which fears that it is already being denied needed care - and the experts - who think our cost problems are fed by the acceleration of unneeded care (which was already substantial when this debate began) - remains quite wide. This gulf was demonstrated once again earlier this year during the Congressional debate over evidence-based medicine which was seen as another attempt to "ration" needed care. Unless the current debate can shrink this area of dissonance, real progress will be very difficult.
Maybe we can enhance the odds that reform will actually work this time by talking candidly about what the goals are and why it hasn't worked yet. Perhaps being a bit more transparent could enlist the American public in helping to achieve reform, or at least discourage the backlash that has previously undermined progress..