Managed Care and Smoke and Mirrors

An extremely well-written article explaining the money grab going on within the healthcare industry.

This essay was first written in late 1993 when the specter of the Clinton Administration's Secret Committee on Revising Health Care was on the event horizon.

This essay was also serialized in three parts on Dr. Carl B. Stewart's Den-Tel-Net's Home Page. Reprinted by permission.

R. E. Brossman, A.B. , D.D.S. , M.S. #3 Crossings Mall Wheeling, WV 26003

With the demise of the Clinton administration's national health care package, many health care providers have been lulled into a sense that they can relax and get on with their professional lives without the specter of Big Brother looming over their shoulders. However, like the hydra, when one arm has been severed, the rest of them are still quite healthy and entirely capable of creating havoc. And just as the doctrine and disciples of international communism may appear to have been swept into the dust bin of history, the wise keep one eye on the dust bin. In the same light, the iniquitous philosophy and philosophers of national health care have not suddenly disappeared from the face of the earth, they are just continuing their most pernicious promoting out of public view in the private chambers of numerous state legislatures across the country.

At this particular moment in history it appears that we are no longer engaged in a military, or political sense, against any major evil empires. That doesn't mean all the bad guys have retired from the field. Our newest enemy's tenets have now become purely corporate and purely financial, and they are infinitely more difficult to root out and defeat, because they prey on human suffering, encourage erroneous thinking on the part of our hard pressed elected leaders, and practice monumental deceit at every turn of a legislators doorknob. The concept now being sold by the silver tongued devils is snake oil in the most charitable definition, and blatantly felonious in the least. Translation: The managed care team simply wants to control you, and wants the product of your labor as long as you last.

The first battles against this new enemy are going on right now, and the initial reports are somewhat discouraging. While the hucksters didn't get to control national health care, they have been busily at work at the financially strapped state level. Under the nefarious guidance of their most covert lieutenants, their main attack plan, the manage care panacea, is still vigorous, infectious, and quite capable of ransacking the health care professions, patients, and the individual state and national economies.

The fundamental concept of managed care is disarmingly simple and definitely old-world in origin. It even pre-dates most of the more familiar business plans attributed to a certain social organization from Sicily. In fact, the term is derived from an old Babylonian term that meant "we'll manage the money, and the other guys'll do the care". For some unknown reason, possibly because it has often been associated with big-time politicians, lawyers, and insurance salesmen, everybody seems to be afraid to call managed care what it is, e.g. , a malevolent and thinly disguised criminal conspiracy solely designed to enrich those on the inside at the expense of the rest of the slobs. When you cut through all of the legalistic hyperbole, managed care is simply a quasi-legalized racket, and it should be exposed for what it is.

Managed care, generally taken to mean huge health maintenance organizations, is once again at the heart of proposed new health care financing systems being discussed by state legislatures across the land.

The term itself has been attributed to Alain Enthoven, one of Robert McNamara's "whiz kids" during the Vietnam War era. It seems Enthoven, one of the inventors of the old "body count" fiasco during that period of public deception, claims to have developed the concept of managed health care as a mean of preventing a run on Stanford University's faculty health plan by some of those people on the fringes of the faculty and staff benefit plan who had, or might later have, that very expensive affliction that ryhmes with Raids. It was designed to allow the university to exclude people with expensive illnesses, and that part of the idea is still firmly embedded in the concept, but artfully hidden from public view by hyperbole. For public consumption, we often see news releases to the effect that some of these plans may end up being single payer plans, e.g. , the state governments, "in order to get control of escalating Medicaid costs".

Other releases pop up from time to time, implying that a total premium pie from some large interest group or other may end up being divided around existing companies in the health insurance business in order to produce some type of savings for the poor taxpayers, or the poor consumer. Again, this is usually phrased as an idea being promoted to "help control escalating hospital and medical costs". Take your pick.

Unfortunately, and this will demonstrate just who is at the heart of the problem, the legislative packages we will finally see will end up being little more than a cash boon to the princes and robber barons of the existing insurance industry. Of course, this only happens after the benefits of "privatization" are slipped into the final legislative drafts by highly paid lobbyists representing the health insurance industry. When you consider the fact that many of our lawmakers are not so much crooked, as just being kept in the dark about the full, long-term ramifications of managed care, you can be assured the final draft will ultimately reflect the will of the insurance industry. Money talks.

What is not fully appreciated is the fact that beyond the embryonic criminality of the whole scheme to begin with, the fundamental concept behind "managed care" is one of the potentially most damaging ideas that modern marketing geniuses have developed as a direct result of the digital computer. This time, while creating a monopolistic system designed to enrich a small circle of insurance industry cronies, the heart and soul of the health care professions - all of them, and all of the associated educational and ancillary establishments created over the last century are at serious risk of absolute destruction.

Marketing, while of some importance to the usual production and sales process of business, may not have much application in the nation's health care delivery system. However, the concept currently sounds so good to our political classes, academics, and the marketing yuppies given the sales task of managed care, that it must be the solution. Although completely unproved, these people fervently believe that the practice of the so called healing arts is just as amenable to being pigeonholed into a managerial decision making process as is the production of washing machines, automobiles, and widgits. They are clever people who worship the concept that everything can be reduced to a plotted line on a nifty graphic display, and that life, death, disease, and human suffering can be quantified and manipulated as data. Interestingly, the marketing people should always keep it mind that once a product or service becomes monopolistic, there really isn't much need for marketing people.

Practitioners of any of the healing arts realize that things are usually not quite that simple. Although it would be great if every patient that came in the door could be treated according to a standard formula, patients seem to go out of their way to come up with individual quirks that can quickly derail the most ideal treatment plan. Humans always seem to do things different than laboratory rats, but, unfortunately, huge masses of them do tend to do things like getting sick, getting better, and ultimately dying off in a predictable manner. Clever people have been watching and recording these trends for the last two hundred years or so, and now have some nifty ideas on how to make some real money off of those musty volumes of recorded data.

Managed care, in a state, regional, or national health care plan, totally depends on establishing a set of standardized "rules" of practice, and by having the clinician stick to these rules, every problem with the perceived health care cost crisis comes under control and will disappear forever. One of the fundamental tenets of managed care is a "rule" completely eliminating anything smacking of being "unnecessary", or of what the managerial types call "low benefit" treatment. This may be somewhat similar to the situation Fido finds himself in when he shows up at the vets office with three broken legs and his master's car payment is due. It seems to me that Hitler solved some of Germany's mental health care problems in a somewhat similar manner in the early Thirties, and you must remember that those boys didn't even have the benefits of modern data processing to help them make decisions.

Health insurance industry bean counters have already discovered countless ways that statistical analyses of health care data can be utilized to ultimately control health care providers, secondarily, and increase company profits, primarily, but they have been somewhat reluctant to fully apply these tactics to date in order to preserve their image: Their "Get Met, It Pays", Snoopy, ought to be replaced with a grinning tyrannosaur. That reluctance will not last long, as a quick way of generating some ready corporate cash will always win out in the end. This control factor is based on the industry appreciation of another fundamental tenet that can easily be put into action given the mass of data at their fingertips.

That trick is the classification of all types of care providers into rankings based on how much each class of providers, and thus by extension, every individual practitioner within that class, ultimately costs the managing plans in total payout dollars, versus numbers of plan clients being treated for any of thousands of tabulated complaints (ICD-9, CPT). Doctors of any kind will soon find that data will easily be developed that can, and will, ultimately be used to classify them into good docs and bad docs within the payment system. "Good docs" will be those who simply cost the system less than the "bad docs". Specialists will generally be considered bad docs, since that perception, or bias, so to speak, is already firmly established in the system. Personal skills, training, and academic accomplishments will receive full recognition - as long as you are not stupid enough to try to bill more than the procedure allowance.

Given the mass of statistical data twirling around in the health insurance industry computers, and particularly when a managing board of directors subscribe to the golden rule of amassing tons of ready cash as soon as it shows itself, it is a simple decision to make that proper health care cost management can be transformed into a non-clinical decision making process that falls easily within the expertise of the average clerk sitting in front of a computer terminal. Imagine a surgeon's office calling the managed care plan for the required permission to perform a certain surgical procedure, and then having to spell out the name of the procedure for the clerk making the decisions.

Once managed care is forced into law, if a clinician finds that he is unable to completely comply with managed care rules, either through some ill-conceived feeling that he is doing what he feels is best for his patient (caring), or if he is just plain ignorant of the full ramifications of what it means to be a managed care provider under a managed health care plan, the system will promptly pressure him to see things in the proper light, and according to the proper rules.

Company computers will quickly identify him as a rules violator and the full mechanism of politically correct education will commence - backed up with the full weight of financial penalties designed to force him back in line. These penalties will minimally include such attention-getters as withholding of payments, and even reducing the offender's access to the mass of managed care patients owned, somewhat like a herd of cattle, by the "plan". Patients have only a limited perception of how the insurance industry actually views them. I would suggest that rather than seeing Snoopy as an insurance company mascot, that a tyrannosaurus would be a more truthful advertising gimmick.

The managed care incentive plan thus developed will only reward the party line clinician who sees the light and actively promotes the concept of treating cheap. Managed care advocates call treating cheap "encouraging competition", and treating expensively under this system will eventually get you fired.

One slight problem with all of this is the fact that there does not seem to be any hard evidence that managed care can really achieve the control over health care costs, locally or nationally, that the public, political classes, and insurance industry leaders seem so eager to achieve. The best national estimates to date seems to point out that "administrative costs" consume about 25% of the nations health care spending. This supposedly translates to about $200 billion a year if the political administration's facts are to be trusted. Interestingly, doctors only seem to get about 20% of the total funds expended, so it is interesting to see that they get less than the paper pushers.

You must also consider that our concerned politicians are getting all of their working figures from the health insurance bureaucracy currently engaged in balking claims for lack of properly dotted "i's" and crossed "t's". Another thing to consider is the fact that our political classes, both nationally and locally, currently seem to have their own top of the line medical coverage as part of their inherent perquisites. This seems to insulate them from the aggravations the rest of us have to put up with in the real world. Managed care sales reps claim that their plan will eliminate at least $50 billion of the usual paper processing on a national basis. They promise they are going to do this simply by streamlining the claims process with a "simplified form", or, even more ominously, by a complete switch to electronic claims processing. The latter really represents the ultimate demise of the health care provider as an individual.

There have not been any particulars defined as to how the paper problem is going to be handled on the state and local level. In reality, the only thing that can be seen looming on the horizon anywhere in the country is the leading edges of a stratocumulus cloud of vast new administrative bureaucracy. Whether this is private, or governmental in nature, everyone must remember the simple corollary that any bureaucracy will, by its very nature, tend to expand to fill any perceived vacancy.

Another important thing to remember is that the administrative costs referred to above also happen to include insurance company profits and insurance company management perquisites, such as bonuses, office parties, meetings at jet-set resorts, and cushy pensions and golden parachutes for top executives.

U.S. Senator Sam Nunn has been chairing senate sub-committee hearings that have been investigating , shall I say, "waste and frivolity" in the health insurance industry for several years. Based on the tiny bits of information that have come to light about just four of the present 68 Blue Cross Blue Shield member plans, there is ample evidence of lot of waste and frivolity, not to mention outright consumer fraud, connected with the upper management of member plans ( West Virginia, Maryland, Pennsylvania, and the Empire Plan in New York are a few examples of outright criminal behavior exposed).

However, why worry about a few paltry examples of health care insurance industry criminality?. . .after all, there are always a few bad apples in any truckload, right? When all is said and done, what happens if the only real result of all the changes being proposed on the state or national basis is another $50 billion in company profits? If the Clinton Plan had gone into effect, the reality of the situation would have been the eventual realization (on the consumers part) that the international insurance cartel had finally hit pay dirt on a plan to have Uncle Sam collect a big chunk of it's yearly profits through clever application of the "contribution" process they know so well.

One of the main selling points in managed care is the humorous assumption that managed care is more efficient than the usual manner of doing business, e.g. , in this case, the typical indemnity insurance plan. This reasoning defies common sense, for both pluck out their administrative costs the first time the money goes by. For example: When $100 is available in the overall economy to pay for medical care, and somebody figures out a way to vacuum off $20 of that amount for another purpose, however you juggle the figures, only $80 remains in the pot to pay for the medical care.

Somebody loses right from the start, and by definition, the losers are restricted to the dummies dividing up the remaining $80. Some figures have been shown that indicate that, on average, health insurance costs are increasing at an annual rate of around 20 percent, while managed care programs are only showing increases of between 10 to 15 percent. While this may appear to be a remarkable achievement of the managed care concept, there are a few voices pointing out that this may be a totally misleading set of statistics. For one thing, managed care organizations tend to limit recruitment of clientele to the younger, and thus healthier segments of population in the areas where they currently do business.

Managed care marketeers also continually promote the idea that huge savings will be realized by the implementation of the full benefit of preventive care on the health status and financial bottom line. The fact is, that only three areas of preventive care seem to have any serious impact on the overall financial picture. The Office of Technology Assessment reported that of all of the preventive services surveyed, that only three paid for themselves in the end.

The three are prenatal care for poor women, childhood immunization, and tests of the newborn to reveal congenital disorders (phenylketoneuria, hypothyroidism) to name the most immediately profitable for both society and the affected individual. Naturally, the OTA was not exhibiting any bias against the dental profession by neglecting to mention the stupendous improvements in dental health brought about by fluoridation, but that may just be an oversight.

Early screening for health problems like cancer and heart disease seems to have a higher overall cost than the actual treatment of the disease. It may be that managed care advocates have attached themselves to a somewhat erroneous perception. The great masses of humanity that would be herded into the managed care emporiums of the future would be effectively surrendered to the tender ministrations of a starry-eyed preventive medicine cartel with little actual influence over the disease processes that will rapidly empty the coffers of the funds designated to pay for actual treatment.

The twin concepts of treating every client according to the Rule, and depending on prevention to save the bottom line may actually point out the degree of wishful thinking that forms much of the core philosophy of managed care. The true believers, actually just the people who are outside of the money handling loop, must zealously attach themselves to the notion that preventive care will reduce the ultimate total cost of managing the subscriber throughout his lifetime.

The principle reasoning being that if fewer people get sick, they will require less care, and that everyone will end up paying less. This really sounds suspiciously like the everyone wins situation often seen in state lottery advertisements. Let us alone and preventive care will save the day for society, government, and the consumer.

Managed care organizations also tend to use less than subtle marketing techniques and impressive subscriber numbers to force hospitals, drug manufacturers, or individual practitioners to discount real costs for fear of losing some perceived percentage of business if they don't sign on. This bit of crafty marketing subterfuge results in the shifting of real and imagined hospitalization and health care costs away from the managed plan and into the red ink columns of non-cooperating hospitals, and then eventually, to the indemnity plans via higher costs and clever billing tactics

. It does this simply by making sure that the other guy, and the non-participating hospitals especially, end up taking care of a much higher percentage of the older and sicker patients. In the ancillary health care industry, managed care marketing techniques have forced most pharmaceutical manufacturers to give their plans around a 25% price break for most prescription drugs.

A recent Associated Press article noted that "what is happening is that old people are subsidizing the discounts being offered to managed care". Drug industry spokesmen were somewhat hesitant to address the reporters accusations about price shifting to Americans least able to afford it. (AP 12-8-95 S. Sakson) What this actually means is that at the bitter end, the taxpayers end up paying the bill, one way or the other, but the managed care purveyors profits go on and on.

Managed care programs across the country enjoyed early successes in the late 70's and mid 80's and probably now enroll about 20 - 25 percent of all health care subscribers. In many market areas they dominate the whole health care system, typically to the detriment of local hospitals and care providers. The basis of this early success was a combination of fully staffed managed care programs similar to the Kaiser-Permanente model, or those that allowed patients to chose between a large group of participating health care providers and paid these participating providers on a contract basis for services to subscribers.

There have been some more recent indications that their clientele is less than overjoyed with what the more aggressively monitored managed care plans have to offer. There must be reasons for this apparent lack of consumer enthusiasm, and the best indication seems to be a growing awareness of the fact that traditional health care services are being increasingly limited and discouraged by the bureaucratic intrusiveness necessary to produce the proper bottom line.

The managed care plan myopically continues to look at the numbers, but doesn't seem to concern itself with the most critical thing that seems to matter most to the patient and providers, the clinical outcome. The managers cannot seem to grasp little things like the realization that a few more radiation treatments might have saved the subscriber. To the aggressively managed plan, 6 treatment sessions (The Rule) is enough for any malignant tumor known to science. Besides, if 6 treatments didn't do the job, then the subscriber will be essentially terminating his contract within six months anyway, and the graphs will hardly be jinked away from what they want to see.

Other management schemes, e.g. , preferred provider organization, or independent practice associations are faring somewhat better in the public eye, mainly because the plan bureaucracies have a little less leverage, or are presently exercising a little less leverage over the clinical judgments of participating clinicians.

Micro-management of the clinician is not as obvious, and monitoring of the individual practitioner is less totalitarian, but health care costs are also more subject to the inflationary spiral and premium costs continue to rise. Comparatively, these health care plans are not achieving any significant financial advantages over traditional indemnity insurance plans, and all indications are that they are eagerly awaiting full conversion to managed care administrators.

The basic dogma behind managed care continues to be the unswerving perception that shrewd management armed with stacks of statistical data can produce and market a health care system that runs as efficiently as the average boiler factory. There is also an implied assumption that this can always be done at less cost. Both statements are misleading; one because there is no unbiased information available for independent inspection and analysis, and the other, because it is based on outright dishonesty.

If our final health care plan eventually ends up being totally government managed, we should eliminate the words "shrewd" and "efficiently" in the first sentence, but everything else can stay. The proponents of this system still believe that once they fully integrate floods of MBAs into the clinical setting, that everything regarding the clinical practice of the healing arts can be reduced to numbers. They believe with the fervor of most zealots that the proper software running in the proper computer environment can come up with all the possible and proper answers for clinical decision making.

Unfortunately, the weakness still seems to be in the interpretation of the statistical data in a manner consistent with the truth and what human gut feelings deem to be proper and personalized medical care. Just what the total economic costs of this program will be when implemented is equally unclear, but it will undoubtedly result in a further depression of the overall state and national economies. This situation will continue to exist, possibly without any equitable resolution, until the socioeconomic climate improves by leaps and bounds, or science develops a cheap Star Trek-like transporter that can vacuum your complete persona out of the old afflicted body and whoosh you into your equally cheap shiny new clone.

It should be obvious by now that the absolute solution to our health care crisis has not been invented yet, and Buddha, Jesus, and Mohammed didn't offer much insight into the problem. Like any crisis situation, the best hope may eventually lie in the mobilization and integration of every last one of us into the effort, consumers, providers, and plan purveyors, alike. Consumers won't like it if they get low quality care, and the providers won't like it if they have to face serious life-style changes.

The educational and physical infrastructure backing up our current health care system will suffer prodigious damage as the incentive for quality diminishes. Needless to say, the plan purveyors won't like anything that doesn't give them their ordained slice of the pie. Reduce this, and they will pick up their marbles and abandon the field, leaving a husk of the former system for someone else to fix. If health care is a real crisis, we should be approaching the whole matter as a crisis - maybe a war for lack of a better word. Right now, powerful economic interests just have too much influence on our political class for them to legislate anything resembling a fair and equitable solution for all concerned. Maybe a little war fever scrutiny ought to be directed at the enemy. We could be surprised at what we find.

Copyright 1996 R. E. Brossman