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What's behind the wave of anti-HMO legislation?

ELECTION YEARS TEND TO BE WATERSHEDS. FOR managed care, 1996 was such a year. Since the late 1980s, the rising tide of managed care overcame most obstacles: physician and hospital resistance, adverse media coverage, etc. In many respects, the proof was in the pudding. Costs went down, the rate of medical inflation was blunted, quality monitoring was instituted, and member satisfaction was generally high. (1)

But by 1996, consumer, physician, and legislative opposition had reached a critical mass. Sparked by such events as David Himmelstein's article in the New England Journal of Medicine complaining about "gag" clauses, (2) and the storm over shortened maternity stays, over 1,400 bills were introduced in 35 states to modify, regulate, or control managed care. (3) In California, two initiatives were placed on the ballot to prohibit gag rules and financial incentives to restrict care, set staffing levels, and impose certain requirements on physician evaluations. (4). In Oregon, one initiative, Measure 35, sponsored by an ophthalmologist, would have outlawed capitation. Obviously, the era of managed care as a target of physicians only is over.

On first glance, it may appear as if managed care itself may be doomed. The avalanche of bills, measures, initiatives, Federal regulations, etc., seemed overwhelming in late 1996. Did this, in fact, portend a national shift away from managed care? What does the consumer protection and regulatory activity really mean? What directions for the future can be identified? This article seeks to answer those questions and highlights a case study of "reform gone awry" that may hold lessons for the national scene.

First, it is important to put this activity into historical perspective. One of the most common omissions of those who argue against managed care is to acknowledge the crises that led to its creation. "Managed care" did not suddenly spring forth fully formed, like Venus from Jupiter's forehead. Objective observers will admit that America's medical care system is seriously flawed. [Given its failure to keep the U.S. from the bottom of any list of health status measures, I hesitate to use the term "health care system"].

Skyrocketing medical inflation, tens of millions of uninsured, patient dissatisfaction, poor access to care--these problems are well known to any physician executive. Hence, it has been disingenuous for the critics to overlook these elements as having laid the groundwork for the current situation. While they may choose to ignore them, employers, patients, and administrators are very aware of the way things used to be. This historical memory is a powerful counterbalance to many of the horror stories and anecdotes that tend to generate publicity. I believe it will also prove to be far more enduring. The attention of the media is short; "news" is a rapidly perishing commodity. But the impact of managed care on the fundamental issues that led to it is substantial and will be long lasting.

As such, the anti-HMO legislation activity does not represent a repudiation of managed care. Rather, it may be seen as a maturing of the entire process of redefining our medical delivery and financing system. Once the enthusiasm for any new process wears off, and a certain amount of experience is generated, the problems in that system will be apparent. To use another historical perspective, this was the rationale for the Bill of Rights, written to address the defects the Founding Fathers saw in the Constitution.

It is clear that managed care is realigning broad areas of our economy, not just the physician and hospital segments. Each area has its own constituency, which is only now beginning to understand how it is affected. This is the impetus for the 1,400 bills introduced last year. The volume of bills should not be daunting. Given the spectrum of people affected, it is probably an expected number. In other words, what we are seeing now is the backlash of special interests seeking to preserve their turf. This is not necessarily bad. Our representative form of government is based upon the right of every group to make its case.

But the petitioners run a major risk--that of being identified as having a particular ax to grind. If it is apparent that legislation is designed to protect a certain group for less than altruistic reasons, that legislation is likely to fail. What happened to those 1,400 bills and measures? As I said earlier, the proof is in the pudding. Only about 65 passed in the legislatures. (5) The Oregon initiative lost badly. Both those in California failed by wide margins. "Why" is explained by health care futurist Jeff Goldsmith: "The twin propositions [in California] were transparent economic protectionism. If its obvious that providers are merely trying to protect their jobs and their incomes, they're not going to fool anyone at the ballot box." (6)

Goldsmith's comment also indicates why initiatives may fail, while individual laws may pass. When a case must be made to the public, as with a ballot measure, the special interest nature of the proponents will be well publicized. At the state and Federal level, where laws are more of a committee process, lobbying and the anecdotal "horror story" (especially if delivered by a constituent) can have a greater impact on the legislators.

A major problem for anti-HMO legislation is that it is a negative movement. It attacks managed care, often vehemently, without offering a viable alternative or recognizing what led to it, as mentioned earlier. In Oregon, the anti-capitation initiative suffered this exact fate. It sought to dismantle the state's unique health plan, without proposing a method for expanding access or controlling costs. Oregon voters realized this and soundly rejected it. (7) They were unwilling to scrap the progress made and return to the pure fee-for-service model. They, like voters nationwide, are also coming to understand that we will not get what we want or need out of medical care by legislating it. The ability of laws to change behavior is far inferior to that of the marketplace, as any student of history or economics knows. The challenge for managed care proponents is to make this a reality.

Going forward

What will the legislative climate be for the future? Having found the spate of laws reflects a natural maturing of the managed care movement, and that voters and legislators have rejected most of the attempts to derail it, I believe that a certain low level of activity will be with us for the foreseeable future. This may be a positive trend. Certainly, the image of the industry has been tarnished by poorly run plans and some bad decisions. But managed care has brought employers and consumers to the table with physicians and hospitals in decision-making for the first time.

Likewise, these stakeholders, as well as legislators, government administrators, and others must have a finite level of confidence and trust with regard to health plans. A reasonable framework of regulations and laws is a way to establish that feeling of safety. Ideally, once the more inflammatory measures are disposed of, a cooperative spirit between health plans and these groups will emerge. The managed care industry itself has become far more proactive in dealing with potential political issues.

For example, the Blue Cross/Blue Shield Association recently developed a statement supporting "open discussion of treatment options between Blue Plan physicians and their patients. Treatment decisions should be based on the best available scientific information, clinical evidence, and the unique needs of the patient." (9) Such a declaration takes much of the wind out of the sails of any legislation on this topic, as well as preempting any criticism based on these concerns. We will see more of these proactive efforts, especially when the press seems ready to seize on a subject like gag clauses and use it to bash HMOs.

One further event will happen in the next one to two years to dampen the "urge to legislate." Quite simply, the bills will come due. As Congress and state Houses impose mandates, costs are invariably imposed as well. With the expenditures for Medicaid and Medicare consuming huge percents of state and Federal budgets, it will soon become apparent that legislating medical care based on anecdotes has ramifications.

For example, regulations that mandate a 48 hour maternity stay postpartum have the potential for adding hundreds of millions of dollars to budgets, without the satisfaction of being able to demonstrate any improvement in health outcomes. (10) It will be interesting to see how lawmakers deal with these budget overruns. Where will the money come from to provide an extra hospital day for basically healthy women: from education? highways? police? farm supports? One or two sessions spent wrestling with these dilemmas will probably cure most politicians of the "urge." Then we will be ready to move forward in a more positive environment to address health care issues.

The Kentucky Story

Having noted the failure of much of the anti-HMO measures in 1996, it is instructive to look at a state where legislation was enacted. In 1994, Kentucky passed sweeping reform meant to guarantee coverage for all citizens by forcing insurers to cover them. It also created benefit mandates and froze rates, essentially eliminating medical underwriting for certain groups. The results were dramatic and swift. In two years, 42 insurance companies left the Kentucky market. (8) The only two choices left to individual consumers are the Blues plan and Kentucky Kare, a state sponsored plan.

While the Department of Insurance maintains that 5,000 people were able to obtain coverage due to the reforms, more typical was the concern of the state Farm Bureau. Many of its members saw their coverage double in price. So severe is the crisis that the legislature plans a special session in 1997 to try and rework the reform bills. As the House Speaker, Jody Richards, said, "We need to do something to bring those companies back. Competition is the best way to bring rates down." (8) Kentucky is a fascinating example of the rapid deterioration of a health care market due to short sighted legislative efforts. It remains to be seen if the 42 insurers who left within months can be lured back in as short a time.

--Derek van Amerongen, MD, MS


(1.) "Employers health costs are stabilizing." The Wall Street Journal, October 7, 1996.

(2.) Himmelstein, D. U. Corporate managed care. NEJM 334(16):1060.

(3.) "States gear up to battle to regulate managed care." The Associate Press, February 12, 1997.

(4.) "TV ads attack pair of anti-HMO initiatives." The San Francisco Chronicle, August 15,1996.

(5.) "HMO excess have spurred backlash, regulation." Ft. Lauderdale Sun Sentinel, November 29, 1996.

(6.) Guglielmo, W. "Why the anti-HMO initiatives failed on election day." Medical Economics, January, 1997, page 27.

(7.) Op cit., page 32.

(8.) "Session needed to revise health care, leaders say." Lexington, KY, Herald Leader, February 9, 1997.

(9.) BCBSA. "Medical Management Policy Statement: Provider-Patient. Communications (So-Called 'Gag Clauses')". January 14,1997.

(10.) Brumfield, C.G., Nelson, K. G., Stotser, D., et al. 24 hour mother infant discharge with a follow-up home health visit. Obstet Gynecol 1996;88:544.

Derek van Amerongen, MD, MS, is the National Medical Director at Anthem Blue Cross and Blue Shield in Mason, Ohio. He can be reached at 513/336-3841 or via fax at 513/336-3551.
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Title Annotation:Managed Care Matures; Health Maintenance Organization
Author:van Amerongen, Derek
Publication:Physician Executive
Geographic Code:1U9CA
Date:May 1, 1997
Previous Article:Strategies for physicians in health care's market revolution.
Next Article:The revolution is here.

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