[Congressional Record Volume 141, Number 127 (Wednesday, August 2, 1995)]
[Extensions of Remarks]
[Pages E1588-E1589]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]


MAKE SURE OUR MORAL COMPASS IS WORKING PROPERLY: QUESTIONS FOR MANAGED 
                                  CARE

                                 ______


                        HON. FORTNEY PETE STARK

                             of california

                    in the house of representatives

                       Wednesday, August 2, 1995
  Mr. STARK. Mr. Speaker, on July 25, the president of the National 
Association of Public Hospitals, Larry Gage, testified before the Ways 
and Means Subcommittee on Health on the pending Medicare cuts.
  I am inserting portions of his outstanding statement--a statement 
that every Member should read before voting on the excessive, 
destructive Medicare and Medicaid cuts proposed by the budget 
resolution. In this section, Mr. Gage discusses the dangers of managed 
care if not properly implemented and supervised, and the benefits of 
managed care when done correctly.
  Portions of Mr. Gage's statement follow:
With Respect to Managed Care, We Must Be Careful Not to Overpromise and 
    Overexpand, Beyond the Capacity of Our Health System to Respond

       The term ``managed care'' is now so ubiquitous that it 
     dominates the field of vision in both the private and public 
     sectors of the our health industry. More than just a helpful 
     tool, managed care has become a preoccupation--perhaps even 
     an obsession--for private insurers, employers, and 
     individuals, as well as for legislators and bureaucrats at 
     every level of government. Yet it is an obsession that 
     obscures the need for greater scrutiny of the managed care 
     industry, in order to avoid potentially irreversible damage 
     to the future viability, quality and ethical standards of 
     health care providers, as well as to the good health of many 
     millions of Americans.
       In other words, before we continue this headlong rush into 
     uncharted territory, we need to pause and take stock, to make 
     sure our moral compass is working properly. We need to ask 
     (and answer) some tough questions in the heat of the current 
     debate, which I believe represents nothing less than a 
     struggle for the reputation, ethics, values, even the soul, 
     of the managed care industry.
       The dilemma is essentially a simple one: what is ``managed 
     health care'' and should it primarily benefit payers or 
     patients? It is largely designed as a blunt instrument for 
     containing health costs--as many policymakers in Washington 
     and dozens of state capitols believe? Or--as many managed 
     care advocates would like to believe--is it something else: a 
     genuine health care delivery reform that shifts the historic 
     emphasis from acute and episodic intervention to the 
     prevention and maintenance of wellness?
       This is not an idle question. If managed care is primarily 
     the former--a way to contain costs--then we may be wasting 
     our time worrying about ethics. As indicated by the recent 
     publicity over the failure of some HMOs to pay for emergency 
     services, if the bottom line is all that counts the patient 
     and the provider will both suffer (this is true whether the 
     bottom line is Medicare savings or higher dividends for 
     shareholders). Of course, we would all like to believe that 
     effective managed care plans can BOTH restrain costs and 
     improve wellness. But the plain fact is, in the public sector 
     at least, MOST managed care activities have been carried out 
     in the name of short term cost containment rather than 
     genuine health system reform.
       There are perhaps several ironies here. The first, of 
     course, is that there is increasing evidence that managed 
     care is not much more effective over time in holding down 
     health costs that the fee for service system it is rapidly 
     supplanting. Only the most highly organized and self-
     contained plans--staff and group model HMOs--have any 
     measurable track record over time in holding down costs. For 
     most other plans, after a brief initial flurry of savings--
     often driven more by the arbitrary demands of payers 

[[Page E1589]]
     than any inherent efficiencies in most organizations--costs seem to 
     rise at about the same rate as the industry as a whole.
       A second irony is that the major underlying reasons for 
     cost increases in the American health industry have little or 
     nothing to do with either managed care or fee for service 
     medicine. Rather, they depend on such factors as the large 
     and ever-growing numbers of uninsured, continuing advances in 
     expensive technology on both the outpatient and inpatient 
     fronts, and the fact that no one has effectively cured most 
     Americans from demanding the most and the best no matter what 
     health plan they enroll in. (It cannot escape the Committee's 
     notice that the so-called ``point of service'' managed care 
     plans--the most costly and least controllable--are the plans 
     that usually score highest in consumer satisfaction among 
     HMOs.)
       The third, and perhaps greatest, irony is that the steps 
     which clearly could reduce health costs over time--
     prevention, wellness and public health services--are the last 
     services added and the first ones on the chopping block when 
     the primary goals are short term cost containment and profit-
     taking.
       Certainly, there is no disagreement about the importance of 
     preventive measures aimed at improving both individual and 
     community-wide health status. Preventive health can minimize
      both the potential for excessive care in the fee for service 
     environment and the potential for providing too few 
     services in the managed care environment. Moreover, the 
     assignment of patients to primary care gatekeepers who are 
     able and willing to manage the full continuum of a 
     patient's care, also improve a patient's health, and thus 
     hold down long term health costs, even if more services 
     are needed in the short run. But these features must be 
     fully integrated into HMO's not just grafted onto the 
     surface. Of course, many managed care organizations and 
     employers do try to emphasize wellness and prevention, or 
     at least pay lip service. The problem is, we cannot 
     demonstrate that these services will reduce health costs 
     overnight. In fact, in the short run their effective use 
     is likely to increase services and costs, especially for 
     low income elderly patients historically deprived of such 
     services.
       Ultimately, of course, if ``managed care'' is seen only as 
     a tool for cutting costs, the result will be a health system 
     that is neither ``managed'' nor ``care.'' We all know that 
     there are more than a few dirty little secrets about the 
     explosive growth in Medicaid managed care over the last 
     several years. I will agree that some managed care 
     organizations have developed elegant, sophisticated MIS and 
     case management systems that emphasize prevention and 
     wellness. Some plans may also have adequate and well-rounded 
     networks of providers that are reasonably reimbursed even as 
     they are given rational incentives to change wasteful 
     practice patterns. However, many other organizations have 
     simply grown too fast to take the time to develop such 
     systems or incentives. Rather, they devote their efforts to 
     enrolling mostly people who are young or healthy (or both), 
     invest as creatively as possible the enormous cash flow 
     generated by capitated payments, ratchet down payments to 
     providers wherever they can, keep support staff to a minimum, 
     erect subtle and not-so-subtle barriers to access, and pray 
     no one needs a liver transplant before they can cut a deal to 
     sell out.
       Now it may sound from these statements that I am cynical--
     perhaps even that I oppose managed care. But nothing could be 
     farther from the truth. I belong to an HMO. NAPH has been 
     working rapidly to help both public and private health 
     systems develop or expand managed care capacity all over the 
     country. Together with my associate, Bill von Oehsen, I have 
     even published a new book--a 1000 page ``How To'' manual for 
     Medicaid Managed Care and State Health Reform. Managed care 
     is not problematic in itself--especially for the poor and 
     disenfranchised. Done properly, managed care can result in 
     genuine improvements in health status and expansion of access 
     for some of our most vulnerable patient populations. It is 
     just that, done poorly, implemented too rapidly, or for the 
     wrong reasons, it could be a setback, not an improvement, 
     both for patients and for entire communities.
       We need only look at the TennCare Medicaid debacle to see 
     some of the problems we face when cost becomes the only 
     issue. With TennCare, the state of Tennessee dumped all 
     Medicaid and many uninsured patients overnight into ill-
     prepared managed care plans with inadequate provider 
     networks, only to pay them premiums that were originally 
     found to be 40% below acknowledged actuarial soundness. As 
     recently as last month, TennCare rates were determined by 
     Governor Sundquist's own TennCare Roundtable to remain 10-20% 
     below costs. And in fairness to the Governor, who was not 
     responsible for developing TennCare, he and his staff have 
     now publicly committed themselves to implementing needed 
     reforms.
       I do not believe it is inevitable that TennCare represents 
     the future of managed care--but if we hope to expand such 
     programs to include a substantial proportion of Medicare 
     beneficiaries, we must act quickly, together, to set tough 
     standards for equity, fairness, access, quality and fiscal 
     integrity in managed care plans.
     

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