Appendix 77b - HMOs

by Michael Greger, MD and United Progressive Alumni

[ Medical School Resources | Appendices | Discussion ]

"This Business Called Medicine":

Recently, an ad for one of DC's larger HMOs started popping up on local buses. It has a photo of a smiling toddler looking down at a hand holding a stethoscope to his chest. The copy reads: 'It's diagnosis, not a business decision.' Don't believe it. In America, every diagnosis is a business decision.

I'm not saying it's extortion - it's not as though they're saying that if you don't buy their plan they'll come over and break your fingers. They're just saying that if you don't buy in their plan and you do break your fingers, they won't fix them.[949]

Decapitate Doctors

Capitation is the economic force behind private managed care; it is rapidly becoming the preferred method of payment.[950] Capitation as explained in the Canadian Medical Association Journal:

Under capitation, doctors accept a flat monthly fee per person to take care of all the healthcare needs of members in a[n]... HMO. If those members are healthy and don't require much care or expensive services, all's well. The monthly fees keep rolling in to the office even if the members don't, and doctors profit. But if the HMO members are not very healthy and require frequent care, expensive services or big-ticket technology, the financial risk grows and physicians face the agonizing choice of either losing money or denying medical services. Further payment is unavailable, no matter how much medical care might be required.[951]

In addition, some managed care contracts "withhold" a significant portion of a doctor's capitation fees, usually 10 percent to 25 percent, until managers can assess whether they have met their "targets."[952] From a letter to the New England Journal:

Disturbingly... risksharing of less than 10 or 20 percent of a physician's income [is portrayed] as benign. For the average internist in 1995, a 'withhold' of 20 percent of gross practice income could have amounted to $77,200 - 41.6 percent of net income (after practice expenses). Few patients would view as innocuous a bonus for withholding care equivalent to the cost of a Mercedes.[953]

You'll never grow old with managed care - Bumper Sticker

From an article called "Capitation Begins To Transform The Face Of American Medicine," "With capitation, the power over healthcare provision by managed care administrators has become absolute - a form of tyranny."[954] The conflicting duties and obligations of capitation create what's been described as, "an untenable, intolerable, and professionally stifling position." From the book M. D. Doctors Talk about Themselves:

When he called to tell me he had chest pains, my first reaction - before a thing else crossed my mind - was 'You can't do this to me. I only get paid eight dollars a month to take care of you.' I went home that night and thought about it, and the next morning I called the director of the HMO and told him I had been corrupted by the HMO, and I quit right then and there.[955]

The system is such that physicians may make more money if their patients die. I was in favor of physician assisted suicide until third year; now I wouldn't trust doctors to put anyone or anything above their own interests. From an article entitled "Managed Care and Managed Death" in the Archives of Internal Medicine, "Suicide might become a moral duty - to family and to country... [since] the happy side effect will be healthcare cost savings."[956] A 1998 article in the New England Journal actually calculated the potential annual cash savings ($627 million) from legalizing physician-assisted suicide.[957]

Pearly Gatekeeper

Capitation creates a system in which to be loyal, the physician must do what is in the stockholder's best interest.[958] Physicians, for example, are encouraged to assume administrative roles as gatekeepers to increase their personal incomes. As healthcare becomes increasingly marketized, and the object of the game becomes cost-cutting, doctors and hospitals with high professional standards are reportedly at risk of being crowded out by those willing to practice medicine "on the cheap."[959]

Capitation has an incentive built-in to undertreat and to delay and discourage treatment and access to care.[960] From a letter to the New England Journal, "For the physician who is paid by capitation... the patient is a threat to profits, indeed, a financial liability, exhausting some of what the physician already had in his or her pocket."[961] From M. D. Doctors Talk about Themselves, "So is a doctor supposed to think he's taking food out of his child's mouth every time he orders a test or a consultation for one of his patients? If this isn't a conflict of interest, I don't know what is."[962]

A recent Congressional report on access problems among HMOs showed that cost-based denials happen far too often because of the temptation to make more money by denying care. For example, in one 24-hour period a Medicare beneficiary with signs and symptoms pointing to pneumonia and a heart attack was twice denied admission to a hospital, and both times a capitated primary care physician concurred with the decision. After the second attempted admission, the patient died on the way to his primary care doctor.

"The conversion of healthcare into a profit-making machine in an amoral marketplace..."[963]

From an article called "The Tyranny of Capitation": "Capitation is unethical and should be illegal. The saddest, most finite and telling comment about capitation and managed care is that, 'Managed care has no social purpose' (Emery B. Dowell, former vice-president and director of Government Affairs for Blue Cross for California)."[964]

"Rats and roaches live by competition under the laws of supply and demand. It is the privilege of human beings to live under the laws of justice and mercy" - Wendell Berry. Capitalism strips, "of its halo every occupation hitherto honored and looked up to with reverent awe. It has converted the physicians... into its paid wage laborers" - The Communist Manifesto.[965]

Milton Friedman, probably the leading academic advocate of "free market" economics, from his book Capitalism and Freedom:

Few trends could so thoroughly undermine the very foundations of our free society as the acceptance by corporate officials of a social responsibility other than to make as much money for their shareholders as possible.

The public be damned. I'm working for my stockholders - William Vanderbilt

Quoting from a letter to the New England Journal, "In medicine we are witnesses to, and to some extent accomplices in, the social revolution aimed at converting people into integers."[966] The managed care industry's deliberate misuse of the English language has been described as "moral maleficence of a high order." Physicians, for example are referred to as "case managers," "fundholders," "gatekeepers," or "clinical econo-mists."[967] Patients are "revenue bodies."[968] According to an article in the American College of Physicians' Observer, "Managed care corporations define the money they spend caring for patients as the 'medical loss ratio'...."[969]

A 1997 study of a national sample of medical school students, residents, faculty members, and deans documents widespread negative views about the effect of managed care on clinical care, teaching, research, and the quality of professional life.[970] In a 1998 survey of 1000 primary care physicians, over half agreed that, "cost reduction takes priority over quality of patient care."[971]

Journal of Family Practice sarcasm:

How can we teach the patient to accept a different relationship with their physicians, one that reflects the current health business environment rather than archaic, sentimental values of trust and integrity? The challenge for us now is to help patients accept the realities of market medicine and encourage them to quit romanticizing about physicians who talk to their patients, advocate for them, or engage in other such nonreimbursable nonsense.[972]

From a New England Journal letter to the editor:

It is hard to be a good doctor. The ways we are paid often distort our clinical and moral judgment and seldom improve it. Extreme financial incentives invite extreme distortions.... Until such reforms are carried out, many physicians scrambling to preserve their careers will be tempted or forced into the corporate embrace. But if we shun the sick or withhold information to benefit ourselves, we conspire in the demise of our profession.... We have been passive passengers, docile slaves obedient to the gag clause.... Let us not end up like tobacco-company executives, who, repenting their sins find that their contracts forbid confessing them.[973]



[949] Dusen, LV. "This Business Called Medicine." Canadian Medical Association Journal 157(1997):1724.

[950] Mundy GR and T Yoneda. "Bisphosphonates as Anticancer Drugs." New England Journal of Medicine 339(1998):398-400.

[951] Korcopk, M. "Capitation Begins to Transform the Face of American Medicine." Canadian Medical Association Journal 154(1996):688-691.

[952] Ibid.

[953] Woolhandler, S and Himmelstein, DU. Letter. New England Journal of Medicine 340(1999):322.

[954] Korcopk, M. "Capitation Begins to Transform the Face of American Medicine." Canadian Medical Association Journal 154(1996):688-691.

[955] Pekkanen, J. MD: Doctors Talk about Themselves New York: Delacorte Press, 1988:139.

[956] Sulmasy, DP. "Managed Care and Managed Death." Archives of Internal Medicine 155(1995):133-136.

[957] Emanue, EJ and MP Battin. "What are the Potential Cost Savings from Legalizing Physician-Assisted Suicide." New England Journal of Medicine 339(1998):167-171.

[958] Packer, S. "Capitated Care Is Unethical." Archives of Ophthalmology 115(1997):1195-1196.

[959] Korcopk, M. "Capitation Begins to Transform the Face of American Medicine." Canadian Medical Association Journal 154(1996):688-691.

[960] Danto, LA. "The Tyranny of Capitation." Archives of Surgery 132(1997):579-585.

[961] Robbins, D. Letter. New England Journal of Medicine 340(1999):322.

[962] Pekkanen, J. MD: Doctors Talk about Themselves New York: Delacorte Press, 1988:140.

[963] Kassirer, JP. Letter. New England Journal of Medicine 339(1998):1328.

[964] Danto, LA. "The Tyranny of Capitation." Archives of Surgery 132(1997):579-585.

[965] "Annotation: Patients on the Auction Block." American Journal of Public Health 86(1996).

[966] Needham, CW. Letter. New England Journal of Medicine 338(1998):66.

[967] Pellegrino, ED. "Words Can Hurt You." Journal of the American Board of Family Practice 7(1994):505-510.

[968] Sherrill, R. "Medicine and the Madness of the Market." Nation 9 January 1995:44-71.

[969] Schiff, G. "Why For-Profit Managed Care Fails You and Your Patients." American College of Physicians' Observer 1996(November).

[970] Simon, SR, et al. "Views of Managed Care." New England Journal of Medicine 340(1999):928-936.

[971] Feldman, DS, DH Novack and E Gracely. "Effects of Managed Care on Physician-Patient Relationships, Quality of Care, and the Ethical Practice of Medicine." Archives of Internal Medicine 158(1998):1626-1632.

[972] Slomka, J. "A Patient's Guide to Managed Care in the House of God." Journal of Family Practice 41(1995):441-442.

[973] Needham, CW. Letter. New England Journal of Medicine 338(1998):66.



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