A Good Idea Gone Bad

Face it - health care costs have profoundly affected the lives and finances of all Americans, whether considered individually, through an employer group plan, or under Medicare.

The question is, has managed care helped or exacerbated the situation?

The theory behind Health Maintenance Organizations (HMOs) was that it's cheaper to keep people healthy than it is to nurse them back to good health. Preventive care and early intervention can reduce long-term chronic illness, thereby reducing the overall costs of medical care. That's how it all began. In the beginning, it made good sense, as well as good cents.

That's how it all began. In the beginning, it made good sense, as well as good cents.

But the coverage included a couple of unique and unpopular restrictions:

1. The insured could only use certain doctors and hospitals that had contracted with the program.
2. Patients could not see a specialist unless the primary care doctor referred them.

Those restrictions kept a lot of people away, but as the costs of medical care continued escalating, everyone started looking for ways to cut expenses without seriously reducing benefits. HMOs seemed to be the answer.

And at first, it seemed to work. But more recent information suggests that HMOs have failed to deliver on their promises. For example, in the late 1980s, Southern Bell switched its employees to an HMO plan. The company had been hit by six consecutive years of 36 percent annual increases in medical coverage. After the switch, those hikes slowed to 12 percent for several years.

However, costs have continued spiraling upward under HMO plans over the past decade. And as costs keep rising, benefits are being pared back. The most significant and obvious areas are higher physician co-payments, a drastic reduction in prescription drug benefits coupled with higher co-payments, and restrictions on the use of drugs and certain diagnostic procedures.

Many doctors are quitting HMOs because they resent the intrusion of "unqualified" persons telling them how to treat patients. At the same time, many insured people are searching for other ways to protect themselves, prompting some to join programs that turn out to be scams.

In most cases, managed care has failed to deliver what was promised. To some, the concept has done an about face, turning from a service that provided preventive care to a program that prevents care.