HMOs and the Threat to Your Health


“Making a Killing: HMOs and the Threat to Your Health,” by Jamie Court and Francis Smith, 224 pages. Common Courage Press, 1999.

Is market-driven capitalism good for your health care? That may depend on your vantage point. If your name is Leonard Abramson and you’re the former CEO of U.S. Healthcare, yes. That’s because Abramson managed to pocket $900 million (no, this is not a typo) as a result of his company’s merger with Aetna.

If your name is Betty Hale, however, and you’re a school nurse who faced not only breast cancer but an HMO that delayed, stonewalled, and eventually refused to pay for life-saving treatment, leaving you with $178,000 in unpaid bills, you might be forgiven if you’re not quite so upbeat about the remunerative new world of managed care.

Obviously, Hale’s story lands more on the edges of the managed care continuum. But say consumer advocates Jamie Court and Francis Smith, authors of “Making A Killing: HMOs and the Threat to Your Health,” it is also symptomatic of what is wrong with the system as a whole.

Health care has evolved into a financial casino of winners and losers where quality does constant battle with a bottom-line culture that says money matters most. Whereas once clinical incompetence was the bane of medicine, the authors declare, today managed care has become the foremost threat to quality care.

Certainly not everyone will agree. But Court and Smith make a strong case. Unlike the old days of independent physicians and free-standing, academic, or charity-run community hospitals, today health care is all market demographics and mergers, slick advertising campaigns and sophisticated fiscal strategy. Health care is a very big business.

Better than any book I’ve read, “Making a Killing” brings together the research and analysis to show the deleterious effects that come with turning health care into just another commodity, just another investor-driven market sector.

The worst inequities are easily apparent. Forty-five million people are without health insurance, a figure that grows unabated despite a “boom” economy. Yet even many insured, better-off folks today are feeling the pinch of health care commercialism. A reported 17 percent of adults earning $35,000 and $60,000 a year went without needed health care in 1998, because it just cost too much.

But why should this be a surprise? Those with insurance face double-digit premiums, rising co-payments and deductibles, and a growing maze of rules and qualifiers for getting coverage.

Money matters most

In his introduction, Ralph Nader rips the “growing swamp of commercialism over service” that characterizes the new managed care culture. Yet could it be otherwise under the present economy? Managed care means playing the margins and delivering profits by keeping premiums high and benefits low. As such, the system is flawed more by design than by any haphazard decisions of insurance bureaucrats or health system executives.

According to Court and Smith, health care capitation is a big part of this flawed reality. In most for-profit managed-care networks, doctors or hospitals receive set lump-sum payments for every “covered life.” What is not spent on patients becomes profit for the doctors or hospitals. Consequently, such systems offer built-in structural incentives to withhold care. Notably, the number of physicians working in capitated arrangements has nearly doubled in recent years.

If all this sounds like hyperbole, think again. A recent study in JAMA found that investor-owned HMOs delivered lower quality of care than not-for-profit HMOs, comparing 14 quality-of-care indicators. But perhaps equally significant now is the ripple effect of the for-profit culture throughout the system. Increasingly, health care systems of all kinds are being compelled to act according to the rigorous demands of the competitive market.

“Making a Killing” tells the story, for example, of Chad Douglas Aiken of Woodland Hills, Calif., who died suddenly in 1995 at age six months after several weeks of a mild but lingering reaction to a required round of vaccinations. Notably, his death took place against the backdrop of a dispute over whether he was entitled to care from his mother’s HMO, non-profit Kaiser Permanente.

A clerical mix-up had led the HMO doctor to believe the family, actually long-time Kaiser enrollees, were fraudulently using Kaiser’s services. Consequently, the HMO washed its hands of the case, despite the baby’s symptoms. Of course, mistakes do happen and clerical mix-ups occur. But this was something more.

Court and Smith expertly delineate how the physician’s hard-nosed stance toward the Aiken family was symptomatic of Kaiser’s new bottom-line culture. The nation’s largest non-profit HMO was struggling to keep pace with its for-profit competitors.

Accordingly, Kaiser had slashed its medical budget by $800 million between 1995-97, even as membership increased. The new cost-tight culture meant everything from treatment innovations like outpatient mastectomies to work rules that chopped away at nurses’ responsibilities, assigning them to less skilled-and cheaper-workers.

However, Kaiser’s cost-cutting approach had not gone unnoticed. Texas regulators fined the company $1 million in 1997 for a series of violations. The federal government even threatened to strip the HMO of its Medicare/Medicaid funding. In the true commercial spirit, Kaiser’s response was not to abandon medical cost-cutting but to increase its public relations and advertising!

Contrary to the venerated mythology of investors, medicine’s humanitarian mission can only be degraded by this kind of competitive economic climate. “Making a Killing” makes this abundantly clear.

It is equally a myth that the market system, if not more efficient than European-brand national health systems, is at least cheaper. In fact, the United States spends more per capita on health care than any country in the world, yet the gaps in coverage here are greater than in any other industrial nation.

The Federal Government Accounting Office estimated in the early 1990s that a system of universal health insurance could reduce annual health costs by more than 10 percent, And that’s just by reducing the paperwork alone, which in 1998 totaled about $100 billion.

Notably, the earnings of managed care CEOs outpace their counterparts in other industries by a factor of two to three, Court and Smith observe. And as much as 20 to 30 percent of current health costs go toward corporate overhead and profit. It’s enough to make you wonder. What else might we do with all that money, other than enrich the likes of Mr. Abramson and company?

Court and Smith give us an idea. The stock-related wealth of just the top 23 managed-care executives alone could provide health insurance for six million people, or health coverage for 14 percent of the nation’s uninsured. If we start talking about the cost of all the mergers and acquisitions, the huge profits of the largest managed care companies or their executives’ overall stock wealth, we’re actually talking about the kind of money needed to at least begin providing comprehensive health insurance for everyone.

Let the people decide

“Making a Killing” reminds us that the emergence of corporate medicine has taken place with barely a semblance of public debate. Pivotal decisions about how the system is designed and run are left increasingly to the private economy. Behind the scenes lurk actuarial firms like Seattle-based Milliman & Robertson, dictating cost-cutting protocols to the nation’s health plans. It doesn’t seem very democratic and it isn’t.

Ironically, the frenzy of investor-driven mergers and acquisitions is not only creating a few giant health-care concerns. It may also be setting the stage for a future non-profit system of national or universal health care.

“The health care system is stumbling toward a bilateral monopoly of insurance companies and provider groups in every market,” says Princeton health care expert Uwe Rheinhardt. “If these plans keep buying each other up, there is no longer competition, because executives of the plans can regulate everything they want in one golf game. The government can then say, ‘You have converted health care into a public utility, we need to regulate you.'”

Certainly regulation in itself doesn’t equal a national health system. But economics, not to speak of justice, point invariably toward a future free of the corrosive effects of a health-care system driven foremost by profits.

Whatever system we as a nation eventually move to, I don’t think we can call it progress unless that system is organized around a basic precept. Health care is a human right. A system based on private profits can never guarantee that right.

In “Making a Killing,” Jamie Court and Francis Smith take that principle to heart. They provide us with a thoughtful treasure of insight and information and a commitment toward helping create the more humane and equitable system we all deserve.

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