A Report From Resources for the Civic Conversation

FAITH COMMUNITIES & MANAGED CARE
Prepared by Robb Burlage, Ph.D.Inter-University Lecturer in Urban Health Consultant, Resources for the Civic Conversation

Some Issues for Faith Communities About Managed Care and For-Profit Health Care Corporatization - Toward Regulatory Movement? Corporate Campaigns? National Health Program Back on the Agenda?

First, something of an introduction to the project I work with and something about where we are coming from:

Resources for the Civic Conversation, an inter-religious, inter-seminary, and inter-university program, is raising nationally the moral and ethical, as well as "practical," issues of the new health care restructuring. We are especially concerned about market-driven, for-profit managed care -- and the impact of this "new system" on communities. The emphasis is on the local level of community dialogue, beginning with faith communities as necessary agents of sacralizing public space, responsible for seeking collectively the larger community and public good.RCC is most particularly concerned now about the rapid and dominant penetration of market-driven, for-profit managed care and the "purchasers and investors revolution." We are concerned about the impact on individuals in need, especially "uncovered lives," as well as on essential community providers, including public, non-profit, and religious-affiliated.

We are particularly concerned that people have their own voices about their changing experiences and needs. We are documenting that these rapidly moving health care restructuring developments are now essentially private decisions, involving billions of dollars in public resources and affecting essential community institutions. This restructuring is now essentially government subsidized and policy-stimulated as comprehensive privatization and resource rationing, but it is otherwise not held to protect individuals and be publicly and communities-accountable by public officials.

As the Consumers Union's Consumer Report just declared (October 1996): "The public didn't vote for managed care. Nor did its representatives in Congress. Yet HMOs are swiftly reshaping the way Americans get their health care...(M)any HMOs do offer high-quality medical treatment. But many people who join an HMO give up a lot: the ability to choose where they are treated; longstanding relationships with their doctors, who may not be part of the HMO; convenient access to care; and, sometimes, care that is essential to their health.

In the aftermath of the failed Clinton health-care plan, HMOs became the vehicle for reform by default. Employers saw that they could save money by pressuring employees to join HMOs, and health-plan executives saw that they could make money by selling managed care plans to employers and investors. Managed care was a profit-driven, marketplace response to the health-care crisis.

"In 1992, Consumer Report argued...that the old-fashioned system - based on traditional indemnity insurance and fee-for-service medicine - was in need of change. The system was wasteful and costly, and left too many people without coverage. Then, 37 million people had no insurance; today, 40 million [-plus] have none. But managed care - at least in its current form - does not solve the problems we described. While managed care has had some immediate success in reducing costs, there are reasons to expect that any cost savings may be short-lived. And it has done little to extend coverage to the uninsured. That's not surprising, because neither HMOs nor traditional insurance can solve the problem of the uninsured without a coherent, national program.

"So far, the health-care system is changing without such a plan. Instead, changes have been driven by the ability of health-care companies to market themselves profitably, not by a national strategy that balances the profit motive with a commitment to serve the public."

...Even if managed care becomes accountable to the public and members receive the protections they need, it fails to address the major questions still facing the health-care system: How are costs to be controlled while assuring quality care, and how will health care be funded to extend coverage to the 40 million people [-plus] who are still uninsured? Those issues are still on the table; no one in the health-care industry or in the political sphere has so far been willing to confront them head on."

Problems and Issues: Immoral Economics?
Among the many problems and issues around for-profit, investor-driven managed care, we of Resources for the Civic Conversation are particularly concerned about "immoral (and dangerous) economics, " such as follows:

(1) Superprofiteering and Community Health Care Divestment:
The individual superprofiteering and the de facto divestment from the health-care sector; all while the social safety net is being shredded and the number of uninsured and uncovered lives is rapidly growing -- and from the most in-need and at-risk communities. Not-for-profit plans spent 91 cents of every dollar for medical care; for-profits spent 79 cents; 15% more (Consumer Reports Survey, 1992 to 1994). Some of the money saved on medical care is going to the byproducts of competition - not only to stockholder equity, but to marketing, sales, information systems, and the acquisition of other HMOs. All those carry a high price tag. Their costs are being built into the system...

No superprofiteering mega-merger has been bigger than the one earlier this year between U.S. Healthcare and Aetna. Aetna paid U.S. Healthcare nearly $9-billion for its expertise in running HMOs. The founder and his family "pocketed" a direct profit of $920 million (larger than the health care budget for more than half a million northern Manhattan residents).

(2) Gresham's Law:
Is there a kind of "Gresham's Law" ["bad money drives out the good"] of market-driven health care restructuring? That is, the "bad" for-profit entities either "drive out" the "good" not-for-profit HMOs or force the old non-profits to become for-profit or to behave increasingly like for-profits, rather than their original social mission and community-accountability.

(3) National Monopoly/Monopsony Trend Plus "Ponzi Scheme"/S&L-Like Scandal Potential?
Stimulated among HMOs across the country have been huge appetites for capital and growing membership/"covered lives". One way HMOs can get these is to add new members, which brings more revenue and gives plans more clout in negotiating discounts with providers. And one way to find additional members, short of convincing more employers to buy your plan, is to take over other plans or merge with them.

In return for their super-deal earlier this year, noted above, Aetna/U.S. Healthcare got the capacity to move into new areas. By 1998, U.S. Healthcare hopes to establish a plan in nearly every state by setting up networks of doctors and hospitals and driving down the price of services. Mergers and acquisitionsresult in bigger organizations that can afford to drive down prices in order to eliminate competition. Eventually, however, an industry made up of a few big players (oligopoly or "monopsony", a monopoly of care purchasers) can raise prices at will and make arbitrary decisions about care coverage for whole communities and regions. Many think the market will boil down to five or six national firms controlling almost all the health care in the U.S., with a sprinkling of local plans that manage to survive.

At the same time, the potential instability and unreliability of the investor market-driven entities may have our communities and nation facing an unprecedented-scale "Savings and Loan" type scandal for essentially publicly-subsidized but private sector owned health care financing and "insurance." Will some fast growing, big, especially for-profit, HMOs "collapse" (bankruptcy, receivership, "fire sale" acquisition or merger), if their growth rate falls below the level required for income to cover expenses (the "Ponzi" principle: keep growing or you collapse)?

The difference between life insurance, where the "Ponzi Scheme" factor has also operated historically, and medical insurance is that claims are being paid for medical insurance on an ongoing basis while claims on life insurance are only paid once - and at a predetermined rate per contract. Medical insurance claims are not as predictable. In New York and many states, insurance companies must maintain much larger reserves (about 25% of premiums, or more) for comprehensive medical insurance. An HMO company on the other hand, has had much lower reserve requirements. An insurance company can call upon funds from non-medical operations, while HMO companies generally have no other resources. An HMO expanding rapidly may tend to use this income to increase dividends, therefore increasing equity, rather than set the money aside for the claims which will be due on those premiums in the future. When and if the growth rate subsides, claims and expenses will likely be greater than current income can support. A "Ponzi Scheme" that falls (unless the HMO can sell itself to an insurance company) will be left "holding the bag."

WHAT IS TO BE DONE?

I. Legislative Campaign for National Comprehensive Managed Care Bill of Rights?
Beyond the tremendous range and volume of state government enactments, proposals, and ballot initiatives, there is need for uniform and comprehensive national regulation...

An integrated approach to support of a national Bill of Rights and Responsibilities, such as H.R. 2400, The Family Health Care and Fairness Act proposal of 1995, supported by the national Coalition for Health Care Choice and Accountability, would cover most basic issue areas: accountability to consumers and providers, and to the public at large; fair and honest dealings; practices that ensure provision of appropriate and high quality care, including such specifics as limiting financial incentives, accurate marketing, access to sufficient providers, independent grievance procedures, information and disclosure, consumer involvement in policy, and allocations for public health and charity care. [My thanks to Ellen Shaffer, executive director of the Coalition, for this recent itemization, in the context of corporate campaigns as well as legislative lobbying.]

The two California patient protection and fair managed care initiatives on the November ballot, which incidentally failed, have gotten major national visibility; one on the ballot in Oregon this fall (and some bills introduced in the 104th Congress) would ban capitation completely. From California to New York, "bill of rights" measures have been passed recently but without, in most instances, really challenging the managed care industry. With regard to particular protection and public accountability issues, although most "any-willing-provider" and "freedom-of-choice" laws have been enacted in states with low levels of managed care penetration, the same is not true for direct-access and mandated minimum length of stay for delivery laws. In 1993, California had the second highest HMO penetration rate, Maryland the third, and Oregon the fifth. Yet, each of these states has passed a direct-access law, and Massachusetts, Maryland, Minnesota, and New York have passed a minimum length-of-stay for deliveries. [See, e.g., Hellinger, Fred J., "The Expanding Scope of State Legislation, October 2, 1996, Journal of the American Medical Association, pp. 1065-1070.]

II. National and Regional Corporate Accountability/Responsibility Campaigns?
With the expressed interest, for example, of the Inter-Faith Center for Corporate Responsibility (of the Division of Urban Ministries of the National Council of Churches of Christ USA), there is growing consideration of targeted stockholder proxy actions regarding major managed care companies.

It is reported that New York State-Wide Seniors Action Council and other groups are planning a corporate campaign in the Albany "Capital District" to "keep U.S. Healthcare out"...U.S. Healthcare (New York), now owned by Aetna Insurance Company, not only has a reputation for "cherry-picking" discrimination but a low "coverage index" (how completely a plan covers average health expenses) : 81% (as compared, for example, to Kaiser nationally with as high an index as 93%) and high Consumers Report complaint level "ranked close to the bottom;" as well as posing a perceived threat to not-for-profit, community-accountable plans in that area.

Catholic Health Association and others have formulated "Principles for Accountable Managed Care", which address the following issues:

1. Marketing and enrollment
2. Disclosure of information
3. Access to services
4. Quality
5. Community service and accountability
6. Financial responsibility
7. Patient choice and other consumer issues
8. Governance

Showstack, et. al. ("Health of the Public: The Private-Sector Challenge" October 2, 1996, Journal of the American Medical Association), pp. 1071-1074) propose criteria and "attributes" of a "Socially Responsible Managed Care System", including, as follows: 1. Enrolls a representative segment; 2. Identifies and acts on opportunities for community health improvement; 3. Participates in community-wide data networking and sharing; 4. Publishes information regarding its financial performance and contributions to its community; 5. Includes the community, broadly defined, in the governance and advisory structures of the managed care system; 6. Participates actively in health professions education programs; 7. Collaborates meaningfully with academic health centers, health departments, and other components of the public health infrastructure; 8. Advocates publicly for community health promotion and disease prevention policies

[Should there be more direct corporate challenging , not only of managed care but other for-profit corporate entities in health care, including hospital and health care system (integrated delivery system) chains, pharmaceutical and bio-technological suppliers with specialized managed disease state plans?]

III. NATIONAL UNIVERSAL HEALTH PROGRAM BACK ON THE AGENDA?
Is it time to newly "envision" and campaign for alternative national (and/or state-initiated , but "community-based" health program alternatives? Of, for example, universal coverage single-payer (national and state/regional, governmental or quasi-public) essentially of "good managed care" (public, non-profit, community-based), essentially "owned" by its "members" and communities?

Seattle's regional Puget Sound Health Care Cooperative has had model characteristics. Prohibiting physician or provider ownership, there should be strong provision for health workforce participation in such HMO/Managed Care Organizations (MCO)s' actual care management. "Ownership" involves not only governance and accountability for community benefits as a public good, but increasingly direct community-based services development, wholistically caring and preventive, a geographic residential-based continuum from pre-natal to hospice, as well as health education, information, and promotion.

[Physicians for a National Health Program, for example, debated an alternative to advocacy simply of Canadian-style fee-for-service global budgeting at their national meeting Saturday, November 16, in New York City before the annual meeting of the American Public Health Association.] [In New York, Assemblyman Richard Gottfried, Chair of the Assembly Health Committee who pushed a "single-payer" universal health care coverage proposal, "New York Health" through the Assembly four years ago, pre-national Clinton Bill debate, is inviting an "updating" process for the re-introduction of his bill. Major state health policy changes have taken place since, including the end of the cross-subsidizing hospital rate formula and the penetration of managed care, and looming mandated managed care changes

The political climate has changed: failure of federal universal health measures, enactment of (some potential) portability, reduction in Welfare/Medicaid, budget threats to Medicare. Some advocates feel that public sentiment may no longer indicate a health care crisis in spite of increased numbers of uninsured, the fiscal instability of community health care delivery sites and the limitations on health care benefits due to insurance changes.]

A WAY OF VIEWING LOCAL FAITH COMMUNITIES' HEALTH CARE ACTION STRATEGY AS PART OF A RENEWED NATIONAL CAMPAIGN?

Are there consistent, effective, and mutually-reinforcing ways of educating and organizing community residents, including inner city religious congregations, locally around a progressive continuum of community health care actions and development activities that advances of a national campaign strategy and systems policy for universal coverage through health care budgeting with community ownership?

Strategically and tactically considered could be, as follows:
1. Initiating consumer education and representation. Example: congregations-based, inner city seniors, collectively represented and "bargaining", preferably inter-community, with Medicare (and Medicaid) managed care contractors.

2. Organizing and promoting community-owned, holistic health services,including primary care, wellness centers, home care, education/ information systems, HMOs; as well as emphasizing "public-community" partnerships to preserve and improve public health care and health protection services with a more community-controlled and participating agenda. Supporting
community-labor (with health workers organizations)and public health coalitions; comprehensive "healthy community" assessment, envisioning, action.]

3. Challenging locally for institutional (integrated delivery system) accountability partnerships; for example, religious-owned, not-for-profit, voluntary systems and academic medical center complex mergers, and against health care profiteering, especially HMOs: a "new social contract" for not-for-profit health care providers and managed care organizations with their communities.

A QUICK LOOK AT THE ONCE EXCEPTIONAL STATE OF NEW YORK:
-- IT'S HAPPENING HERE

For New York communities, the New System, of market and investor-driven, for-profit-dominated, Managed Care HMO's, is rapidly arriving.

As of January 1, 1997, the old New York State system of regulated reimbursement and cross-subsidy (NYPHRM: New York Prospective Hospital Reimbursement Methodology) will be replaced essentially by big market dealing. By the beginning of 1997, State government-mandated Medicaid Managed Care for most of those eligible is to be implemented. Along with growing marketing by HMOs for (healthier and younger) Medicare eligibles, that will represent a growing majority of the total covered population. The number of uninsured and "uncovered lives" in New York, including lower-income and part-time employed and immigrant populations, now are upwards of one-fourth of the total population, more than 1.5 million here alone, and growing.

So, for-profit, investor-owned HMOs, such as Oxford, Aetna/US Healthcare, Prudential Health Care, NYL(New York Life)Care, even the new for-profit Empire Blue Cross, are beginning to dominate the covered market, some with separate (and unequal) networks for their Medicaid and for their commercial enrollees - a virtual "monopsony" (purchaser's monopoly or oligopoly).

At the same time, New York City's unique "social safety net" and guaranteed care for all - the public hospitals and health services of the Health and Hospitals Corporation (HHC) - are up for sale, transfer, downsizing, closings under the Mayor's privatization plan. An international investor-dominated national for-profit chain purchaser of the fiscally sound and community-necessary Coney Island Hospital is an opening salvo.

New York City's unparalleled array, formerly seven, of academic medical center complexes (AMC's), encompass more than two-thirds of the beds and the high prestige of the old system - ten thousands of beds and doctors, including "affiliation" domination of the HHC hospitals. The AMC's - are rapidly "mega-merging" as "Integrated Delivery Systems" to deal with the big HMOs - with community hospitals and each other alike across the metropolitan area. (E.g., very recent mergers of the institutions and networks of Columbia-Presbyterian and New York Hospital (Cornell); Mount Sinai and New York University; and Beth Israel and Long Island Jewish [Albert Einstein College of Medicine...)

Meanwhile, national for-profit hospital and specialty care chains are making mega-deals here; with looming elimination of New York State's unique prohibition of out-of-state, investor-owned hospital facilities and networks. (E.g., a California for-profit cancer care firm is seeking to take over what they call "the Four Billion Dollar oncology market" and have already announced a joint venture with St. Vincent's Medical Center of downtown Manhattan.)....