Business vs. Medical Ethics: Conflicting Standards for Managed Care

Eckholm Erik , “While Congress Remains Silent, Health Care Transforms Itself,” New York Times, Dec. 18, 1994, at 34.

Iglehart John K. , “The American Health Care System—Managed Care,” N. Engl. J. Med., 327 (1992): 743–47.

Rodwin Marc A. , “Conflicts in Managed Care,” N. Engl. J. Med., 332 (1995): 604–07.

Rodwin Marc A. , Medicine, Money & Morals: Physicians' Conflicts of Interest (New York: Oxford University Press, 1993); and Franks Peter Clancy Carolyn M. Nutting Paul A. , “Gatekeeping Revisited—Protecting Patients from Over-treatment,” N. Engl. J. Med., 327 (1992): 424–29.

Pellegrino Edmund D. , “Words Can Hurt You: Some Reflections on the Metaphors of Managed Care,” Journal of the American Board of Family Practice, 7 (1994): 505–10.

Committee on Child Health Financing, American Academy of Pediatrics, “Guiding Principles for Managed Care Arrangements for the Health Care of Infants, Children, Adolescents, and Young Adults,” Pediatrics, 95 (1995): 613–15; Council on Ethical and Judicial Affairs, American Medical Association, “Ethical Issues in Managed Care,” JAMA, 271 (1994): 1668–70; Waymack Mark H. , “Health Care as a Business: The Ethic of Hippocrates versus the Ethic of Managed Care,” Business & Professional Ethics Journal, 9, nos. 3–4 (1990): 69–78; and Wolf Susan M. , “Health Care Reform and the Future of Physician Ethics,” Hastings Center Report, 24, no. 2 (1994): 28–41.

Clancy Carolyn M. Brody Howard , “Managed Care —Jekyll or Hyde?,” JAMA, 273 (1995): 338–39.

The percentage of MCOs that are for-profit companies grew from 18 percent in 1982 to 67 percent in 1988. See Davis Karen , Health Care Cost Containment (Baltimore: Johns Hopkins University Press, 1990).

The White House Domestic Policy Council, The President's Health Security Plan. The Clinton Blueprint (New York: Times Books, 1993): At 11–12.

As Sager has noted, managed care, in the form of employee group health organizations, was considered a radical (even socialist) innovation before and after World War II. See Sager Alan , “Reforming Managed Care: More Benefits—Fewer Costs,” presented at the conference “Ethics of Managed Care: Values, Conflicts, and Resolutions,” Boston University School of Public Health, Boston, Massachusetts, December 9, 1994. Group Health of Puget Sound, the Health Insurance Plan of New York, and the Kaiser-Permanente Medical Care Program have provided comprehensive care at a relatively reasonable cost to large groups of employees for at least fifty years. See Smillie John G. , Can Physicians Manage the Quality and Costs of Medical Care? The Story of the Permanente Group (New York: McGraw-Hill, 1991).

Marmor Theodore R. Oberlander Jonathan , “A Citizen's Guide to the Healthcare Reform Debate,” Yale Journal on Regulation, 11 (1994): 495–506.

Shortell Stephen M. Gillies Robin R. Anderson David A. , “The New World of Managed Care: Creating Organized Delivery Systems”, Health Affairs, 13, no. 4 (1994): 46–64; and Enthoven Alain C. , “The History and Principles of Managed Competition,” Health Affairs, 12, supp. (1993): 24–48.

Starr Paul , “Look Who's Talking Health Care Reform Now,” New York Times Magazine, Sept. 3, 1995, at 42–43.

Miller R.H. Luft Harold S. , “Managed Care Plan Performance Since 1980: A Literature Analysis,” JAMA, 271 (1995): 1512–19.

Congressional Budget Office, The Effects of Managed Care and Managed Competition, CBO Memorandum (Washington, D.C.: Congressional Budget Office, Feb. 1995); Marmor Theodore R. Mashaw Jerry L. , “Conceptualizing, Estimating, and Reforming Fraud, Waste, and Abuse in Healthcare Spending,” Yale Journal on Regulation, 11 (1994): 455–94; Schwartz William B. Mendelson Daniel N. , “Eliminating Waste and Inefficiency Can Do Little to Contain Costs,” Health Affairs, 13, no. 1 (1994): 223–35; and Aaron Henry Schwartz William B. , “Rationing Health Care: The Choice Before Us,” Science, 247 (1990): 418–22.

See Iglehart , supra note 2.

Institute of Medicine, Gray Bradford H. Field Marilyn J. , eds., Controlling Costs and Changing Patient Care? The Role of Utilization Management (Washington D.C.: National Academy Press, 1989); Hillman Alan L. Pauly Mark V. Kerstein Joseph J. , “How Do Financial Incentives Affect Physicians' Clinical Decisions and the Financial Performance of Health Maintenance Organizations?,” N. Engl. J. Med., 321 (1989): 87–92; and Rodwin , supra note 4.

Light Donald W. , “The Practice and Ethics of Risk-Rated Health Insurance,” JAMA, 267 (1992): 2503–08.

Several states have considered legislation prohibiting insurers from excluding coverage of preexisting medical conditions (completely or for a limited time period). In general, the insurance industry has opposed such legislation.

Morone James , “The Ironic Flaw in Health Care Competition: The Politics of Markets,” in Arnould Richard J. , eds., Competitive Approaches to Health Care Reform (Washington, D.C.: Urban Institute Press, 1993): 207–22; Grumet Gerald W. , “Health Care Rationing Through Inconvenience: The Third Party's Secret Weapon,” N. Engl. J. Med., 321 (1989): 607–11; U.S. Inspector General, Beneficiary Perspectives of Medicare Risk HMOs (Washington, D.C.: Dept. of Health and Human Services, OEI-06-91-00730, 1995); and Blendon Robert , Sick People in Managed Care Have Difficulty Getting Services and Treatment (Princeton: Robert Wood Johnson Foundation, 1995).

Mariner Wendy K. , “Patients' Rights after Health Care Reform: Who Decides What is Medically Necessary?,” American Journal of Public Health, 84 (1994): 1515–20.

U.S. Congress, Office of Technology Assessment, Identifying Health Technologies That Work: Searching for Evidence (Washington, D.C.: Government Printing Office, OTA-H-608, Sept. 1994); and Mariner Wendy K. , “Outcomes Assessment in Health Care Reform: Promise and Limitations,” American Journal of Law & Medicine, XX (1994): 37–57.

Beauchamp Tom Walters LeRoy , Contemporary Issues in Bioethics (Belmont: Wadsworth, 4th ed., 1994). The concept of medical ethics itself is subject to different interpretations. See Grodin Michael A. , “Introduction: The Historical and Philosophical Roots of Bioethics,” in Grodin Michael A. , ed., Meta Medical Ethics: The Philosophical Foundations of Bioethics (Dordrecht: Kluwer, 1995): At 1–26.

See Wolf , supra note 6.

Annas George J. , “Transferring the Ethical Hot Potato,” Hastings Center Report, 17, no. 1 (1987): 20–21. With respect to whether corporations in general are moral entities, compare Friedman Milton , “The Social Responsibility of Business Is to Increase its Profits,” New York Times Magazine, Sept. 13, 1970, at 32–33, 122, 124, 126; Simon Herbert A. , Administrative Behavior (New York: Free Press, 1965) (arguing that corporations cannot be held morally responsible); and Ladd John , “Morality and the Ideal of Rationality in Formal Organizations,” The Monist, 54 (1970): 488–516 (arguing for corporate responsibility). For general discussions of the debate, see French Peter A. , Collective and Corporate Responsibility (New York: Columbia University Press, 1984); and Curtler Hugh , ed., Shame, Responsibility and the Corporation (New York: Haven, 1986).

DeGeorge Richard T. , Business Ethics (New York: Macmillan, 4th ed., 1995): At 127.

Legal obligations have been a significant source of ethical standards for business. See Steidlmeier Paul , People and Profits: The Ethics of Capitalism (Englewood Cliffs: Prentice Hall, 1992): At 14; and Boatright John R. , Ethics and the Conduct of Business (Englewood Cliffs: Prentice Hall, 1993): At 386. Federal antitrust legislation, such as the Sherman Act and the Robinson-Patman Act, were arguably efforts to impose ethical standards of fair competition on industry, and law is often seen as the “guardian of business ethics.” See Henderson Verne E. , What's Ethical in Business (New York: McGraw-Hill, 1992): At 7.

Sulmasy Daniel P. , “Physicians, Cost Control and Ethics,” Annals of Internal Medicine, 116 (1992): 920–26; Povar Gail Moreno John , “Hippocrates and the Health Maintenance Organization,” Annals of Internal Medicine, 109 (1988): 419–24; Council on Ethical and Judicial Affairs, supra note 6; Pellegrino , supra note 5; and Wolf , supra note 6.

Thurow Lester C. , “Medicine Versus Economics,” N. Engl. J. Med., 313 (1985): 611–14.

See, for example, DeGeorge , supra note 26; Wilbur James P. , The Moral Foundations of Business Practice (Lanham: University Press of America, 1992); Green Ronald M. , The Ethical Manager: A New Method for Business Ethics (New York: Macmillan, 1994); Berenbeim Ronald , Corporate Ethics (New York: Conference Board, 1992); Paul Karen , ed., Business Environment and Business Ethics (Cambridge: Ballinger, 1987); and Henderson , supra note 27.

See Boatright , supra note 27, at 386; and DeGeorge , supra note 26.

Reiser Stanley Joel , “The Ethical Life of Health Care Organizations,” Hastings Center Report, 24, no. 6 (1994): 28–35.

See DeGeorge , supra note 26. Steidlmeier has summarized American business values as follows: “(1) protecting the interests of property owners by promoting efficiency, reducing costs, and thereby increasing profits; (2) encouraging respect for the rights of property owners; (3) refraining from anticompetitive activities; (4) guarding the freedom of labor, owners, and customers; (5) discouraging government interference; (6) developing personal honesty, responsibility and industriousness; and (7) encouraging private contributions to charity.” See Steidlmeier , supra note 27.

See, for example, Darr Kurt , Ethics in Health Services Management (Baltimore: Health Professions Press, 2d ed., 1993), which is directed at developing a personal ethic for individual managers.

American College of Healthcare Executives, Codes of Ethics (1988).

The American College of Health Care Administrators' Code of Ethics requires the administrator to “strive to provide to all those entrusted to his or her care the highest quality of appropriate services possible in light of resources or other constraints.” See The American College of Health Care Administrators, Code of Ethics (1989) (emphasis added). Even the Joint Commission on Accreditation of Healthcare Organizations, which requires hospitals to have a mechanism for considering ethical issues in patient care, qualifies its requirement by providing that the hospital reasonably respond to a patient's need for treatment “within the hospital's capacity.” See Joint Commission on Accreditation of Healthcare Organizations, 1995 Accreditation Manual for Hospitals, Vol. I Standards (Oakbrook Terrace: JCAHO, 1994).

The Group Health Association of America has proposed some standards for managed care and health plans, but these deal with financial solvency requirements (common in insurance regulation), patient confidentiality, and some consumer protections. See Iglehart John K. , “The Struggle Between Managed Care and Fee-for-Service Practice,” N. Engl. J. Med., 331 (1994): 63–67.

See Council on Ethical and Judicial Affairs, supra note 6.

American Medical Association, Principles of Medical Ethics (Chicago: American Medical Association, 1980).

Perillo Joseph M. , Corbin on Contracts (St. Paul: West, vol. 1, 1993).

MCOs are increasingly offering preferred provider or point of service plans that permit enrollees to obtain service outside the plan's network of providers for a larger copayment or deductible. Such plans appear to be a response to enrollee demand for greater freedom to choose physicians and services.

American Heritage Dictionary (Boston: Houghton Mifflin, 1978): At 792.

Health plans that offer services through independent practice association (IPAs) preserve greater choice of physicians for enrollees than do staff model HMOs, for example. Historically, however, IPAs have produced smaller cost savings for health plans. See Miller Luft , supra note 14.

Enthoven Alain C. Kronick Richard , “A Consumer-Choice Health Plan for the 1990's: Universal Health Insurance in a System Designed to Promote Quality and Economy,” N. Engl. J. Med., 320 (1989): 29–37.

Of course, most MCOs also provide health care through providers in a widening array of organizational structures, including staff model HMOs, group practice HMOs, networks of IPAs, or other integrated services and preferred provider organizations.

Starr Paul , “The Framework of Health Care Reform,” N. Engl. J. Med., 329 (1993): 1666–72; Enthoven Kronick , supra note 44; Hall Mark A. Anderson Gerard F. , “Health Insurers' Assessment of Medical Necessity,” University of Pennsylvania Law Review, 140 (1992): 1637–712; Menzel Paul T. , Strong Medicine: The Ethical Rationing of Health Care (New York: Oxford University Press, 1990); and Eddy David , “Clinical Decision Making: From Theory to Practice—Connecting Value and Costs—Whom Do We Ask and What Do We Ask Them?,” JAMA, 264 (1990): 1737–39.

Employee Benefit Research Institute, Sources of Health Insurance and Characteristics of the Uninsured: Analysis of the March 1993 Current Population Survey (Washington, D.C.: EBRI, Jan. 1994).

Cantor Joel C. Long Stephen H. Susan Marquis M. , “Private Employer-Based Health Insurance in Ten States,” Health Affairs, 14, no. 2 (1995): 199–211. Smaller employers were more likely than larger to offer a FFS plan, but such plans were more likely to cover fewer benefits and to exclude preexisting conditions. Only about half of the smaller employers offered any health insurance at all.

Chollet Deborah , “Employer-Based Health Insurance in a Changing Work Force,” Health Affairs, 13, no. 1 (1994): 327–36.

Christopher Georges, “Medicare Drive Toward Managed-Care System Could Turn Out to Produce a Costly Success,” Wall Street Journal, July 31, 1995, at 16; and Iglehart John K. , “Medicaid and Managed Care,” N. Engl. J. Med., 322 (1995): 1727–31. Some states, like Tennessee, Florida, and New York, have reported problems in moving Medicaid beneficiaries quickly into some managed care plans. See Fisher Ian , “Forced Marriage of Medicaid and Managed Care Hits Snags,” New York Times, Aug. 28, 1995, at B1, B5; and Gottlieb Martin , “The Managed Care Cure-Ail Shows its Flaws and Potential,” New York Times, Oct. 1, 1995, at 1, 16.

Davis Karen , “Choice Matters: Enrollees' Views of Their Health Plans,” Health Affairs, 14, no. 2 (1995): 99–112.

The Commonwealth Fund Survey found that among respondents who reported a serious illness, 45 percent of those in FFS medicine rated their plans as excellent, compared to 33 percent of those in managed care. Id.

The Employee Retirement Income Security Act, 29 U.S.C.S. §§ 1021–25 (1995), which governs employee group health insurance plans offered by employers, requires only that employees receive a summary of the plan, not the contract itself.

Describing covered benefits in detail would require extensive lists because appropriate treatment often depends significantly on individual medical conditions. See Ellman Ira Mark Hall Mark A. , “Redefining the Terms of Insurance to Accommodate Varying Consumer Risk Preferences,” American Journal of Law & Medicine, XX (1994): 187–201.

Recent examples of patients who claimed their health plan should have covered various treatments are described in a series of articles by Hiltzik Michael A. Olmos David R. Marsh Barbara in The Los Angeles Times, Aug. 27–31, 1995.

U.S. General Accounting Office, Medicare Part B: Inconsistent Denial Rates for Medical Necessity Across Six Carriers (Washington, D.C.: GAO, GAO/T-PEMD-94-17, 1994); and General Accounting Office, Medicare Part B: Regional Variation in Denial Rates for Medical Necessity (Washington, D.C.: GAO, GAO/PEMD-95-10, 1994).

Mariner Wendy K. , “Rationing Health Care and the Need for Credible Scarcity: Why Americans Can't Say No,” American Journal of Public Health, 85 (1995): 1439–45.

Anders George , “HMOs Pile Up Billions in Cash, Try to Decide What to Do With It,” Wall Street Journal, Dec. 21, 1994, at A1, A5; and Freudenheim Milt , “Penny-pinching H.M.O.'s Showed Their Generosity in Executive Paychecks,” New York Times, Apr. 11, 1995, at D1, D4. In remarks to Congress on August 30, 1995, H. Ross Perot was reported to say, “If someone were to ask me what is my principal concern about H.M.O.'s, it's the giant concentration of power; it's the giant salaries…. You know, that doesn't look good to me.” See Pear Robert , “Perot Tells Senate Committee It's Time to Get Experts' Opinion on Reining in Medicare,” New York Times, Aug. 31, 1995, at B13.

See Mariner , supra note 57.

See, for example, Fuja v. Benefit Trust Life Ins. Co., 18 F.3d 1405 (7th Cir. 1994).

For summaries of different conceptions of justice with respect to allocating health care resources, see Kilner John F. , “Allocation of Health-Care Resources,” in Reich Warren Thomas , ed., Encyclopedia of Bioethics (New York: Simon & Schuster, vol. 4, 1995): At 1067–84; and President's Commission for the Study of Ethical Problems in Medicine and Biomedical and Behavioral Research, Securing Access to Health Care: Report on the Ethical Implications of Differences in the Availability of Health Services (Washington, D.C.: President's Commission, 1983).

Anderson have recommended objective assessments of technologies and therapies and better education to ensure that patients know what they are buying. Anderson Gerald F. Hall Mark A. Steinberg Earl P. , “Medical Technology Assessment and Practice Guidelines: Their Day in Court,” American Journal of Public Health, 83 (1993): 1635–39.

Faden Ruth R. Beauchamp Tom L. , A History and Theory of Informed Consent (New York: Oxford University Press, 1986).

Ironically, capitation of physicians—the financial arrangement that has prompted the most concern about ethical standards—may be the least problematic method of payment. This is because capitation permits the MCO to avoid micro-managing patient care decisions in order to control costs. When the risk of financial loss is shifted to the physician, an MCO's financial self-interest rarely conflicts with patient welfare. It is the physician who faces a potential conflict. Physicians have a longer history of personal obligations to patients defined by medical ethics. Nonetheless, because the MCO is responsible for patient care, it should have a responsibility to calculate capitation payments that adequately provide for its patients. In addition, the MCO may be obligated to create different physician payment arrangements that reduce the potential conflict of interest.

Several states have introduced legislation to require the disclosure of certain information by MCOs, but the industry has generally opposed such regulation. Michael Hiltzik A. Olmos David R. , “State Widely Criticized for Regulation of HMOs,” Los Angeles Times, Aug. 28, 1995, at A1.

See Rodwin , supra note 4, at 212–22.

Yarmolinsky has noted, “Patients may be the only consumers who have to seek permission from someone else in order to obtain services.” See Yarmolinsky Adam , “Supporting the Patient,” N. Engl. J. Med., 332 (1995): 602–03. In some instances, employees may be able to persuade their employers to offer a different health plan or to have the employer negotiate with an MCO to change the terms of the plan.