The Metamorphosis of Managed Care: Implications for Health Reform Internationally

This article develops the themes that I presented in a talk at the 1st International Conference on Health Care Reform, University of Mexico, Mexico City, April 24, 2009. Rodwin M. A. , “The Metamorphosis of Managed Care,” in Rivero Serrano O. , ed., 1er Congreso Internacional de Medicina y Salud (México, D.F.: Universidad Nacional Autonoma de México, 2010). For the standard text book on managed care, see Kongstvedt P. , Essentials of Managed Health Care , 5th ed. (Boston: Jones and Bartlett, 2007).

Hirschman A. O. , Exit, Voice, and Loyalty: Responses to Decline in Firms, Organizations, and States (Cambridge: Harvard University Press, 1970); Hirschman A. O. , “Exit and Voice: An Expanding Sphere of Influence,” in Rival Views of Market Society and Other Recent Essays (New York: Viking Press, 1970).

Weller C. D. , “Free Choice as a Restraint of Trade, and the Counterintuitive Contours of Competition,” Health Matrix 33, no. 2 (1985): 3–23; Rodwin M. A. , “Exit and Voice in American Health Care,” Michigan Journal of Law Reform 32, no. 4 (1999): 1041–1067; Rodwin M. A. , “Consumer Voice and Representation in Managed Health Care,” Journal of Health Law 34, no. 2 (2001): 223–272.

For a history and analysis and history of commercialism and conflicts of interest in American medicine from the colonial period until the present, see, Rodwin M. A. , “Medical Commerce, Physician Entrepreneurialism, and Conflicts of Interest,” Cambridge Quarterly of Healthcare Ethics 16, no. 4 (2007): 387–397.

Rodwin M. A. , Medicine, Money and Morals: Physicians' Conflicts of Interest (New York: Oxford University Press, 1993).

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Rodwin M. A. , “Patient Accountability and Quality of Care: Lessons from Medical Consumerism and the Patients' Rights, Women's Health and Disability Rights Movements,” American Journal of Law and Medicine 20, nos. 1 & 2 (1994): 147–167.

Derbyshire R. C. , Medical licensure and discipline in the United States (Baltimore: Johns Hopkins Press, 1969): At 77–85; Ameringer C. F. , State Medical Boards and the Politics of Public Protection (Baltimore: Johns Hopkins University Press, 1999).

Weiler P. C. Newhouse J. P. Johnson W. G. Brennan T. Hiatt H. , A Measure of Malpractice: Medical Injury, Malpractice Litigation, and Patient Compensation (Cambridge: Harvard University Press, 1993).

For some of the leading histories of American medicine and health policy, see Starr P. , The Social Transformation of American Medicine (New York: Basic Books, 1982); Stevens R. , In Sickness and in Wealth: American Hospitals in the Twentieth Century (New York: Basic Books, 1989).

Adverse selection is not limited to patients or purchasers. Insurers can also engage in adverse selection by marketing insurance to individuals less likely to need medical services than average or by excluding high risk individuals and groups.

Burrows J. G. , Organized Medicine in the Progressive Era: The Move toward Monopoly (Baltimore: Johns Hopkins University Press, 1977): At Chap. 8, “Contract Practice,” 119–132. Chase-Lubitz J. F. , “The Corporate Practice of Medicine Doctrine: An Anachronism in the Modern Health Care Industry,” Vanderbilt Law Review 40, no. 2 (1987): 445–488.

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See Starr , supra note 12.

Schwartz J. L. , “Early History of Prepaid Medical Care Plans,” Bulletin of the History of Medicine 39, no. 5 (1965): 450–475; Hansen H. R. , “Laws Affecting Group Health Plans,” Iowa Law Review 35, no. 2 (1950): 209–236.

They succeeded, despite the federal government successfully prosecuting the AMA in 1942 for violation of antitrust laws by excluding physicians in Group Health Association, Washington, D.C.

Laufer J. , “Ethical and Legal Restrictions on Contract and Corporate Practice of Medicine,” Law and Contemporary Problems 6, no. 4 (1939): 516–27. See Chase-Lubitz , supra note 14.

Statistics on U.S. population from Statistical Abstracts of the U.S. Statistics on enrollment in insurance plans from Statistical Abstracts of the U.S. Statistics on enrollment in insurance plans from: Fein R. , Medical Care, Medical Cost: The Search for a National Health Insurance Policy (Cambridge: Harvard University Press, 1986): At Chapter 1, “In Sickness and in Health.”

States could cover additional low-income groups and choose the income eligibility level for their qualifying. Today, Medicaid covers less than half of all individuals, and only one-third of childless adults, falling below the federal poverty level. Rosenbaum S. , “Medicaid and National Health Care Reform,” New England Journal of Medicine 36, no. 21 (2009): 2009–2012.

Marmor T. , The Politics of Medicare , 2nd ed. (Hawthorn NY: Aldine Transaction, 1994); Oberlander J. , The Political Life of Medicare (Chicago: University of Chicago Press, 2003).

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P.L. 92–603 (1972); McDonough J. , “Tracking the Demise of State Hospital Rate-Setting,” Health Affairs 16, no. 1 (1997): 142–149.

However, planning agencies did not directly control funds for construction or reimbursement, which undercut their effectiveness. See Rodwin V. G. , The Health Planning Predicament: France, Québec, England, and the United States (Berkeley: University of California Press, 1984).

States were required to create state health planning agencies and implement a system to issue certificates of need which would be necessary for new hospital construction or expansion. Health System Agencies regulated providers, but the majority of members represented consumers. The boards would make recommendations to state agencies on issuing certificates of need, and to the federal government on use of federal funds. Planning agencies and PSROs were supposed to develop explicit standards for determining need. Employers and consumer groups participated in decisions about allocation of resources which had previously been left to physicians and hospitals.

At the time, many leaders believed Congress would soon pass NHI. Because of this, Nixon later introduced his own proposal for NHI, which might have become law had not the Watergate scandal forced his resignation.

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See Rodwin (2001) supra note 3; Rodwin (1999), supra note 3; Rodwin M. A. , “Conflicts in Managed Care,” New England Journal of Medicine 332, no. 9 (1995): 604–607.

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1976 Amendments to the HMO Act.

Data from Inter-study, summarized in Gray B. , “The Rise and Decline of the HMO,” in Stevens R. Rosenberg C. E. Burns L. R. , History and Health Policy in the United States: Putting the Past Back In (New Brunswick: Rutgers University Press, 2006): 309–339, at 312. By 2001, HMO enrollment declined to 71.8 million. The Inter-study Competitive Edge 3.2., Excelsior, MN, Decision Resources, Inc.

Goldfarb v. Virginia State Bar, 421 U.S. 773 (1975); Ameringer C. F. , The Health Care Revolution: From Medical Monopoly to Market Competition (Berkeley: University of California Press, 2008).

In re American Medical Ass'n, 94 F.T.C. 701, 801 (1979); [1979–1983 Transfer Binder] Trade Reg. Rep. (CCH) p 21,955 at 22,418–19.

See McDonough , supra note 24.

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See Inter-study, The Inter-study 7 HMO summary, Excelsior, MN, Decision Resources, Inc., 1985; Inter-study, National HMO firms 1986: A Report on Companies That Own or Operate HMOs in Two or More States, Excelsior, MN, Decision Resources, Inc., 1987.

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See the Health Affairs theme issue on conversion, “Hospital & Health Plan Conversion,” in Health Affairs 16, no. 2 (1997). See especially, Gray B. , supra note 34. “Conversion of HMOs and Hospitals: What's at Stake?” Health Affairs 16, no. 2 (1999): 29–47; Claxton G. Feder J. Shactman D. Altman S. , “Public Policy Issues in Nonprofit Conversions: An Overview,” Health Affairs 16, no. 2 (1997): 9–28; Kuttner R. , “Must Good HMOs Go Bad? The Commercialization of Prepaid Group Health Care,” New England Journal of Medicine 338, no. 21 (1998): 1558–1563

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Luft's comment was made in public presentation at Heller School, Brandeis University in the fall of 1986. However, Luft and others did evaluate managed care performance. See, e.g., Miller R. H. Luft H. S. , “Managed Care Plan Performance Since 1980: A Literature Analysis,” Journal of the American Medical Association 271, no. 19 (1994): 1512–1519; Miller R. H. Luft H. S. , “Does Managed Care Lead to Better or Worse Quality of Care?” Health Affairs 16, no. 5 (1997): 7–25; Miller R. H. Luft H. S. , “HMO Plan Performance Update: An Analysis of the Literature, 1997–2001,” Health Affairs 21, no. 4 (July/August 2002): 63–86.

Gabel J. , “Ten Ways HMOs Have Changed During the 1990s,” Health Affairs 16, no. 3 (1997): 134–145; Draper D. A. Hurley R. E. Lesser C. S. Strunk B. C. , “The Changing Face of Managed Care,” Health Affairs 21, no. 1 (2002): 11–23.

Weiner J. de Lissovoy G. , “Raising a Tower of Babel: A Taxonomy for Managed Care and Health Insurance Plans,” Journal of Health Politics Policy and Law 18, no. 1 (1993): 75–103; Welch W. P. Hillman A. Pauly M. V. , “Toward New Typologies for HMOs,” The Milbank Quarterly 68, no. 2 (1990): 221–243.

For a history of utilization review programs see, Gray B. H. Fields M. J. , eds., Controlling Costs and Changing Patient Care: The Role of Utilization Management (Washington, D.C.: National Academy Press, 1989).

See Gabel , supra note 46.

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Shapiro M. F. Wenger N. S. , “Rethinking Utilization Review,” New England Journal of Medicine 333, no. 20 (1995): 1353–1354; Kassirer J. P. , “The Use and Abuse of Practice Profiles,” New England Journal of Medicine 330, no. 9 (1994): 634–636.

Robinson J. C. , “The Future of Managed Care Organizations,” Health Affairs 18, no. 2 (1999): 7–24.

National Industry Council for HMO Development, The Health Maintenance Organization Industry: Ten Year Report 1973–1983, Council for HMO Development, Washington, D.C., 1983; see Inter-study (1987), supra note 41.

Robinson J. C. , “Consolidation and the Transformation of Competition in Health Insurance,” Health Affairs 23, no. 6 (2004): 11–23.

See Starr , supra note 12, at 429, 442; Kronick R. Goodman D. C. Wennberg J. , “The Marketplace in Health Care Reform: The Demographic Limitations of Managed Competition,” New England Journal of Medicine 328, no. 2 (1993): 148–152; Hirschman A. O. , Exit, Voice, and Loyalty: Responses to Decline in Markets, Organizations, and States (Cambridge: Harvard University Press, 1970): at 57–60.

Robinson J. C. , “The Future of Managed Care Organizations,” Health Affairs 18, no. 2 (1999): 7–24.

See Weiner de Lissovoy , supra note 47.

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Himmelstein D. U. Woolhandler S. Hellander I. Wolfe S. M. , “Quality of Care in Investor-Owned vs. Not-for-Profit HMOs,” Journal of the American Medical Association 282, no. 159 (1999): 159–163; Tu H. T. Reschovsky J. D. “Assessments of Medical Care by Enrollees in For-Profit and Nonprofit Health Maintenance Organizations,” New England Journal of Medicine 346, no. 17 (2002): 1288–1293; Landon B. Epstein A. M. , “For-Profit and Not-for-Profit Health Plans Participating in Medicaid,” Health Affairs 20, no. 3 (2001): 162–171; Consumer's Union, “How Does Your HMO Stack Up?” Consumers Reports 64 (1999): 23; Riley G. F. Ingber M. J. Tudor C. G. , “Disenrollment of Medicare Beneficiaries from HMOs,” Health Affairs 16, no. 5 (1997): 117–124.

Rodwin M. A. , “Backlash as Prelude to Managing Managed Care,” Journal of Health Politics, Policy and Law 24, no. 5 (1999): 1115–1126; Brown L. Eagan E. , “The Paradoxical Politics of Provider Re-empowerment,” Journal of Health Politics, Policy and Law 29, no. 6 2004 1045–1072; Zelman W. A. Berenson R. A. , The Managed Care Blues and How to Cure Them (Washington, D.C.: Georgetown University Press, 1998).

See Rodwin , supra note 65.

Rodwin M. A. , “Consumer Protection and Managed Care: The Need for Organized Consumers,” Health Affairs 15, no. 3 (1996): 110–123.

Rodwin M. A. , “Consumer Protection and Managed Care: Issues, Reform Proposals, and Trade-Offs,” Houston Law Review 32, no. 5 (1996): 1319–1381. A series of articles on managed care regulation appears in a symposium issue of the Seton Law Review vol. 26, no. 3 (1996). For discussions of market failure and managed care regulation see, Korobkin R. , “The Efficiency of Managed Care ‘Patient Protection’ Laws: Incomplete Contracts, Bounded Rationality, and Market Failure,” Cornell Law Review 85, no. 1 (1999): 1–88; Hall M. A. Sloan F. A. , “Market Failures and the Evolution of State Regulation of Managed Care,” Law and Contemporary Problems 65, no. 4 (2002): 169–206. For more recent reviews of managed care regulation see, Furrow B. R. Greaney T. L. Johnson S. H. Jost T. S. Schwartz R. L. , Health Law , 2nd ed. (Saint Paul, MN: West, 2000) “Regulation of Managed Care,” 501–508; Hall M. A. Sloan F. A. , “Market Failures and the Evolution of State Regulation of Managed Care,” Law and Contemporary Problems 65, no. 4 (2002): 169–206; Altman S. Reinhardt U. Schactman D. , Regulating Managed Care: Theory, Practice, and Future Options (San Francisco: Jossey-Bass Publishers, 1999). For discussion of quality standard regulation, see Brennan T. A. , “The Role of Regulation in Quality Improvement,” The Milbank Quarterly 76, no. 4 (1998): 709–732.

Dallek G. Pollitz K. , External Review of Health Plan Decisions: An Update (Menlo Park: Family Foundation, 2000). External review laws, however, also had some unintended consequences in terms of diminishing consumer voice. See, Rodwin M. A. , “Patient Appeals as Policy Disputes,” in Hoffmaan B. Tomes N. Grob R. , Impatient Voices: Patients as Policy Actors (New Brunswick, NJ: Rutgers University Press, in press).

See Rodwin , supra note 69.

Robinson J. C. , “The End of Managed Care,” Journal of the American Medical Association 285, no. 20 (2001): 2622–2628; Jacobson P. D. , “Who Killed Managed Care? A Policy Whodunit,” St. Louis University Law Journal 47, no. 2 (2003): 365–396; Hall M. A. , “The Death of Managed Care: A Regulatory Autopsy,” Journal of Health Politics Policy and Law 30, no. 3 (2005): 427–452.

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For a discussion of the globalization of managed care, see Rodwin M. A. , Conflicts of Interest and the Future of Medicine: The United States, France and Japan (New York: Oxford University Press, forthcoming 2010); Weiner J. P. Famadas J. C. Water H. R. , “Managed Care and Private Health Insurance in a Global Context,” Journal of Health Politics, Policy and Law 33, no. 6a (2008): 1107–1131; Beichl L. Gunnery L. Navarro J. A. , “A Formula for Successfully Competing in Non-U.S. Health Insurance Markets,” Managed Care Quarterly 11, no. 2 (2003): 22–28; Gould B. S. , “When Managed Care Doesn't Travel Well: A Case Study of South Africa,” in Wieners W. W. , ed., Global Health Care Markets: A Comprehensive Guide to Regions, Trends, and Opportunities Shaping the International Health Arena (San Francisco: Josey Bass, 2000): At 52–65; Jacobs A. , “Seeing Difference: Market Health Reform in Europe,” Journal of Health Politics, Policy and Law 23, no. 1 (1998): 1–33; Le Grand J. , “Competition, Cooperation, or Control? Tales from the British National Health Service,” Health Affairs 18, no. 3 (1999): 27–39.

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Homedes N. Ugalde A. , “Why Neoliberal Health Reforms Have Failed in Latin America,” Health Policy 71, no. 1 (2005): 83–96; Iriart C. Merhy E. E. Waitzkin H. , “Managed Care in Latin America: The New Common Sense in Health Policy Reform,” Social Science & Medicine 52, no. 8 (2001): 1243–1253; Laurell A. C. , “Health Reform in Mexico: The Promotion of Inequality,” International Journal of Health Services 31, no. 2 (2001): 291–321; Stocker K. H. W. Iriart C. , “The Exportation of Managed Care to Latin America,” New England Journal of Medicine 340, no. 14 (1999): 1131–1136.

See Homedes Ugalde , supra note 79.

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See Rodwin , supra note 77.

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See id. ( Okamoto Kozo ), at 46.