The Managed Care Malignancy

Vernon L. Goltry, MD
Article Type: 
Spring 1996
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In order to solve a problem, its root cause must be recognized and understood. This prevents falling into the trap of simply implementing or substituting another error.

In the 1940s, medicine was taken out of the free market. Wages could not be raised in the price controlled World War II economy. But employers could and did offer tax-free health care benefits as a condition of and enticement to employment. In doing this, a fundamental economic principle was violated.  Someone other than the receiver or the beneficiary of goods and services, in this case medical care, began paying the bill. This ultimately set medicine up to experience price distortion. Make no mistake, the doctor and his patient loved this arrangement and together they knowingly or unknowingly exploited the payer. The patient could demand whatever diagnostic and therapeutic care he wanted or needed, and the physician, a willing accomplice, was there to implement that at any cost. And so, the patient and the physician stood arm-in-arm and the hospitals joined them in establishing and promoting a flawed economic concept.

In the 1960s, our activist government socialized the health care industry for the elderly and the poor with the enactment of Medicare and Medicaid. Once again, at the outset, patients and physicians loved it. They essentially had a blank check. There was no incentive for the patient to be a prudent shopper. There was no incentive for the physician to provide cost effective health care to his patient because the latter had no incentive to request or require it. Well, this system danced happily along, year after year, decade after decade, with growing frustration from the payer, and rightfully so, until finally, the third-party payer, whether government or corporate America, put their heels in the dirt and said, “No more!”

Now, we have entered correction time. One would think there would be a concerted effort by the powers-that-be to study the root cause and make a correction that would ensure the return of the health care delivery system to the sanity of the free market place. However, as Winston Churchill said, and I paraphrase, “One thing we can count on from the American people is that they will try every wrong thing first before finally getting it right.”

Rather than recognizing high medical costs are the result of abandoning the principles of the free market and setting out to correct this, the powers-that-be are attempting to control prices through the phenomenon called managed care. The variety of schemes implementing the principles of managed care are legion, i.e., HMO, PHO, PPO, IPA, MSO, etc. I will not attempt to define each of these, but the basic principle of all managed care is rationing and price controls. There is no place in any of these schemes for the patient to be empowered to control costs through his own self-interest.

In order to effectively implement managed care, the medical community must be sufficiently intimidated to literally sign up to practice medicine in the managed care arena. Physicians, by nature, are independent, individualistic, and entrepreneurial in their thinking.  This has led to the finest health care system in the world. One of the primary means designed to crush physician independence and autonomy is the physician hospital organization (PHO). The stated intent of this scheme, as printed in hospital administrative literature, is to change the thinking and the behavior of the physician, softening him to accept the controls that managed care administrative personnel must impose in order for them to make a profit.

Make no mistake, managed care is not concerned with and has nothing to do with improving access to care or quality of care. The long- and short-term goal of managed care is one thing and one thing only.  That goal is to rake out cash. Have you seen the articles in the Wall Street Journal and elsewhere reporting on the success of the managed care corporations (HMOs) “awash in cash?” A statement from the July 1994 Scientific American is germane to our discussion: “Managed care involves a feature not entertained by our medical forebears, that is, the control of medical care by an entity other than the patient or the patient’s physician. Such control serves to restrict diagnostic and treatment options based on the financial interests of the management which is usually a commercial insurance company.”

The principal concept of managed care turns the entire patient-doctor relationship upside down. I  recently attended a presentation by a physician who is now an insurance company employee. He was presenting his employer’s recently developed managed care plan to his fellow physicians for their acceptance and contract signature. As he went through the plan, one of the statements he made was, “The better job the physician does, the more he is rewarded by the company.”

Now, when I was in medical school and residency training, I heard similar words from my instructors, only the emphasis was placed on putting the patient’s interest first, “Young doctor, the better job you do, the more patients will come to you. The better care you give and the more accurate your diagnosis, the more respect you will receive  from happy patients and colleagues.”

Today, the physician-executive’s words convey exactly the opposite intent, with emphasis placed on putting the interest of the third-party payer first. What he was saying was, “The better job you do containing costs by NOT providing diagnostic and therapeutic care, by leaving more money for the managed care company to retain, by practicing as little medicine as possible, referring as little as possible, and still have your patient accept this by using your skills, your training, and your expertise to restrict diagnostic tests needed for appropriate treatment and thereby denying treatment at the same time is now the desired road to your (and, of course, management’s) financial betterment.”

So, what we have is the virtual elimination of the classic Hippocratic patient-doctor relationship. In the classic Hippocratic patient-doctor relationship, the patient is the physician’s first concern above all else. In the case of the managed care physician, whether he knows it or not, it is no longer a patient-doctor relationship, but a doctor-management relationship where there is a perverse economic incentive NOT to diagnose, treat, or refer, that will become increasingly onerous, depending upon the financial situation of the physician.

The patient becomes simply a commodity or statistic. His medical care contract is determined by his employer and the managed care company, and becomes a salable asset of the managed care company.  Most likely his managed care company will be bought out by, or merged with, a more aggressive managed care company. He has no say in the choice of his physicians, and does not have the necessary medical background to know what appropriate medical care has been withheld or denied.

When the physician signs a managed care contract because of fear or intimidation, he relinquishes his role of skilled healer and advocate for the patient, and takes on the role of hired hand for the management company and adversary to the patient. Something that is not recognized by many physicians is the most valuable piece of private property we own is our medical knowledge, experience, and resulting expertise. We acquired our expertise through great expense in time and money, and it is not transferable to anyone else. No one has a right to another person’s private property; indeed, this is foundational to all of our subsequent rights.

The physician is the determining factor in the success and the establishment or de-establishment of the managed care malignancy. He alone is in charge of whether he will allow the traditional patient-doctor relationship to be supplanted by the perverse doctor-managed care relationship. If the number of physicians refusing to sign up with managed care increased by tens and hundreds and thousands, the final answer is that managed care would go away. In the end, each of us as an individual physician has to choose to practice or not to practice our vocation under these trying conditions.

Our Founding Fathers intended limited government. Socialism is synonymous with big government and is the enemy of freedom and the free market, whether operating solely through government or in a partnership therein with the private sector (in this case, with managed care companies which receive special favors and exemptions from the state) control the tools of medical production at the expense of physicians, their patients, and the hospitals. It is irretrievably flawed. It cannot work. It cannot last.

The rotting corpse of Eastern Europe is laid there for everyone to view, a testimony to socialism progressing to its ultimate end. Various levels of socialism survive in the world today only because there is enough free market activity to sustain it. Why do we seek to emulate those failed policies in medicine or in anything else?  There must be a healthy and strong free market in medicine operating alongside the option of managed care. If this is not so, the tragedy will be when managed care fails as it surely will (because it is simply another attempt to try to find the right way to do the wrong thing), its failure will be used as an excuse by the federal government to nationalize the entire health care industry.  Then we will have unadulterated socialized medicine. As has been said by others, “If you think health care is expensive now, just wait until it’s free!”

So, how do we deal with managed care? One of my colleagues has designed a poster that he puts up in various places throughout the two hospitals in Boise. I think it says it all. The answer, from the doctor’s standpoint, on how to deal with managed care is so simple that it defies the imagination. It is simply to say, “No!” Just say, “No!” “No, I will not sign your contracts.” “No, I will not participate in this immoral and perverse system, nor will I betray my patients.”

Educate your patients after you have educated yourself. Help empower your patients to choose their medical care freely, without coercion, and to control their medical costs by directing them to free market alternatives such as medical savings accounts. Prices will become reasonable and all of us will retain the most important commodity, our freedom. Recognize that truly the vandals are at the gates of medicine, but they will get through only if we let them through.

In closing, I want to paraphrase a statement by Frederic Bastiat who wrote that marvelous book, The Law, at the time of the French Revolution of 1848. “Everyone wants to live at the expense of the state and the third-party payer. They forget that the state or the third-party payer wants to live at the expense of everyone else.”

Dr. Goltry is an otolaryngologist in Boise, Idaho, and a member of the Editorial Board of The Medical Sentinel. This editorial is based in part on his presentation at the Western Regional Meeting of the AAPS in Boise, Idaho on May 6, 1995. His address is 200 North 3rd, #203, Boise, ID 83702.

Originally published in the Medical Sentinel 1996;1(1):25-26. Copyright©1996 Association of American Physicians and Surgeons (AAPS)




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