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HSA 3

1

2

MANAGED HEALTH CARE

READING A.

SPRING 2021 L. EITEL

PHILOSOPHIES OF RISK MANAGEMENT IN HEALTH INSURANCE: FINANCIAL RISK AND MEDICAL RISK

Do health insurers manage health risks in a way which focuses narrowly on health insurance financial viability and (as appropriate) profitability?

OR

Do health insurers manage health risks in a way which is fiscally prudent, and which also serves the cause of enhanced individual patient health status as well as improved population health status of U.S. communities, and the United States as a whole?

I.
INDEMNITY AND SERVICE PLANS AND RISK – FOCUS ON FINANCIAL RISK:

The focus under these plans, which represented the bulk of the health industry’s insurance products through the 1970’s and even into the late 1980’s, was to properly price insurance products through relatively accurate actuarial projections of expected health services usage for selected communities or for experience-rated subgroups such as employees of a particular firm. Properly priced premiums, sometimes associated with expense-sharing features such as consumer deductibles, coinsurance, and co-payments, were expected to ensure that outlays for services did not exceed a health insurance plan’s inflow of premium funds.

Risk was looked at solely in terms of financial risk to the insurer and the consumer associated with treatment for episodes of acute care. Risk was further managed by establishing annual and lifetime limits on the insurance company payout for health services provided to individual consumers and their families.

Risk was seen neither in terms of a population’s health status or an individual’s health status, nor in terms of the quality and appropriateness of services delivered. The quality of the inputs to the health services delivery process (modern hospitals, well-trained board-certified physicians) and the adherence of health care professionals to the standards of conduct for their chosen profession were implicitly assumed to address those risks.

The purpose of this kind of health insurance was to make acute and catastrophic care affordable and available to consumers without affecting the character and operation of the health care delivery system. Preventive Care and Wellness Services were not seen as the proper target of these plans, nor were they seen as appropriate objects for the expenditure of premium dollars. These health insurance plans paid out money for services, but did not see themselves as responsible for the size and shape of the network of health services providers available to serve their publics, nor for the quality and appropriateness of the health care services which were delivered.

II.
MANAGED HEALTH INSURANCE PLANS AND RISK: FOCUS ON BOTH MEDICAL RISK
AND
FINANCIAL RISK:

This family of health insurance products addressed health risks in a way which was fiscally prudent, but which also served the cause of enhanced individual patient health status as well as improved population/community health status.

Management of the financial risk associated with insuring and paying for the delivery of health care goods and services was not the sole emphasis of this kind of insurance, but was seen as important, and as directly linked to the provision of truly appropriate and high-quality health care services.

Financial Risk was not the sole focus of these plans, which made them different from Indemnity and Service plans. Risk was
ALSO
seen in terms of a population’s health status as well as an individual’s or family’s health status, and in terms of the quality and appropriateness of services delivered. Related to this philosophy of health insurance, preventive care and wellness services were also seen as a critical concern.

These plans focused on Wellness and Preventive Services, the use of Primary Care Practitioners as coordinators of all of a patient’s health care services (what was later, in the 1990s, called the “gatekeeper” function), preauthorization and precertification of diagnostic and therapeutic procedures, and other activities which involved the insurance company in decisions about the actual provision of care.

Managed Care Organizations also created and maintained specially contracted and more limited networks of individual and institutional health care providers.

1

HSA3

1

2

MANAGED HEALTH CARE

FALL 2020 L. EITEL

READING 5.:

THE PREVALENCE OF MANAGED CARE IN THE 1990s AND THE MANAGED CARE BACKLASH: KEY POINTS

I.
THE PRINCIPAL TYPES OF MANAGED CARE PLANS IMPLEMENTED IN THE 1990s – HEALTH MAINTENANCE ORGANIZATIONS (HMOs), POINT OF SERVICE PLANS (POS), AND PREFERRED PROVIDER ORGANIZATIONS (PPO).

· By the late 1980s the primary kinds of Managed Care Health Plans had been developed and were offered to employers and employees throughout the period of the great health insurance plan transitions between 1988 and 1996.

· HMOs, Point of Service Plans, and PPOs varied in the extent to which the particular type of insurance plan regulated key aspects of the process by which enrollees, advised by doctors, accessed personal health care services covered by those plans.

A.
Key areas in which Managed Care Plans differed in the intensity and extent of their control of medical management, and physician and plan enrollee choice, included the following
:

· Managing limited networks of individual and institutional providers, and requiring that plan enrollees only used those provider networks to access care.

· Requiring plan enrollees and their families to access most personal health care services with the approval of a “gatekeeper” or Primary Care Practitioner (individual or team.)

· Aggressively negotiating payment rates for provider services, often using capitation for Primary Care Practitioners, and negotiating lower payment rates for Specialty Care Practitioners.

· Requiring PCPs to take on extensive risk.

· Implementing extensive Utilization Management, Case Management, and Disease Management programs.

· Subjecting critical decisions on selected hospital admissions, access to diagnostic imaging, and access to specialty physician consultations to approval not only from PCPs, but from medical management staff within the plan.

HMOs and POS plans were most controlling forms of Managed Health Insurance, and PPOs were much less so.

B. In the 1990s HMOs and POS plans had the highest levels of enrollment, unlike the post Managed Care Backlash experience in the post- 2000 era when PPOs predominated (and continue to do so).

Understanding the various types of Managed Care Health Insurance Plans, their relative levels of enrollment, and the different ways they impacted on providers, employers, and plan enrollees in the 1990s is key to understanding the successes and failures of these plans in the 1990s, and understanding the Managed Care Backlash.

II.
The New Managed Care Plans: how they worked:

By the 1990s, Managed Care health insurance plans existed in three principal forms: HMOs (health maintenance organizations), POS (point of service plans), and PPOs (preferred provider organizations).

HMOs and to a certain extent POS plans were the most restrictive forms of Managed Care health plan, and PPOs were the least restrictive.

A. The restrictive aspects of Managed Care in these newly minted, large Blue Cross/Blue Shield and commercial Managed Health plans (as well as in the plans administered by the newer regional managed care organizations) were the following:

1. The insurers created and implemented limited networks of individual, group, and institutional health care service providers.

2. They implemented extensive case management, disease management, and inpatient and outpatient utilization review programs.

3. Using significant market share and the threat of limiting provider network size and composition, the insurers negotiated low provider payment rates with individual, group, and institutional providers. This was one of the main reasons that yearly National Health Expenditure and health insurance premium increases significantly slowed and decreased in the mid-1990s. It was also one of the reasons that the late 1990s and early 2000’s saw the rapid development of large integrated provider health care delivery systems. (As a protective reaction to the way in which managed health insurance plans had exploited their size and market advantage.)

4. These insurers implemented their own mass-produced and simplified version of the complex, subtle, and consensual patient/Primary Care Provider relationship that had been developed by the PHSPs, and especially by Kaiser Permanente.
As part of the massive shift to Managed Care in the 1990s, Managed Health Plans instituted the role of Primary Care Provider or Primary Care Provider Team as “gatekeeper.”

· PCPs/PCP teams were given the responsibility for regulating the flow of inpatient admissions, limiting the use of Specialty Care Practitioners, and limiting the utilization of unnecessary diagnostic tests and expensive medical procedures.

· In some Managed Health Insurance Plans, PCPs were actually expected to bear financial risk for the level of use, not only of primary care services, but also of hospital, testing, and specialty care services.

· For certain selected procedures and tests PCPs and Specialty Care Practitioners were required to get approval from centralized health plan medical and other utilization review staff.

· PCP responsibility for the prudent use of health care goods and services was reinforced by the extensive use of Capitation (fixed per-patient payments) to pay PCPs and PCP teams. (However, Capitation rates were based on estimated averages of per person utilization of health care services: PCPs who had an especially unhealthy mix of patients were underpaid for their services.) Even in the best of circumstances PCPs and PCP teams were paid relatively low Capitation rates.

· The original idea of Managed Care was that PCPs and PCP teams were especially important for providing optimal Continuous, Comprehensive, Coordinated Care to individuals and their families: it was assumed that PCPs would have a relatively stable panel of patients. They would be able to get to know those patients and their families over time, would develop a personal relationship with them, and would have a deep understanding of all their acute, preventive, and other health care service needs (including, as they aged, palliative care and hospice care). However, the sheer volume of patients assigned to individual PCPs and PCP teams by the various Managed Care Plans, and the constant changes in the composition of those panels, made that critical personal connection infeasible.

III.
POSITIVE IMPACTS OF MANAGED HEALTH INSURANCE PLANS IN THE 1990s:

Managed Care health insurance plans had a number of positive impacts:

A. They significantly slowed the growth of National Health Expenditures for the first time in almost 15 years.

B. They significantly reduced cost sharing for insurance plan enrollees. In the 1990s the majority of those covered by Managed Care plans were covered by HMOs and POS plans. The philosophy of those plans, especially HMOs, was that the enrollee’s premium was all the enrollee should pay. It would be up to the insurance plans and networks of providers to work to make high quality affordable health care available to most people. The focus on enrollee cost-sharing which would characterize Consumer Directed Health Plans in the early 2000’s was the exact opposite of the philosophy of the major health insurance plans that covered most people in the 1990s.

C. It is very likely that the mass implementation of Managed Health Insurance plans in the 1990s had a significant impact on the unnecessary utilization of health care goods and services in the U.S. However, at this point this is speculative – largely because the most recent estimates of unnecessary health care utilization in the U.S. have been done several years after the years when HMOs and POS plans dominated the health insurance marketplace. Clearly the reduction in annual increases in National Health Expenditures in the mid-1990s was not simply from constrained payments to providers, nor from the denial of needed care.

D. They emphasized the use of Preventive Health Care Services and of exercise and Wellness programs, which had never been an emphasis of Indemnity and Service plans when they were the predominant form of private employer-based health insurance in the United States.

IV.
WHY WAS THERE A BACKLASH?

A.
who was against managed care IN the 1990S
?

Providers and Employees/Plan Members, interacting with negative media coverage of the most blatant failings of Managed Health Insurance Plans, placed increasing pressure on the health insurance plans and employers to change their strategy of massively implementing the most restrictive forms of Managed Care (HMOs, POS plans). Each of these groups had their own reasons, sometimes overlapping, for serious opposition to Managed Care as it had been implemented.

B.
Provider Concerns:

Overall, the Providers reacted strongly to the massive and rapid implementation of Managed Health Insurance plans which, unlike traditional Indemnity and Service plans, presumed to challenge the primacy of physician and hospital medical decision-making, and the previously unchallenged status of those providers.

·
Payment Issues:

· Late payment;

· Low payment rates, not adequately increased over a number of years;

· The sense that payment rates were negotiated with little respect for individual, group, and institutional providers, and that the insurance plans used their sheer market power and threats of provider network exclusion to get those rates;

· Capitation payments for Primary Care Practitioners.

·
Limits on Provider Networks:

Either real limits were imposed, or the providers considered the payment and other concessions that were the price of provider inclusion in insurance plan networks too high.

·
Limits on Provider Tests and Procedures:

Through Utilization Management, Case Management, the use of PCPs as “gatekeepers,” and other centralized health plan controls on inpatient admissions, inpatient lengths of stay, and on selected diagnostic tests and procedures.

·
PCP Disenchantment: See the Section I.B.4. Above on the reasons for PCP antagonism and disenchantment.

C.
employee/PLAN MEMBER Concerns:

Employees/Plan Members reacted strongly to the massive and rapid implementation of Managed Health Insurance plans. Although health insurance premium increases slowed, National Health Expenditure did the same, and patient cost-sharing was in some cases significantly reduced, for many Employees/Plan Members these positive benefits were either not visible, were too abstract, or seemed to be an inadequate payoff for what was perceived as massive and unwarranted health plan interference in access to providers, tests, and medical procedures.

1.
Making Access Difficult: Routine Care:

Perhaps most important was the sense of Employees/Plan Members that they were being denied necessary care, even if that was not true. Central health plan interference, extensive use of PCPs as “gatekeepers,” and the various seemingly bureaucratic obstacles to getting certain tests and procedures, and to accessing Specialty Care Providers, all worked to frustrate Employees/Plan Members as well as Providers. For years Employees had been able to access Specialists as they wished, with interference from neither plans nor PCPs.

2.
Making Access Difficult: Experimental Care and Life-Threatening Conditions:

There was a belief, supported by some high-profile cases, and encouraged by the mainstream U.S. media, that innovative and often life-preserving care was being denied because of Managed Health plan oversight, policies and procedures, and overall interference in the doctor/patient relationship.

3.
Belief that Health Plans were Not Acting in the Best Interest of Employees/Plan Members:

Many Employees/Plan Members felt that the restrictions on choice of provider, tests, and treatment were meant to generate profits for the Managed Health plans, not to improve the quality and affordability of personal health care goods and services.

1

HSA3

1

2

MANAGED HEALTH CARE

FALL 2020 L. EITEL

REVIEW OF THE MANAGED CARE BACKLASH (LATE 1990s – EARLY 2000’s): KEY POINTS

I.
WHY WAS THERE A BACKLASH?

A.
who was against managed care IN the 1990S
?

Providers and Employees/Plan Members, interacting with negative media coverage of the most blatant failings of Managed Health Insurance Plans, placed increasing pressure on the health insurance plans and employers to change their strategy for mass implementation of the most restrictive forms of Managed Care (HMOs, POS plans). Each of these groups had their own reasons, sometimes overlapping, for serious opposition to Managed Care as it had been implemented.

B.
Provider Concerns:

Overall, the Providers reacted strongly to the massive and rapid implementation of Managed Health Insurance plans which, unlike traditional Indemnity and Service plans, challenged the primacy of physician and hospital medical decision-making, and the previously unchallenged status of those providers.

1.
Payment Issues:

· Late payment;

· Low payment rates, not adequately increased over a number of years;

· The sense that payment rates were negotiated with little respect for individual, group, and institutional providers, and that the insurance plans used their sheer market power and threats of provider network exclusion to get those rates;

· Capitation payments for Primary Care Practitioners.

· In some plans, forcing Primary Care Practitioners to bear financial responsibility for Plan Member/Patient Hospital utilization, Specialty Physician consultations, Tests and Diagnostic Imaging, even if PCP control over such utilization had practical limits.

Many States passed laws (with associated financial penalties) setting
common rules and regulations governing timely Insurance plan payment to Providers.

2.
Limits on Provider Networks:

Either real limits were imposed, or the providers considered the payment and other concessions that were the price of provider inclusion in insurance plan networks too high.

In some States the concern of Physicians that they would be left out of the networks contracted and used by Managed Health Insurance plans (specifically HMOs and PPOs) resulted in those States passing
Any Willing Provider laws.

3.
Limits on Provider Tests and Procedures, Hospital Admissions and Lengths of Stay, Ambulatory Care Services, and Specialty Care Physician Consultations:

HMOs and POS Managed Health Insurance plans used Utilization Management, Case Management, PCPs (as “gatekeepers,”) and other centralized health plan controls to reduce and stabilize inpatient admissions, inpatient lengths of stay, selected diagnostic tests and procedures, and Specialty Care Physician consultations.

· Some Specialty Care Physicians, especially, resented this limitation on their incomes.

· Affected providers generally opposed what they saw as an uninformed and insulting attack on their clinical skills and judgement, as well as their incomes.

· These limits affected Individual Physicians, Physician Groups, Hospitals, and other providers.

4.
PCP Disenchantment: See the three previous bullet points.

C.
employee/PLAN MEMBER Concerns:

Employees/Plan Members reacted strongly to the massive and rapid implementation of Managed Health Insurance plans. Although health insurance premium increases slowed, National Health Expenditure did the same, and patient cost-sharing was in some cases significantly reduced, for many Employees/Plan Members these positive benefits were either not visible, were too abstract, or seemed to be an inadequate payoff for what was perceived as massive and unwarranted health plan interference in access to providers, tests, and medical procedures.

1.
Making Access Difficult: Routine Care:

Perhaps most important was the sense of Employees/Plan Members that they were being denied necessary care, even if that was not true. Central health plan interference, extensive use of PCPs as “gatekeepers,” and the various bureaucratic obstacles to getting certain tests and procedures, and to accessing Specialty Care Providers, all worked to frustrate Employees/Plan Members as well as Providers. For years Employees had been able to access Specialists as they wished, with interference from neither plans nor PCPs.

2.
Making Access Difficult: Experimental Care and Life-Threatening Conditions:

There was a belief, supported by some high-profile cases, and encouraged by the mainstream U.S. media, that innovative and often life-preserving care was being denied because of Managed Health plan oversight, policies and procedures, and overall interference in the doctor/patient relationship.

3.
Concern that HMOs and POS plans were not covering certain clinical services:

In the late 1990s, all States passed laws ensuring that HMOs and POS plans included certain services in the core benefits packages offered by those plans.

PPOs were usually not identified as problems in these situations, and were often not included in the State laws which were passed.

4.
Limits on Provider Tests and Procedures, Hospital Admissions and Lengths of Stay, Ambulatory Care Services, and Specialty Care Physician Consultations:

Employees/Plan Members in many cases saw these limits as unnecessary interference in the care process – again, this was entirely different from the Indemnity and Service Health Insurance plan had been.

5.
Limits on Provider Networks:
This limited the kind of patient choice to which Employees/Plan Members were accustomed under Indemnity and Service Plans and could negatively impact Continuity of Care.

6.
Belief that Health Plans were Not Acting in the Best Interest of Employees/Plan Members:

Many Employees/Plan Members felt that the restrictions on choice of provider, tests, and treatment were meant to generate profits for the Managed Health plans, not to improve the quality and affordability of personal health care goods and services.

7.
Provider Negativity toward Managed Health Insurance Plans Influenced Employee/Plan Member attitudes toward that kind of insurance.

II.
PERSPECTIVES ON THE BACKLASH.

EXCERPTS: The Managed Care Roller Coaster:

THE HEALTH CARE BLOG: JULY 16, 2008

By MAGGIE MAHAR & NIKO KARVOUNIS

A.
Paul Ellwood and the HMO Concept as Developed in the 1960’s – The Managed Care Backlash in Context.

To understand what is going on, it’s helpful to consider the history of HMOs in the U.S. As originally conceived by pediatric neurologist Paul Ellwood and the “J

ackson Hole Group

” in the 1960s, HMOs were all about managing care in the truest sense: actively regulating and coordinating medical services to ensure the best marriage of health outcomes and cost.

Here’s how Ellwood’s HMOs worked: patients enrolled in a plan that provided access to doctors and hospitals in a specific network of providers.  Providers receive a fixed payment, per patient served, per month, for a particular set of services (this is called capitation). Their goal: to keep these patients well. (This is why they were called “Health Maintenance Organizations,” or HMOs.)

In return, doctors have the security of knowing that they will always have customers. These referrals will come from the primary care physicians in the network, who serves as “gatekeepers,” recommending a visit to a specialist when a patient needs it.

The idea here is to build the high-quality/low-cost truism into the very machinery of health care plans.

First, because patients need referrals to see a specialist, and provider payments are fixed, much unnecessary spending can be curtailed. We know that “fee-for-service” payment provides perverse incentives to “do more.” By contrast, fixed payments encourage more efficient medicine because doctors are getting one lump sum, regardless of what they do, they are not encouraged to undertake unnecessary, labor-intensive, high-cost procedures. Instead, they are motivated to stop sickness before it starts. The emphasis is on preventive care — which in the long run, is less costly for everyone and less time-consuming for the health care provider.

Finally, while many patients object to going through a “gatekeeping” primary care doctor to get a referral to a specialist, this is all part of making sure that “the right patient gets the right care at the right time.” More than two decades of

work

by Dartmouth’s medical researchers have shown us that when patients see more specialists, outcomes are not better; often they are worse.

Last, but certainly not least, Ellwood envisioned HMOs as non-profit organizations subjected to strict quality reviews (with these reviews based on medical research). In Ellwood’s mind, plans would compete with each other on quality, not price. The cost-consciousness of managed care is balanced with an emphasis on outcomes.

Ellwood’s original model for HMOs is “managed care” in the sense that Paduda talks about. It tries to encourage smart, efficient, and financially sustainable medicine, all in the interest of patients.

Yet today, the phrase “managed care” has been besmirched. Conventional wisdom has it that HMOs are among the most heinous villains in the health care field. Yet in theory, HMOs are a perfect marriage of cost-consciousness and quality. So, what went wrong? One word: Profit.

B.
Transformation of Managed Health Insurance Plans in the 1980’s and the 1990’s: Some Sources of the Managed Care Backlash.

Enter the Profit-Motive

As Ellwood

lamented

in an interview with Time magazine in 2001, ultimately HMO’s have focused on “competition on price alone,” instead of quality. The management of care has become a game of accounting, rather than an exercise in strategic medicine.

It wasn’t always this way. The first HMOs adhered closely to Ellwood’s vision. As George Anders notes in his 1996

book,

Health Against Wealth: HMOs and the Breakdown of Medical Trust, almost all of the HMOs through the 1960s and 1970s were non-profit, and “they approached their goals of providing affordable medical care and promoting wellness with an almost missionary-like zeal.” The welfare of the patients came first, as “ninety percent of the premiums they collected — and often more — went for patient care.”

By the 1980s, Ellwood’s managed care model had gained a lot of momentum. One 1986 Health Affairs article

noted

that between 1980 and 1984, the percent of insured households enrolled in an HMO increased by one-third. The percentage of corporate employers offering health plans where at least 10 percent of their employees had joined HMOs almost doubled over this period, from 26 percent and 45 percent.

Yet as the HMO industry grew, Ellwood’s vision of patient-centered, cost-effective care receded into the background. Quality in health care is hard to measure (so hard, in fact, that a frustrated Ellwood eventually founded a non-profit to push for more clarity and accountability in health outcomes). Sadly, as the market expanded, size — not quality — became the major metric for success. Bigger HMOs could offer a wider network of providers — and consumers like having a broad choice of doctors and hospitals.

Meanwhile, nonprofit HMOs were hitting a ceiling in terms of expansion. They couldn’t amass the capital necessary to become huge, because, as Anders notes, the plans “couldn’t issue stock and sometimes had trouble arranging bank loans.” Their solution? Become for-profit corporations and make stock available to the public to create and expandable base of shareholders.

President Reagan also had a hand in the shift to for-profit HMOs in the early 1980s. The HMO Act of 1973 had made federal grants and loans widely available to non-profit operations. This is one reason why, in 1981, 88 percent of all HMOs were non-profits. But in the early 1980s, Washington cut off the stream of federal funding — and eliminated a major incentive for nonprofit status.

Thus, for-profit insurers took over the HMO industry. In the 1970s, notes Anders, there were “30-odd HMOs, almost all not-for-profit.” By 1997, there were “well over 600, more than three-quarters of them investor-owned.” HMOs became big business.

With the advent of share-holder HMOs came a change in priorities. As Anders puts it, “once managed-care companies started entering the for-profit arena, the financial world’s values started seeping in.” Securities analysts and big investors refused to support plans that spent “too much” on members, leaving “too little” for shareholders. “Before long,” says Anders, “HMO bosses regarded boosting stock prices as a major priority.” And that meant maximizing financial gains to ensure a sound investment.

Unfortunately, Wall Street isn’t savvy when it comes to medicine. The delivery of care that Ellwood labored so intensively to coordinate was reduced to a line item in a budget and a sunk cost. Increasingly, patient care was viewed as the least desirable of expenses, because it never found its way back to the company. HMOs shifted expenditures away from patients and toward business operations like marketing, administrative overhead, and salaries—expenses that are understood by Wall Street as a cost of doing business.

In an indication of how the profit-driven mindset took over managed care, the percent of premiums that insurers actually paid out for patient care was re-christened the “medical-loss ratio.” Reimbursements for medical care were regarded as an undesirable financial loss, regardless of whether the care was necessary or unnecessary, life-saving or totally ineffective. Insurers were not getting smart about health care delivery.

According to Anders, in the late 1970s leading nonprofit HMOs spent about 94 percent of premiums on members’ medical treatments; by the late 1990s, leading HMO companies were spending less than 70 percent of their earnings on patients. Plans began rolling back coverage based solely on cost — as opposed to cost-effectiveness — and refused to cover expensive procedures like certain cancer treatments.

Preserving the bottom line became a mission divorced from any interest in medical necessity: in one blog post, Paduda

notes

that insurance giant WellPoint actively canceled coverage for seriously ill people if they actually sought care, and the company HealthNet “paid bonuses based on executive’s success in canceling individual policies” for people with high claims.

The clumsy stinginess of private insurers has not escaped the public eye—and it’s helped to fuel the belief that “managing care” equals refusing people treatments they need. As recently as 2004, 61 percent of Americans were

worried

that their health plan was more concerned with saving money than providing the best treatment.

As a result of the backlash, HMOs have moved away from Ellwood’s capitated model. Too many people worried that when doctors were paid a lump sum to keep a patient well, they might skimp on care.

And in fact, some for-profit HMOs did encourage doctors to “do less.” But at the same time, many doctors realized that it was in their long-term interest to do everything necessary to keep the patient well, both because they wanted the best for their patients, and because they realized that, if the patient became sick, this would mean more work without additional pay.

Nevertheless, patients suspected that if a doctor wasn’t paid fee-for-service, they would be short-changed. “Capitated care” began to disappear. People said it “just didn’t work.” Here the last of Ellwood’s bulwarks against high-cost, low-quality care crumbled. Now too many HMOs offer the worst of both worlds, focused on reducing care even as they adhere to a payment system that encourages high-volume, wasteful treatments.

1

THE CENTRALITY OF PRIMARY CARE – EXCERPTS FROM THE WORK OF BARBARA STARFIELD, M.D.

A.
WHAT IS PRIMARY CARE?

EXCERPT
– “Is Primary Care Essential?” Barbara Starfield, MD;
The Lancet, 22 October 1994, Vol 344(8930), pages 1129-1133.

The conference convened by the World Health Organization at Alma Ata in 19781 used 100 words to describe primary care; they included essential, practical, scientifically sound, socially acceptable, universally acceptable, affordable cost, central function and main focus of overall social and economic development, first-level contact, and first elements of a continuing health care process. Serious planning for primary care requires a conceptualization that is easily and uniformly understood, implemented, and amenable to measurement.

Primary care is first-contact, continuous, comprehensive, and coordinated care provided to populations undifferentiated by gender, disease, or organ system.
The elements of first contact, continuity, comprehensiveness, and coordination are included in most definitions proposed by professional organizations, agencies, and commissions [2-5]. When viewed from the perspective of populations as well as individual patients, a health system that seeks to achieve these four elements will be achieving what was envisaged in the Alma Ata Declaration.

Primary care is only one level of a health system, albeit a central one.

Other essential levels of care include secondary care, tertiary care, and emergency care (especially for serious trauma).

· Secondary and tertiary care are distinguished by their duration as well as by the relative uncommonness of problems that justify them.

· Secondary care is consultative, usually short-term in nature, for the purpose of helping primary-care physicians with their diagnostic or therapeutic dilemmas. Secondary care may be provided by informal consultations of secondary-care physicians with primary-care physicians, by regular visits of secondary-care physicians to primary-care facilities for the purpose of advising on management of patients with particular disorders (e.g., diabetes), or by short-term referral of patients.

· Tertiary care, in contrast, is care for patients with disorders that are so unusual in the population that primary-care physicians could not be expected to see them frequently enough to maintain competence in dealing with them. When the disorder has a substantial impact on other aspects of a patient’s health, the tertiary-care physician may have to assume long-term responsibility for most of the patient’s care, consulting with the primary-care physician for problems and needs that primary-care physicians are better equipped to handle.

All of these other levels of care require integration with primary care for the patient to receive clear and consistent advice.

B.
THE SPECIAL CHARACTERISTICS OF PRIMARY CARE.

EXCERPT:
“PRIMARY CARE AS PART OF US HEALTH SERVICES REFORM,” Barbara Starfield, MD, MPH and Lisa Simpson, MB, BCh, MPH; JAMA, June 23/30, 1993 – Vol 269, No. 24, pp. 3136-3139.

The poor development of primary care within the US health care system has received relatively little attention despite evidence that it may underlie or at least exacerbate access, quality, and cost problems. Primary care facilities make it possible for individuals to obtain services for illnesses before they become severe.

Primary care services, when properly linked to specialty services for consultation and referral, achieve better outcomes. Primary care services are also less costly than specialty services, largely because they are less technology-intensive. Higher levels of primary care manpower are associated with lower mortality rates. Where it has been examined as a characteristic, Primary Care is twice as important as insurance in maintaining health.

INDEMNITY AND SERVICE HEALTH INSURANCE PLANS IN THE U.S.: NATURE AND EVOLUTION FROM THE

1

930’s THROUGH THE 1970’s.

         

I.
The management of health insurance risk under Indemnity and Service health insurance plans: 1930’s through the 1970’s.

NOTE:
Indemnity and Service Health Insurance Plans, and initially the Medicare and Medicaid insurance programs, were based on the principles of non-interference in the practice of medicine, the choice of a health care service provider, and the decisions of patients and physicians about the preferred treatment for a given medical condition.
SO
– Initially all those plans were opposed to the basic principles of Managed Care in health insurance and the delivery of health care goods and services.

A.
OVERVIEW OF INDEMNITY AND SERVICE PLANS:

These plans developed in the 1930’s (Blue Cross and Blue Shield plans) and in the 1940’s and 1950’s (commercial health insurance, whose rapid and massive expansion of coverage for American workers was facilitated by Federal regulation and law, including provisions of the Federal tax code.)

The focus under these plans, which represented the bulk of the health industry’s insurance products through the 1970’s and even into the late 1980’s, was to properly price insurance products through relatively accurate actuarial projections of expected health services usage for selected communities or for experience-rated subgroups such as employees of a particular firm. Properly priced premiums, sometimes associated with expense-sharing features such as consumer deductibles, coinsurance, and co-payments, were expected to ensure that outlays for services did not exceed a health insurance plan’s inflow of premium funds.

Risk was looked at solely in terms of financial risk to the insurer and the consumer associated with treatment for episodes of acute care. Risk was further managed by establishing annual and lifetime limits on the insurance company payout for health services provided to individual consumers and their families.

Risk was seen neither in terms of a population’s health status or an individual’s health status, nor in terms of the quality and appropriateness of services delivered. The quality of the inputs to the health services delivery process (modern hospitals, well-trained board-certified physicians) and the adherence of health care professionals to the standards of conduct for their chosen profession were implicitly assumed to address those risks.

The purpose of this kind of health insurance was to make acute and catastrophic care affordable and available to consumers without affecting the character and operation of the health care delivery system. Preventive Care and Wellness Services were not seen as the proper target of these plans, nor were they seen as appropriate objects for the expenditure of premium dollars. These health insurance plans paid out money for services, but did not see themselves as responsible for the size and shape of the network of health services providers available to serve their publics, nor for the quality and appropriateness of the health care services which were delivered.

In the 1970s and 1980s employers and the major private insurance companies (Blue Cross/Blue Shield, the major private commercial insurance companies) started to introduce elements of Managed Care such as big case management, disease management, and inpatient utilization review to the management of those Indemnity and Service plans. These changes in insurance plan approach, however, did not significantly impact rapidly rising prices of health care goods and services, nor did they affect the significant year-to-year increases in national health expenditures and health insurance premiums.

B.
OUT-OF- POCKET EXPENDITURES: Coinsurance, co-payment, deductible, period of eligibility:

A deductible is a fixed dollar amount, either paid annually, or for each period of eligibility, which a subscriber must pay before their health insurance starts to pay for a particular set of services. For instance, an annual deductible of $800 might have to be paid for hospital services before the subscriber or provider may bill the insurance plan for expenditures incurred above that amount.

A co-payment is a fixed dollar amount paid for each service provided. For instance, for each office visit to a specialist, a subscriber may have to pay a co-payment of $10. A coinsurance is a percentage of the charge for a service which a subscriber must pay each time a service is accessed. For instance, for a Magnetic Resonance Imaging scan received on an outpatient basis, the member might have to pay 20% of the reasonable charge as defined by the insurance company and charged by the physician and/or the imaging center.

A period of eligibility is a period during which the deductible paid for a set of services is, once paid, not required. If a subscriber, or instance, has to go to the hospital twice in a year, and a certain amount of time has elapsed between the first and the second stay, a new period of eligibility may start, and a new deductible may have to be paid.

PLEASE NOTE:

· Health insurance usually involves a variety of plan-specific limitations on what services are and are not covered.

· Until the passage of the Affordable Care Act of 2010, insurance plans often had annual and lifetime financial limits to how much the insurance plan was liable to pay out to cover a plan subscriber’s medical expenditures. This is being phased out of existing insurance plans, and does not exist for health insurance plans marketed and sold in the State Exchanges/Marketplaces for individuals and small businesses established under the ACA.

THE PRECONDITION FOR PROVIDER ACCEPTANCE OF PRIVATE GROUP HEALTH INSURANCE, WHETHER IN THE FORM OF BLUE CROSS/BLUE SHIELD PLANS, OR IN THE FORM OF COMMERCIAL HEALTH INSURANCE, WAS THAT THE SOLE PURPOSE OF HEALTH INSURANCE WAS TO PAY PROVIDERS REASONABLE COMPENSATION FOR THEIR SERVICES. IN MATTERS OF QUALITY OF CARE, MEDICAL PRACTICE, AND CHOICE OF PROVIDER THE INSURANCE COMPANIES OF ALL STRIPES WERE EXPECTED TO KEEP THEIR NOSES OUT OF THE BUSINESS OF HEALTH CARE DELIVERY. AS LONG AS INSURANCE WAS ALL ABOUT PAYMENT, AND NOT ABOUT INFLUENCING OR INTERFERING IN THE DECISIONS ABOUT PROVIDER OR MEDICAL PRACTICE, IT WAS OK.

II.
The 1960s AND THE 1970s: CHANGES IN INDEMNITY AND SERVICE PLANS SINCE THE 1930s AND 1940’s.

·
Cost-sharing:
The use of cost-sharing (deductibles, coinsurance, co-pays) to limit employer and insurance plan liability by requiring that workers pay out-of-pocket for some portion of the health care goods and services they used started to erode in the 1960s. Health care prices and total expenditures were still at relatively low levels, and employers felt that they could afford to pay more and hold workers responsible for less.

·
Services covered:
Over time, and especially in this time period, the originally relatively limited coverage of physician and hospital services that had been central to Indemnity and Service group health insurance plans became much more expansive. Starting with the introduction and growth of major medical converge in the 1950s, by the 1970s these insurance plans were very comprehensive in terms of the types of providers and services they covered, and limits on what was covered were substantially reduced. Again, relatively slow growth in health care expenditures, and the low levels of health care services prices and expenditures, made employers comfortable with increasingly generous health insurance benefits coverage.

·
Non-interference:
The same principles of non-interference in decisions about choice of provider and choice of medical intervention (treatments, procedures, etc.) prevailed as they had since the 1940s.

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HSA 3

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MANAGED HEALTH CARE

SPRING 2021 L. EITEL

READING 1.C.:

THE CRISIS OF THE PREVAILING EMPLOYER-BASED INDEMNITY/SERVICE PLAN, THE MASSIVE SHIFT TO MANAGED HEALTH CARE PLANS 1988-1996, AND THE MANAGED CARE BACKLASH

I.
HEALTH INSURANCE IN THE UNITED STATES: CRISIS AND TRANSITION – LATE 1960s THROUGH EARLY 1990s

CHALLENGES TO THE SUSTAINABILITY OF THE EMPLOYER-BASED GROUP HEALTH INSURANCE MODEL FROM THE 1960’S THROUGH THE EARLY 1970S.

A. The influx of Medicare and Medicaid recipients making demands on the U.S. Health Care services system beginning in the late 1960s interacted in a variety of complicated ways with other changes going on in that system to produce substantive and unprecedented increases in the portion of Gross Domestic Product allocated to health care services, and in sustained year-to-year increases in National Health Expenditures.

These substantive increases in price and expenditure started to threaten the stability of the prevailing system of Indemnity and Service health insurance plans – would premiums become unaffordable for workers and their employers? How would that impact on the accessibility and affordability of health insurance for a large percentage of the American population?

B. Managed Care and HMOs began to be seen by some politicians, policy makers, academicians, and advocates of the primacy of Primary Care as a quality-oriented answer to the prevailing health insurance system’s inability to address massive, sustained price and expenditure increases. President Nixon and Congress in 1973 approved the HMO Act of 1973, which played a major role in the 1970s and 1980s in starting the spread of Managed Care Health plans beyond their East and West Coast strongholds and breaking down local resistance to the previously marginalized Managed Care health insurance plans.

II.
Federal Government Support for the Spread of Managed Health Insurance in the Early 1970s: The HMO Act of 1973

A. The Federal government, early on recognizing the beginnings of a real crisis in health care expenditures and pricing, embraced the idea of Managed Care in order to encourage the spread of a form of health insurance which could actually control health care expenditures.

B. The Federal government, through the
1973 HMO Act
broke down barriers to the spread of Managed Health plans throughout the U.S., laying the groundwork for the slow but steady expansion in Managed Health plan enrollees in the 1980s.

C. This Act preempted individual State laws which prevented the spread of Managed Health Insurance Plans outside of their strongholds in Washington State, California, New York City, and Washington, D.C.

D. This Act provided grants and start-up funds to encourage the spread of Managed Health Insurance Plans.

E. This Act required all Employers who offered health insurance to their Employees, and who employed a certain minimum of Employees, to offer at least one (1) Managed Health Insurance Plan as one of the health insurance options they offered to their Employees.

III. THE MASS MOVEMENT OF AMERICANS WITH EMPLOYER-BASED GROUP HEALTH INSURANCE FROM INDEMNITY AND SERVICE PLANS TO MANAGED CARE HEALTH PLANS 1988 – 1996.

A.
Throughout the late 1970s through the 1980s, Blue Cross and Blue Shield health insurers, and large commercial health insurers, tried to maintain and save the Indemnity and Service plans in which the vast majority of Americans with employer-based insurance were enrolled.

(As late as 1988 73% of American workers and their families who were covered by employer-based private group health insurance were enrolled in those Indemnity and Service plans.)

Indemnity and Service Plans had originally been thoroughly opposed to the idea and practice of Managed Care (as exemplified in the Kaiser-Permanente Model).
These plans followed the principles of non-interference in the practice of medicine, unrestricted consumer choice of a health care service provider, and non-interference in the decisions of patients and physicians about the preferred place of and treatment for a given medical condition
.

B.
In part inspired by Federal government experiments in Utilization Review and Management, these plans started to adopt some aspects of Managed Health Plan/HMO practice in order to constrain annual expenditure increases for Personal Health Care Services.
They adopted Large Case Management programs, Utilization Review programs, and used other medical management tools traditionally uses by Managed Health Insurance plans, and thus started to do just what physicians and hospitals had feared prior to 1930 – they started to involve themselves in decisions of length of treatment, type of treatment, appropriateness of treatment, and place of treatment for some health insurance plan members.

These changes in health insurance plan management and philosophy did not have a significant impact on health expenditures, and were not likely to keep premiums and out-of-pocket expenditures from increasing substantially. These changes did not significantly impact rapidly rising prices of health care goods and services, nor did they affect the significant year-to-year increases in national health expenditures and health insurance premiums.

C. Faced with the likelihood of severely disappointing employers and employees by substantially increasing premiums and out-of-pocket expenditures, and reducing benefits covered by the Indemnity and Service Plans, the major insurers faced a collapse in the health insurance system which had prevailed since the 1930’s, with a resulting threat to the welfare of employees and the viability of the private group health insurance industry.

D.
Blue Cross and Blue Shield health insurance plans, all the plans managed by commercial insurers, and the newer insurance companies which focused more heavily on providing Managed Health Insurance Plans, worked with employers to transition most Americans with employer-based health insurance to Managed Health Insurance Plans between 1988 and 1996
.

It was believed that only Managed Health Insurance Plans would allow those companies to continue offering generous packages of health insurance benefits, and would enable them to control the growth in personal health care expenditures, prices, and the volume of services produced.
The price of maintaining the private group health insurance industry’s viability would be the wholesale movement of employer-based group health insurance enrollees to Managed Health Insurance Plans.

E. Between 1988 and 1996 the relative significance of Indemnity/Service Plans and Managed Care Plans in the lives of American employees and their families was reversed. By 1996 73% of American workers with employer-based group health insurance were enrolled in those Managed Health Insurance Plans. By 2000 92% of those workers and their families were in Managed Health Insurance Plans – HMOs, Point of Service Plans, and Preferred Provider Organizations.

F. This massive change in the type of health insurance most Americans relied upon to ensure their access to affordable health care services was dramatic and for many Americans a shock. Previously, access to acute care services, diagnostic services, specialty services including consultations, and the full array of personal health care services involved minimal interference from the health insurance plans. Now most Americans would face limits on that access, especially in the form of having to access most services with approval either from an assigned Primary Care Practitioner, or from medical management personnel associated with the respective insurance plans.

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deductibles, or co-payments from the patient; balance billing is not allowed. 1

THE UNITED STATES HEALTH CARE SYSTEM:

KEY HEALTH INSURANCE TERMS

2/9/2021

1. TYPES OF HEALTH INSURANCE PLANS: TRADITIONAL HEALTH
INSURANCE PLANS:

Traditional health insurance plans are risk bearing health insurance plans.

This means the following: An employer offers health insurance coverage to their
employees and may offer a variety of health insurance plans. Employees choose a plan, and
the employer then forwards the monthly premiums for that plan to the insurance company which
both offers and manages the plan. The insurance plan takes full risk for that plan, meaning that
if there is money from the premiums left over at the end of the year, the insurance plan would
keep it. If the amount that the plan has to pay out for health care goods and services exceeds
the premiums received, the plan has to cover the loss. SO – responsibility for accurately pricing
premiums; for establishing deductibles, coinsurance, copayments, and plan financial limits; and
for running the plan in an efficient and effective way – is in the hands of the insurance company.
These health insurance plans are regulated by the individual States.

• INDEMNITY PLANS – DOMINANT POST 1930 THROUGH 1988.

• SERVICE PLANS – DOMINANT POST 1930 THROUGH 1988.

• DIRECT SERVICE (PREPAID HEALTH SERVICES) – EARLY FORM OF
MANAGED CARE HEALTH INSURANCE PLANS; MAINLY IN
CALIFORNIA, WASHINGTON STATE, NEW YORK CITY, AND
WASHINGTON, D.C. – DOMINANT 1930 THROUGH EARLY 1970.

• AFTER 1973 – MANAGED HEALTH INSURANCE PLANS – DOMINANT
EARLY 1990S TO THE PRESENT: Health Maintenance Organizations
(HMOs), POS (Point of Service Plans), or PPOs (Preferred Provider
Organizations.

Under indemnity plans, the patient may go to any provider; the provider bills the insurance
company directly, only collecting any applicable coinsurance, deductibles, or co-payments
from the patient; OR the provider may bill the patient directly, relying on the patient to pay the
bill from the payment provided to the patient by the insurance company; balance billing may be
allowed.

Under service plans, there is a large but defined and contracted provider network; the
provider bills the insurance company directly, only collecting any applicable coinsurance,

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Under a direct service plan (Prepaid Health Services plans, or as they were eventually
called, Managed Care plans), all services (including many preventive services) are covered
by the monthly payment made to the insurer. Except for some co pays, deductibles, or
coinsurance (Preferred Provider Organizations have those), the patient does not have to pay
the doctor or hospital for each episode of care. The providers may bill the insurer based on a
contracted rate, or in the case of primary care doctors the provider may receive a monthly
capitation payment rather than billing on and episodic basis.

2. SELF-INSURANCE:

In self-insurance arrangements, an employer takes on their own risk. They establish their
own version of a health insurance plan for their employees, collect and manage the premiums
themselves, and bear the financial risk rather than passing it on to an insurance company. The
employer hires a Third-Party Administrator (TPA) to manage the health benefits plan on
behalf of the employer, but the TPA does not take on financial risk. Such plans are
regulated (in theory) by the Federal government rather than the States.

3. INSURANCE PREMIUMS; EXPERIENCE AND COMMUNITY

RATING:

Insurance premiums are paid on a regular basis (monthly, quarterly) to the insurance
company, and guarantee the coverage of a member (and his/her family) under a plan in which
they are enrolled. Premiums are usually paid through the employer, with the member and
his/her family contributing some proportion of the premium.

An enrollment period is a specified period of time within a calendar year in which a member
may change the insurance plan to which he/she and their family subscribe and belong.

Under community rating, premiums which insurance plan subscribers pay reflect expected
expenditures for medical services utilization averaged out across all members. Under
experience rating, premiums reflect the expected medical utilization and expenditure
experience (actuarially determined) of a particular group. Thus, under experience rating, the
premium paid by a young single male office worker would be significantly different from that
paid by a 50-year-old male steelworker. Community rating spreads the burden of paying for
medical services as expressed in premiums fairly evenly across all subscribers. Experience
rating clearly differentiates the financial burden for the premium based on relative subscriber
risk, making high-risk individuals and families subject to significantly higher premiums since
there is no averaging of premiums across a broad range of subscribers.

Originally, Blue Cross and Blue Shield plans were community rated (at least the group plans
were: individual policies were always higher). The loss of business over time to commercial
plans that were experience rated led to an overall decline in the use of community rating. All
insurance plans by the 1970s were using experience rating as the basis for determining and
assigning premiums.

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4. COINSURANCE, CO-PAYMENT, DEDUCTIBLE, PERIOD OF
ELIGIBILITY:

A deductible is a fixed dollar amount, either paid annually, or for each period of eligibility, which a
subscriber must pay before their health insurance starts to pay for a particular set of services. For
instance, an annual deductible of $800 might have to be paid for hospital services before the
subscriber or provider may bill the insurance plan for expenditures incurred above that amount.

A co-payment is a fixed dollar amount paid for each service provided. For instance, for each
office visit to a specialist, a subscriber may have to pay a co-payment of $10. A coinsurance is a
percentage of the charge for a service which a subscriber must pay each time a service is
accessed. For instance, for a Magnetic Resonance Imaging scan received on an outpatient basis,
the member might have to pay 20% of the reasonable charge as defined by the insurance
company and charged by the physician and/or the imaging center.

A period of eligibility is a period during which the deductible paid for a set of services is, once
paid, not required. If a subscriber, or instance, has to go to the hospital twice in a year, and a
certain amount of time has elapsed between the first and the second stay, a new period of
eligibility may start, and a new deductible may have to be paid.

Also note that health insurance usually involves a variety of plan-specific limitations on what
services are and are not covered.

5. OTHER OUT – OF – POCKET EXPENDITURES:

Expenses paid by the subscriber that will not be reimbursed by the insurance company.
Technically includes that portion of the insurance premium paid to the insurance company which
comes out of the employee’s pocket rather than the employer’s pocket.

6. SERVICE CARVE-OUTS:

Some selected services may not be covered by the health insurance plan. The patient is 100%
liable for payment to the provider for those services.

7. ANNUAL AND LIFETIME LIMITS:

Prior to the passage of the Affordable Care Act in 2010, it was possible for health insurance plans
to have Annual and Life-Time limits. These are limits on the annual or total (across the lifetime of
an insurance policy) amount of money which the insurance plan must pay out for personal health
care goods and services. All expenditures beyond the limit would be the responsibility of the
health insurance plan member, not the employer, nor the health insurance plan itself.

2. SELF-INSURANCE:
• 3. INSURANCE PREMIUMS; EXPERIENCE AND COMMUNITY RATING:
• 4. COINSURANCE, CO-PAYMENT, DEDUCTIBLE, PERIOD OF ELIGIBILITY:

5. OTHER OUT – OF – POCKET EXPENDITURES:
6. SERVICE CARVE-OUTS:
7. ANNUAL AND LIFETIME LIMITS:

Kaiser Permanente’s long record of achievements in providing high-quality, affordable health
care to its members and its communities is directly related to the unique way we organize, finance,
and deliver health care to members.

The combination of the following characteristics distinguishes Kaiser Permanente from most other
health care organizations:

• Prepayment – Prepayment, or capitation, of the annual member premium means that under Kaiser
Permanente’s comprehensive coverage plans members face no economic barriers to medically
necessary care, as determined by their personal physician(s). Pre-payment aligns incentives
between the health plan and the member so that both benefit when care is delivered.

• Integration – All of the insurance, administrative, and clinical functions of health care are provided
within a partnership of three entities (health plan, hospitals, physician groups) working together
with aligned goals for quality of care, efficiency, and affordability. In addition, all aspects of patient
care are integrated for coordination and efficiency across specialties, sites of care, and life stages.

• Group Practice – The self-governed, multispecialty Permanente Medical Groups are committed to
collaboration and coordination of care, evidence-based medicine, and wise use of resources.

• Nonprofit – The nonprofit status of the health plan and hospitals means that all revenue margins
are invested in improved patient care infrastructure and in health-related community benefit
programs.

Unlike most American health care organizations, Kaiser Permanente
is not just a health insurer, not just a hospital system, not just a
physician group. It is all three of these things – a non-profit, prepaid,
integrated delivery system.

It is through that close integration of all vital health care functions
that KP is able to achieve the remarkable strengths and synergies that
set it apart in terms of quality and efficiency from the fragmented,
fee-for-service, non-systematic world of most American health care.

Kaiser Permanente

KP Model A Prepaid Integrated Delivery System
How is the Kaiser Permanente model of care delivery different from most
American health care organizations?

Unique Approach

Setting KP Apart

A Seamless Partnership of Health Plans, Hospitals, and Medical Groups

Since its founding in 1945, Kaiser Permanente has defined the integrated model of health care financing
and delivery through its unique partnership among three entities:
• Kaiser Foundation Health Plans – Nonprofit regional health plans that contract with members
(individuals and groups) for prepaid (capitated) comprehensive health care services.
• Kaiser Foundation Hospitals – Nonprofit corporations that own and operate or contract for hospital
facilities and services for the care of Kaiser Foundation Health Plan members.
• Permanente Medical Groups – Self-governed, multispecialty medical groups in each KP region that
contract exclusively with Kaiser Foundation Health Plan and Hospitals to provide medical services to
members.

Preventive health and wellness
services are emphasized to help
keep members healthy.

Kaiser Permanente’s size, scope,
and integrated structure enables it to
take full advantage of state-of-the-art
information systems supporting
clinical practice, administrative
functions, and communications
between and within KP and its
members.

• Mission-driven organization:
health care

KP Model Non-integrated Model

• Physicians practice in isolation

• Insurance executives/managers
drive organizational strategies and
priorities

• Fee-for-service payment
encourages duplication, waste, and
overuse of services

• For-profit health plan investments
focused on short-term stockholder
returns

• Physicians practice in isolation from
specialist colleagues

• Market-driven organizations: Profit

• Competition between physicians
and health plans

• Multidisciplinary team-based care

• Partnering physicians help determine
organizational strategies and priorities

• Capitated prepayment encourages
efficiency, prevention/wellness service

• Non-profit health plan investments
focused on long-term quality and
efficiency

• Physicians cooperate and
coordinate across specialties

• Partnership of physicians and health plan

In Kaiser Permanente’s multispecialty medical groups, physicians and other clinicians:
o Share experience and expertise to identify and implement successful practices.
o Share a vast clinical knowledge base that continuously supports quality improvement.
o Coordinate care across disciplines to provide continuity of care and reduce duplication and waste.
o Practice physician-led team-based care (physicians, nurses, care managers, technicians, and others).
o Monitor and report the quality of care.
o Invest in sophisticated quality improvement tools and strategies that are not available to solo practice
or small group physicians.

Kaiser Permanente

KP Model A Prepaid Integrated Delivery System

Kaiser Foundation Health Plans

Kaiser
Foundation Hospitals

Permanente
Medical Groups

Members

In contrast to the economic competition among doctors, hospitals, and health plans in the non-integrated
system, all entities within the KP system share the same, aligned economic incentive: the efficient delivery
of high quality, total health care to members.

A Seamless Partnership

Key Advantages

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The Shared Principles of Primary Care: A Call to Action

PDW and RPS Residency Education Symposium

March 26, 2018

Ted Epperly, MD

CEO | Family Medicine Residency of Idaho

Past President and Board Chair American |American Academy of Family Physicians Engagement Chair | Family Medicine for America’s Health

ACGME |Board of Directors COGME | Council Member

“IT WAS THE BEST OF TIMES, IT WAS THE WORST OF TIMES, IT WAS THE AGE OF WISDOM, IT WAS THE AGE OF

FOOLISHNESS.”

Charles Dickens

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“INSANITY: DOING THE SAME THING OVER AND OVER AGAIN AND
EXPECTING DIFFERENT RESULTS.”
Albert Einstein

“NOBODY KNEW HEALTH CARE COULD BE SO COMPLICATED.”
Donald Trump
February 28, 2017

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Why Primary Care?
A Greater Focus on Prevention
Early Management of Health Problems
Cumulative Effect of Primary Care to more Appropriate Care
Reducing Unnecessary and Potentially Harmful Specialist Care
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Source: Starfield B., Leiyu S., Mackinko J., Contribution of Primary Care to Health Systems and Health, (Milbank Quarterly, Vol. 83., No. 3, 2005) 457-501)
Greater Access to Needed Services
Decreased Morbidity and Mortality
Better Quality of Care
More Equitable Distribution of Health in Populations
Lower Cost of Care
Better Self-Reported Health
High Value Care

Primary Care – Should Be The Foundation of All Health Care Systems in the World
World Health Organization – 2008
Institute of Medicine – 1994
Barbara Starfield – 1992
Commonwealth Fund – 2013
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Joint Principles of the Patient Centered Medical Home
Personal Physician
Physician Directed Medical Practice
Whole Person Orientation
Care is Coordinated/Integrated
Quality and Safety
Enhanced Access
Payment
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4

The Result:
Seven Principles of Person Centered & Team-based Primary Care
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Person & Family Centered
Comprehensive & Equitable
Continuous
Coordinated & Integrated
Accessible
Team Based & Collaborative
High Value
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Person & Family-Centered
Primary care is focused on the whole person – their physical, emotional, psychological and spiritual wellbeing, as well as cultural, linguistic and social needs.
Primary care is grounded in mutually beneficial partnerships among clinicians, staff, individuals and their families, as equal members of the care team. Care delivery is customized based on individual and family strengths, preferences, values, goals and experiences using strategies such as care planning and shared decision making.
Individuals are supported in determining how their family or other care partners may be involved in decision making and care.
There are opportunities for individuals and their families to shape the design, operation and evaluation of care delivery.

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Comprehensive & Equitable
Primary care addresses the whole-person with appropriate clinical and supportive services that include acute, chronic and preventive care, behavioral and mental health, oral health, health promotion and more. Each primary care practice will decide how to provide these services in their clinics and/or in collaboration with other clinicians outside the clinic.
Primary care providers seek out the impact of social determinants of health and societal inequities. Care delivery is tailored accordingly.
Primary care practices partner with health and community- based organizations to promote population health and health equity, including making inequities visible and identifying avenues for solution.

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Continuous
Dynamic, trusted, respectful and enduring relationships between individuals, families and their clinical team members are hallmarks of primary care.
There is continuity in relationships and in knowledge of the individual and their family/care partners that provides perspective and context throughout all stages of life including end of life care.

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Coordinated & Integrated
Primary care integrates the activities of those involved in
an individual’s care, across settings and services.
Primary care proactively communicates across the spectrum of care and collaborators, including individuals and their families/care partners.
Primary care helps individuals and families/care partners navigate the guidance and recommendations they receive from other clinicians and professionals, including supporting and respecting those who want to facilitate their own care coordination.
Primary care is actively engaged in transitions of care to achieve better health and seamless care delivery across the life span.

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Accessible
Primary care is readily accessible, both in person and virtually for all individuals regardless of linguistic, literacy, socioeconomic, cognitive or physical barriers. As the first source of care, clinicians and staff are available and responsive when, where and how individuals and families need them.
Primary care facilitates access to the broader health care system, acting as a gateway to high-value care and community resources.
Primary care provides individuals with easy, routine access to their health information.

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Team Based & Collaborative
Interdisciplinary teams, including individuals and families, work collaboratively and dynamically toward a common goal. The services they provide and the coordinated manner in which they work together are synergistic to better health.

Health care professional members of the team are trained to work together at the top of their skill set, according to clearly defined roles and responsibilities. They are also trained in leadership skills, as well as how to partner with individuals and families, based on their priorities and needs.

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High Value
Primary care achieves excellent, equitable outcomes for individuals and families, including using health care resources wisely and considering costs to patients, payers and the system.
Primary care practices employ a systematic approach to measuring, reporting and improving population health, quality, safety and health equity, including partnering with individuals, families and community groups.
Primary care practices deliver exceptionally positive experiences for individuals, families, staff and clinicians.

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What Does This Mean For Primary Care in the U.S.?
Foundational
Align Health Care Systems around Primary Care and these Shared Principles
Delivery Model Innovations
Population and Community Health
Align Payment Mechanisms
Value Based Versus Volume Based Payment
All Rowing in the Same Direction
All Speaking With One Voice
Achieves the Triple Aim

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The Result:
Seven Principles of Person Centered

& Team-based Primary Care

16

Person & Family
Centered

Comprehensive
& Equitable

Continuous

Coordinated
& Integrated Accessible

Team Based&
Collaborative

High Value

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TheResult:
Seven Principles of Person Centered
& Team-based PrimaryCare
16
Person &Family
Centered
Comprehensive
&Equitable
Continuous
Coordinated
&Integrated
Accessible
Team Based&
Collaborative
HighValue
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READING 2.C.:

THE PHILOSOPHY OF MANAGED CARE – A FOCUS ON CONTINUOUS, COMPREHENSIVE, COORDINATED HEALTH CARE FOR INSURANCE PLAN ENROLLEES:

A. Kaiser Permanente’s philosophy of Managed Care, which focuses on the primacy of Primary Care and the necessity for highly coordinated efforts by insurers and providers, was a major inspiration for the types of Managed Health Insurance Plans implemented throughout the 1990s.

B. Essential to the Kaiser Permanente philosophy was the belief in the primacy of Primary Care within the system by which personal health care services were delivered in the United states. This belief, championed from the 1960’s and thereafter by policy makers such as Barbara Starfield, asserted that reasonably priced quality health care could only be delivered on a routine basis if patients worked closely and routinely with assigned Primary Care Physicians (individuals and/or teams).

C. At the heart of this belief in the centrality and primacy of Primary Care was a belief that Primary Care Practitioners were best equipped to ensure that patients and their families received Continuous, Comprehensive, and Coordinated patient care.

PRIMARY CARE PRACTITIONER’S ROLE: THE CORE OF THE 3 C’s MODEL
Continuity	Sees patient regularly over time for a large proportion of the patient’s health encounters (providing longitudinal rather than cross-sectional care).
Comprehensiveness	Cares for most of the patient’s health problems; capable of dealing with substantial comorbidity in those with multiple chronic problems.
Coordination	For the minority of problems that require services from other providers, arranges the referral, test, or procedure and collates the results.
Contact—first	Whenever possible, is willing to be the first provider the patient contacts for episodes of illness or health concerns

QUIZ

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– HSA 312

EMPLOYER-BASED GROUP HEALTH INSURANCE:

DUE 11:59 PM, TUESDAY MARCH 30, 2021 – YOU MAY SUBMIT EARLIER IF YOU WISH.

EVOLUTION OF HEALTH INSURANCE IN THE UNITED STATES FROM INDEMNITY/SERVICE PLANS TO MANAGED HEALTH INSURANCE

MANAGED HEALTH CARE

SPRING 2021 L. EITEL

NOTE:
THESE QUESTIONS ADDRESS KEY POINTS ABOUT U.S. HEALTH INSURANCE FROM 1929-2000. THIS COVERS MATERIAL FROM OUR SECOND CLASS THROUGH THE WEEK OF MARCH 15.

·
FROM THE BIRTH OF EMPLOYER-BASED GROUP HEALTH INSURANCE;

·
TO THE FULL DEVELOPMENT OF THAT INSURANCE IN INDEMNITY AND SERVICE PLANS;

·
TO THE CRISIS OF HEALTH CARE EXPENDITURES IN THE 1970’S AND 1980’S;

·
TO THE TRANSITION TO MANAGED CARE;

·
AND THE MANAGED CARE BACKLASH OF THE LATE 1990s.

QUESTION 1 – DIFFERENT APPROACHES TO/DEFINITIONS OF RISK IN GROUP HEALTH INSURANCE:

A.
BRIEFLY DESCRIBE THE TWO KEY APPROACHES TO AN RISK IN THE HISTORY OF GROUP HEALTH INSURANCE. READING A.

B.
WHICH APPROACH IS ASSOCIATED WITH INDEMNITY/INSURANCE PLANS, AND WHICH APPROACH IS ASSOCIATED WITH MANAGED HEALTH INSURANCE (HMOs, POS Plans, PPOs (Preferred Provider Organizations)?

READING A.

THIS SHOULD BE A VERY SHORT ANSWER.

QUESTION 2: DIFFERENT APPROACHES TO HEALTH INSURANCE FOR PERSONAL HEALTH CARE GOODS AND SERVICES –

INDEMNITY AND SERVICE HEALTH INSURANCE PLANS:

A.
USING ATTACHED READING 1, READING A.,PAGES 1 AND 2

., AND READING

·
PART 1:
Did the Indemnity and Service plans which dominated the U.S. private group health insurance market from the 1930’s through the 1980’s focus on
Financial Risk Management of health insurance
benefits (making sure health plan expenditures did not exceed health plan revenues from premiums),
OR
on
broader Medical Risk Management of the health status of health plan enrollees?
READING 1.
AND
READING A., PAGES 1 AND 2.

·
PART 2:

Deductibles and Coinsurance
:
READING B., PAGES 2-3
, OR READING 1., PAGES 2-3.

·
Define the difference between a Deductible and Co Insurance?

·
Are these two different forms of Out-of-Pocket Spending? YES or NO?

·
PART 3:
As a rule, prior to the 1970s, did Indemnity and Service health insurance plans
actively attempt to manage
physician and hospital decisions about the length of hospital stays, or the location and choice of medical treatments for patients?
READING 1.

B.
USING READING 1.,PAGES 3 AND 4 ATTACHED, ANSWER THE FOLLOWING:

· Between the 1930’s and the late 1960’s, how did the predominant Indemnity and Service Health Insurance plans
CHANGE
in terms of
Out-of-Pocket Expenditures,
and the
Coverage of Physician and Hospital Services?

QUESTION 3: TRANSITION TO MANAGED HEALTH INSURANCE IN THE UNITED STATES:

USING READING 1.C. ATTACHED, ANSWER THE FOLLOWING:

A. What was the
major reason
that employers, Blue Cross/Blue Shield plans, and commercial insurance companies moved private, employer – sponsored group health insurance from an
Indemnity/Service Plan Model
to a
Managed Care Model
between 1988 and 1996?

B. Briefly Indicate the
three (3) main ways
in which the
HMO Act of 1973
made it possible for Managed Health Insurance plans to spread beyond their regional strong holds on the East and West coasts.

QUESTION 4: MANAGED CARE – THE KAISER PERMANENTE MODEL

[NOTE:
A PHILOSOPHY OF
COMPREHENSIVE MEDICAL CARE MANAGEMENT
WAS AT THE HEART OF THE ORIGINAL CONCEPT OF MANAGED CARE AS IT WAS DEVELOPED AND IMPLEMENTED BY KAISER PERMANENTE IN CALIFORNIA. AT THE CENTER OF THE PHILOSOPHY WAS THE NOTION OF 
CONTINUOUS, COMPREHENSIVE, COORDINATED CARE
 FOR PLAN MEMBERS AND THEIR FAMILIES.

USING
READINGS 2., 2.A., 2.B. AND 2.C.
ATTACHED, ANSWER THE FOLLOWING:

·
PART A:
In the Kaiser Permanente Model of Managed Care:

· what is the relationship between the insurance plan and the provider network (especially physician groups and hospitals)?

· Is the relationship cooperative and positive, or adversarial, negative, and suspicious? –
READING 2.

PART B:
What is the Coordination function as performed by a Primary Care Physician or Primary Care Team, and why is it KEY to successful management of Patient Care?–
READINGS 2.A., 2.B., AND 2.C. (SLIDES 5, 9-12).

QUESTION 5: MANAGED CARE IN THE 1990s AND THE MANAGED CARE BACKLASH.

USING
READING 5 AND READING 6.
, ANSWER THE FOLLOWING:

·
PART A:
Briefly describe two (2) of the Managed Health management techniques used by the two predominant Managed Care Health Plans of the 1990s (HMOs, POS Plans) to influence and/or control provider and patient choices about the type, length and location of medical treatment.
READING 5

·
PART B:
Briefly describe two (2) positive accomplishments of Managed Health Insurance Plans in the 1990s.
READING 5

·
PART C:
Briefly describe one (1) key reason for Provider opposition to Managed Health Insurance as it was implemented through HMOs and Point of Service Plans.
READING 6

·
PART D:
Briefly describe one (1) key reason for Patient/Health Plan Enrollee opposition to Managed Health Insurance as it was implemented through HMOs and Point of Service Plans.
READING 6

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