Managed care: will it be for everyone?

• Author: Birenbaum, Arnold

FIFTY MILLION Americans now belong to health maintenance organizations (HMOs), a result of employers and employees seeking to lower the cost of their health care. Many states are converting their Medicaid fee-for-service coverage of individuals in the community, and Medicare voucher payments will encourage millions more to join HMOs.

This emphasis on cost reduction could hurt people with disabilities. Without universal coverage mandates, HMOs and other managed care providers would have little incentive to enroll consumers who use additional services (e.g., medical specialists, speech or physical therapy) or require expensive equipment (e.g., wheelchairs and braces). To avoid this situation, health policy experts propose risk-adjusted payments to encourage HMOs to serve costly subscribers.

When healthy individuals are allowed to avoid HMOs through a combination of affluence, access to high-deductible policies, and medical savings accounts, risk adjustment will not make up for the losses of these potentially low-cost and therefore profitable enrollees. Universal coverage in the same plan or at least in the same general pool is the only way truly to offset risks.

The use of plans that offer comprehensive health care from an established panel of providers to a voluntarily enrolled population on a prepaid basis has been around since the 1930s. The HMO system combines the provision of health insurance with delivery of services under a single management. It took a Federal mandate to make them more widely available to the public. Ever since 1973, employers are required by Federal law to include an HMO as part of any menu of health care coverage. Starting with nonprofit plans such as Kaiser-Permanente on the West Coast and the Health Insurance Plan of Greater New York (HIP), many for-profit programs geared up in the 1980s. U.S. Health Care is one of the new aggressive companies in the field.

With these models available, the private insurance sector that once avoided controlling services has moved so far in the direction of managed care that it becomes increasingly more difficult to find a policy that does not contain some managed care components. In 1993 alone, more than 4,000,000 individuals enrolled in HMOs, with nonprofit enrollment still leading coverage through profit-making programs.

HMOs are attractive to employees because they limit the out-of-pocket expenses of subscribers in exchange for restricting choice of providers to those who are...