October 13, 1995

Health Maintenance Organizations:
Neither Evil Nor Panacea

by Peter Pratt, Ph.D., Vice President & Senior Consultant for Health Policy

Now that the O.J. Simpson trial has concluded, Americans will need a new controversy to occupy their voluminous free time. Facing 60 Minutes’ accusations of murder and neglect, HMOs have been cast into the breach. Sure, there is no football hero on which to focus our sights, but 60 Minutes (which follows pro football, O.J.’s earlier medium, on Sunday nights) has come down squarely against HMOs.

60 Minutes presented the HMO industry as a for-profit monolith, unconcerned about patient care. This is a vast oversimplification, evidence of the sorry state of what passes for debate on major public policy in America. The more that people talk about an issue, the more superficial their positions become. The opposite should take place. A prominent Michigan policy maker once said to me, "Managed care is bad, isn’t it?" Yes and no answers do not suffice in complex health policy issues.

The irony of this surge in bad publicity is that, in the Republican Congress and the Democratic White House, few doubt that HMOs are an integral part of addressing the insistently rising cost of health care. Last year the Republicans lambasted the Clinton Plan for its reliance on managed care to hold down costs; this year, Newt Gingrich is managed care’s champion. In fact, Washington’s determination to present managed care as a panacea, trumpeting its benefits without facing its liabilities, contributes as much to the absence of sound debate as 60 Minutes.

At the risk of stating the obvious, HMOs in general are not good or bad. They have gained momentum because of the pressure to cut costs, which has two potentially opposite effects: on the one hand, it can sometimes create financial incentives for doctors and other health care providers to deliver less care than is necessary for the well-being of a patient. On the other hand, cost-cutting can force groups of providers to rethink the way that they deliver health care, perhaps by focusing more on keeping people healthy, which most people agree is better than the old way of waiting for people to get sick and then treating them. Some care up front can prevent the need for much more care later on.

How can you tell if an HMO is more committed to the latter than the former? How can you tell now if your family doctor is good? The answer to both questions is the same: You can’t. Long-standing personal relationships, and the comfort they breed, count for much between a family and a doctor. But the truth is that most people have no other way of evaluating whether the care they receive is appropriate and of good quality.

Accountability is the key to the future of our health care system. If patients (now also known as consumers) and purchasers (the businesses that pay for most private insurance) have good information to make decisions about the health care providers they see, higher quality care will be rewarded, regardless of whether it is provided by an HMO or not. HMOs and providers that cut corners to keep down costs will lose ground to those who can deliver health care in which cost control and quality go hand in hand.