Politicians Delight in Killing Goose that Lays Golden Eggs

Published October 1, 2001

Most adults in the U.S. can remember when doomsayers announced health care costs were about to destroy our nation’s economy. Double-digit inflation in health-related expenditures would cripple local, state, and national budgets. Former Governor Richard Lamm of Colorado described health care as the Pac-man of his state budget, devouring enormous amounts of money and pushing other expenditures out.

At the same time, many employers had reached the point of no return. They were even considering dropping employee health insurance programs. Something had to happen.

That something was managed care. Over a 20-year period, managed care became the predominant form of health care insurance in the U.S. HMOs, PPOs, IPAs, and the like became well known. Managed care, in many forms, was firmly established. Health care services and health care insurance had been dramatically reformed.

Cost Spiral Slowed

But something else very important happened. The inexorable rise in health care costs had been dramatically slowed. Health care ceased to be the major driver in overall national inflation. Budgets seemed to breathe a sigh of relief, and money could be spent on priorities other than health care.

Somewhat lost in the euphoria was the reason behind the cost savings in health care: managed care. This is not a matter of opinion; it is a matter of fact. The “goose” of managed care had provided our nation with many cherished golden eggs.

The path to managed care was not, of course, paved only with golden eggs. Many health care providers saw their incomes fall. Hospitals merged to take advantage of economies of scale, often reducing workforces in the process. Patients no longer had direct access to specialists and expensive tests. Approvals had to be sought, physicians had less discretion, and concerns about denial of care surfaced.

Dangerous to Your Health?

“Red flags” were raised, as politicians and the press appeared to have exposed a downside to managed care. A cry went up to protect the people from the monster of managed care. The “Patients’ Bill Of Rights” movement was launched.

But before we go too far down that road, it is essential that we determine if managed care is, in fact, a threat to your health.

In the August 1998 issue of the Journal of Health Politics, Policy and Law, Emanuel and Goldman explained, “. . . there are limited and inconclusive empirical data on the occurrence, extent, and consequences of conflicts of interest by omission” (the perceived incentive within managed care organizations to provide less care than is appropriate). Further, they noted, “Other studies show minimal or no compromise of patients’ health.”

An article in the January/February 2000 issue of Health Affairs appeared to concur. Authors Harris, Ripperger, and Horn examined legislative mandates that limited the ability of managed care plans to use specific techniques to manage costs. The researchers concluded, “Ironically, these techniques have yet to be proven to be detrimental to health plan members on a widespread basis.”

My interpretation of these reports is that managed care provides appropriate care to patients, and sweeping negative allegations about the quality of care delivered are not justified.

There is another body of evidence that cannot be overlooked and may even be startling to those anxious to denigrate managed care. This evidence is found in the approval ratings managed care organizations receive from their patients.

The February 2001 issue of Managed Care Executive includes an article headlined, “HMOs Earn High Ratings from the Public.” The story offers evidence that managed care ratings are remaining quite positive.

In a survey of Arizona state employees, a managed care organization was rated highest of six available choices for health insurance. Eighty-seven percent of state employees using managed care provider Cigna for their health care reported satisfaction with the service they received, versus 83 percent for the provider ranked second.

Effective this month, Cigna has been named the sole health care provider for State of Arizona employees. State employees will have a choice of three Cigna options; all meet the definition of managed care.

Anecdotes Make Bad Policy

If the vast majority of patients are satisfied with their managed care plans, and if no evidence exists in the research literature to show such plans deliver inappropriate care to their patients, why the attack on managed care?

In short, it’s anecdotal evidence. Our elected officials are responding to isolated incidents–saddening, often angering incidents, but isolated nevertheless.

Before state and federal elected officials make the mistake of enacting bad public policy on the basis of anecdotal evidence, they ought to acquaint themselves with the surveys that document patient satisfaction with managed care, and the research literature that confirms the appropriateness of care delivered by managed care organizations.

Every highway accident does not lead to a recall of automobiles. Every drug side effect does not remove the drug from the market. And, thank goodness, the FDA does not approve new drugs on anecdotal evidence. We must concentrate on the incredible success of managed care. Let us not forget that more laws and regulations will lead to higher health costs for Americans . . . and every increase in health care costs results in more uninsured Americans.

The Right to Sue

Though patient appeal and grievance processes are clearly spelled out in managed care contracts, elected officials seem especially concerned that patients do not have the explicit right to sue their managed care organizations. Proposals abound to lower barriers in the way of lawsuits for punitive damages.

My fervent hope is that all parties in this national debate will remember that the financial impact of such lawsuits falls squarely on insured citizens themselves. Every lawsuit and award increases the premium we pay for insurance. I fear that when our policymakers think of lawsuits and punitive damages, they believe the money to pay for them comes from fairies, guardian angels, or the pockets of managers and stockholders.

I could support a proposal for federal court intervention, with a cap of $500,000 for punitive damages after all related direct costs incurred by the patient are paid. I believe a federal court venue is consistent with the federal government’s current involvement in health care. I also believe a half-million dollars is sufficient to deliver a message, yet will not severely impact the cost of insurance.


Rather than proposing “reforms” that can only increase the cost of health care, our elected officials should be seeking ways to encourage managed care to become more efficient and less costly.

There is much money to be saved in health care, to the benefit of all Americans. A General Motors official has said he believes 30 percent of all health care costs are simply waste. This is where government assistance is needed.

Research support and public statements of appreciation for the financial benefits created by managed care organizations should be the outcome of political discussions. The opinion of the vast majority of Americans enrolled in managed care should prevail in this debate.

I like my managed care. Please politicians, do not make it cost more!

Stuart A. Wesbury Jr., Ph.D. is professor emeritus in the School of Health Administration and Policy at Arizona State University’s College of Business. With Joseph L. Bast and Richard C. Rue, Wesbury is the coauthor of Why We Spend Too Much on Health Care (1993). His email address is [email protected].