Medical Journals Criticize Health Care Financing System

JULY 21, 1997 VOLUME 5, NUMBER 3

Articles in two separate medical journals this week were critical of the effects of federal medical policy. Both criticized the reimbursement system for the giant federal Medicare program.

HMOs May Not Save Money For Medicare

Health Maintenance Organizations (HMOs) which sign up Medicare beneficiaries are paid 95% of the average cost of care per patient in the area they serve. Federal policy makers determined several years ago that this should save Medicare money, while permitting cost-cutting HMOs to make a profit. Now an article in the New England Journal of Medicine challenges that logic.

According to figures gathered by the article’s authors, Medicare HMOs primarily cater to patients who are not currently ill. In fact, the average use of inpatient medical services by HMO enrollees is about two-thirds that of traditional “fee-for-service” Medicare patients.

What is more striking, however, is what the new study says about HMO patients who become ill. In the three-year study period, those patients who left HMOs and returned to fee-for-service Medicare coverage incurred 180% of the inpatient medical services of similar patients who had never joined an HMO.

In other words, the study supports the common belief that well patients sign up for HMOs, then disenroll and return to fee-for-service when they become ill. But even that is not the end of the story.

During the study period, the authors also observed another phenomenon: after patients left HMOs during periods of illness, they often returned to the HMO. In fact, the point at which they re-enrolled in Medicare HMOs was typically just as their inpatient care returned to about the level of those patients who never left fee-for-service care.

What does this mean? The authors are hesitant to make the logical next step, at least until further studies are undertaken. But the conclusion seems obvious: Medicare HMOs, though they were meant to save Medicare money, probably actually cost the system extra money. If Medicare HMOs continue to receive payments based on the assumption that they will enroll a representative mix of healthy and ill patients, the total cost of Medicare will continue to rise. The Medicare-HMO Revolving Door–The Healthy Go In and the Sick Go Out, New England Journal of Medicine, July 17, 1997.

Medicare Reimbursement Discourages Palliative Care

In another critique of health care, the Journal of the American Medical Association addresses the need for better end-of-life care by physicians. According to the Institute of Medicine, too many dying patients suffer needless pain and distress.

According to the JAMA article, one cause of the problem is the way health care is financed. Insurance plans and Medicare, particularly, discourage high-quality end-of-life care, by emphasizing reimbursement for overuse of surgery and tests, while failing to compensate health care professionals for talking with and evaluating the needs of dying patients and their families.

Although HMOs could improve the level of counseling given to dying patients and families, the report also notes a problem with funding mechanisms for such organizations. Under current reimbursement rules, HMOs are penalized when caring for patients with serious chronic illness.

According to the JAMA article, several things could be done to alleviate the end-of-life problems. Doctors and other health care workers should be better trained to assess and manage pain. Health care teams should include palliative-care experts. Laws that cause doctors to avoid opioids to relieve pain should be changed, despite concerns that they may lead to addiction in dying patients or be diverted to drug abusers. Approaching Death: Improving Care at the End of Life, Journal of the American Medical Association, July 16, 1997.

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