As one of its last acts before adjourning nearly two weeks ago, the General Assembly passed major legislation that preserves important choices for health care consumers in the rapidly changing world of health maintenance organizations and managed care.
The bill does two things that HMOs hate, and both of them are good for consumers and for the physicians who care for them.
First, the bill makes HMOs in Maryland provide some coverage and payment for consumers who seek care outside their HMO's closed system of providers. Second, the bill brings into the public light pernicious HMO payment practices that pressure HMO-contracted physicians to undertreat their patients. Both elements of this bill are important consumer protections, and the General Assembly should be applauded.
The legislation was vehemently opposed by the HMO industry. Why is the HMO industry so upset? With these small steps, the legislature is exposing some of the warts and flaws of managed care, and the HMO industry doesn't like having its weaknesses displayed for the consuming public to see and understand.
Both of the bill's major components -- preserving patients' rights to choose a doctor and protecting physicians from untenable conflicts of interest -- foster ideals that are a fundamental part of our culture and markets: freedom of choice and the obligation of licensed professionals to make treatment decisions based on what is best for the patient, without fear of financial retribution.
The bill requires all managed care plans in Maryland to offer a "point-of-service" option. Simply put, this allows a consumer to see the physician of his or her choice, regardless of whether that physician is a contracted member of an HMO's roster of physicians. In exchange for being able to choose a doctor, consumers will shoulder a greater portion of the costs for the doctor's services. So, instead of paying $5 or $10 for a physician visit, the consumer likely will have to satisfy an annual deductible and pay a greater portion of the doctor's fees. The portion that the HMO pays will be determined by the HMO and in many cases will be calculated based on the HMO's payments to contracted physicians for a similar service.
I belong to an HMO with this option, and I pay a $300 annual deductible plus 25 percent of a non-HMO physician's charges to see the provider of my choice. My employer offers only one health insurance plan, so even though I cannot choose between plans, I can at least choose among physicians. The additional costs are a stiff price to pay and not every consumer would choose to do it. But it is important to have the choice because it allows me to see physicians whom I know and trust rather than see someone selected by the HMO.
Point-of-service options are not new, and the HMO industry's complaints about them are disingenuous nonsense. According to the Group Health Association of America -- a national trade association of HMOs -- point-of-service options are one of the most important trends in the marketplace. Nearly 60 percent of all HMOs offer this option. As recently as 1991, only 20 percent of plans offered this option. Clearly, there is a market demand for point-of-service options. Consumers understand that they stand to lose access to trusted physicians in many HMOs and have expressed their unwillingness to do so. All the General Assembly has done is to codify an important market trend and to tell Maryland HMOs that they must compete on a level playing field, one that is consistent with consumers' demands and expectations.
There is no evidence that the point-of-service option will be the death of the HMO industry or its alleged ability to constrain costs. In fact, the industry right now is fairly crowing about new data showing that health care costs in HMOs are slowing dramatically nationwide. It is unlikely that this could have occurred while point-of-service options were spreading like wildfire if the point-of-service options were so costly.
In fact, in the plan I belong to, the health insurance premium has been stable for more than two years. Further, it is far too early to claim that HMOs are the solution to the problem of rising health care costs. There is little credible evidence to show that HMOs can continue their success over the long term, and the data we see now might be only a rest period before costs rise again. We also do not know the impact of HMOs' penurious payments on the quality of the care that is provided to consumers enrolled in HMOs.
HMO "report cards" that purport to show how successful HMOs have become do not evaluate real clinical outcomes but report softer measures of consumer satisfaction. Until HMOs can evaluate patients' outcomes over the long term, their claims of success must be viewed skeptically.
The other part of the bill makes it illegal for HMOs to withhold any portion of its payment to a contracted physician. In other words, HMOs can no longer use unfair financial leverage to coerce physicians' treatment decisions. And that is exactly what withholding payment does. Most consumers probably do not even know that this is one of the ways HMOs pay doctors and thereby control the way they practice medicine. The practice of withholding part of the physician's income until year's end makes doctors vulnerable to losing money if their treatment choices are too costly in the eyes of the HMO.
This might be necessary in cases where physicians ignore standards of medical practice in their communities and continually order too many tests, for example, or hospitalize patients unnecessarily. But the practice of withholding money is fundamentally unfair to physicians who treat older or sicker patients.
The HMO's system of withholding money also does not take into account the effectiveness of the physician's care for his or her patients. So, a physician who is average in how well he or she treats patients but who meets the plan's cost goals will be rewarded. But one whose patient population requires more intensive attention and who achieves above-average results might very well be punished for costing too much.
Withholding income should be illegal. It is a cost-driven tool that largely ignores patient outcomes because most HMOs cannot measure them in a sophisticated way. If HMOs want to change physician behavior, they should do it through professional education, consensus-building with physicians and hospitals and consumers, and an outcomes-based approach to physician payment.
We clearly cannot return to a fee-for-service health care system that rewards providing too much care, but we also cannot blindly accept all the financial concoctions foisted on us by the HMO industry. At least not until we study their potential consequences and ensure that they meet our community's needs.
There is a certain irony in the HMOs' opposition to this bill. We live in a time when Americans and millions worldwide are rushing to expand markets and empower consumers by giving them abundant choices. Whether you want to buy a car or get information on the Internet, you have more choices than ever. Americans believe in having a wide diversity of choices in commercial markets and of buying whatever they think best meets their needs.
It is truly strange, therefore, that many of the same advocates of free markets -- Wall Street investment bankers who help fund HMOs and the multi-million dollar executives who run them -- are so anxious to take the power of choice from consumers. It is sheer folly for executives at for-profit HMOs, who have no legal, ethical or moral obligation to take care of patients, to complain that the physicians are only trying to preserve their incomes. After all, it is the physicians who care for patients, accept the risks and, in most cases, make a fraction of what many HMO chiefs make.
The HMO industry is so upset about the General Assembly's bill that it is threatening to sue, claiming that the legislation violates the 1973 federal law that helped encourage the growth of HMOs. This bill does nothing of the kind, and neither the governor nor the attorney general should be daunted by this threat.
The federal HMO law keeps states from blocking the development of HMOs. The federal law does not prevent states from taking reasonable regulatory steps to correct market dysfunctions and to provide guidelines for the way HMOs operate. In this case, the General Assembly acted with conviction and foresight to protect health care consumers and their physicians. The governor should sign this legislation.
Vikram Khanna, former director of the Health Education and Advocacy Unit of the state attorney general's office, writes from Columbia.