HMO MADE IN USA

A journey to the land of health care organizations, coordinated by the CNAMTS «International Relations» Committee, chaired by Patrick NEGARET, director of the Le Mans CPAM. A well-timed journey, since France is currently facing many questions on the subject of the future of «channels and networks», or «filières and réseaux» as they are called in France. Were we not under the impression that «health care organizations» meant « English doctoring », which struck horror in French hearts and conjured up images of rationed health care ? Well the answer is that this is not the case, and the basic model of the health sector is the « HMO » (health maintenance organization) which is found in the country which champions a free-market economy.

However, in the USA, where one incongruity more or less matters little, compared to the American-style HMO, the «French referral doctor», or gatekeeper, object of the wrath of the defenders of the ultra-medical free market, is an indecently timid step.

This study mission was quite original in that it benefited from a thorough overview of the entire system. We visited a representative sample of the various types of HMO, we met « traditional » insurers, we met buyers (the employers), «evaluators», «referencers», and even «cost reducers». We now have a fairly complete picture of the system : everything that the French nationalized health care system has never even dared dream of doing - they are doing.

A brief background : In the United States, any reasonably large employer pays a health insurance contribution for their employees. This seems more to relate to custom than to a law, and given the tense market climate in terms of hiring, such insurance benefits represent an indirect wage element which helps attract the sought-after workers.

Some years ago now, employers became alarmed at the extravagant rate at which the cost of this insurance increased - France is not the only country which sets inflation records in the health care field - this is decidedly an international phenomenon !

It is thus decided to tackle the problem forthwith, and to «manage the health care system» American style, leading to «managed care», concretely embodied by the HMO. In this system, employers buy health coverage for their employees from an HMO at competitive prices, for the care chain is managed, organized and assessed by management professionals. The system is restructured, using means whose efficiency is well-known to all: selective accreditation, gate keeper (subscription with a general practitioner, or a group of health care professionals), profit-related incentives for the doctors, direct purchasing of referenced or generic medicines , and pre-consulting screening by nurses.

At first, the acknowledged objective was to reduce costs - and the results have clearly met the expectations : as compared to traditional insurance combined with independent health care professionals paid per visit, the cost of employer contributions has drastically decreased and is 2.5 to 3 times less expensive.

This operation of restructuring and reorganizing the health care system is working, and resulting, of course, in massive savings. Obviously, health care professionals are screaming against «rationing of care». One of the candidates campaigning for governor of California stated loud and clear during our stay that health care should be decided «by doctors, and not by accountants».

And yet, subsequently, and coming as a pleasant surprise, progressive, enlightened employers have realized that financial squandering was actually synonymous with poor care quality. Let demagogue politicians and the obliging media say what they will, we can be businesslike all the while improving the quality of health care - an ideal new deal !

New companies immediately appeared on the scene, focusing on quality care and cost reduction. The American system is efficient and pragmatic: no soul-searching, ultra-specialized firms concentrate on evaluation of quality, others establish the references for proper procedures, others specialize in cost reduction, and these competing elements sell their results to the HMO and to the employers.

The second step was for managed care technicians to undertake a highly delicate transfer phase: transform the waste in the care system and the high income levels of the health professionals into profits to the benefit of the HMO and of the employers’ employee health care costs.

HMOs are not yet the general rule. Only an enlightened vanguard of employers seems to be aware that, in order to reduce costs, it is more effective to provide quality care than to simply ration care. The firms which evaluate practices and reduce costs are taking each other over and attempting to resist outside pressures. Doctors are reacting by creating their own HMO. If they do not immediately go bankrupt, they add their specific care-giving skills to the market. Lastly, far from representing a monolithic system, this system offers several facets: there are industrial HMO, there are human-scale not-for-profit HMO, even public HMO responsible for providing care to those eligible for Medicaid and Medicare. All kinds of examples exist, stories abound, the concept is flexible enough to adapt to all types of contexts, why not to the French context ?

The bottom line is that the system works and people are better cared for and at less expense than before. Compared to France, the system is 10 to 20 years ahead of the times, in terms of experience, techniques, savoir-faire and particularly ... change in attitude. Public attitude is definitely the area where the most work needs to be done in France.

It must be emphasized that HMO as such are simply a technique for organizing and evaluating the care system. Culturally, they are neutral, and do not influence ethics. The insurer, for example, can be public, private, for profit or not-for-profit. The sole real issue is to know which of these players have the most maneuverability to impose such restructuring on the health care professionals.

Kaiser Permanente International :
An industrial-scale, direct-managed care proposal

The mood is immediately conveyed on the very first visit. KAISER PERMANENTE, 500,000 members in California, 9.5 million members in the other states where Kaiser is available, prosperous-looking skyscraper, comfortable meeting room. The European agent was present in the event that one of the directors of the French national health care system had an irresistible urge to buy ready-made expertise on the market. It appears that the agent has contacts in France, though her information is a trade secret.

The Kaiser organization has a dual purpose: a management structure works in conjunction with a care structure. This is «direct management»: physicians are salaried doctors, owner hospitals. This huge company has also just swallowed up some smaller competitors that could cause some digestive problems. High fixed costs, spate of unforeseen clientele during the year (forcing last-minute negotiations with sub-contractors), very heavy management structure. KAISER showed a deficit for the last fiscal year and has reacted by seeking to replace its direct-managed establishments with a sub-contracting system. Kaiser is highly professional, so much so that we understood that the co-payment (patient’s contribution toward medical costs) («ticket modérateur» in French) contributes nothing at all, and is really only there to reassure the employers. It is indeed better not to discourage first level visits, which avoid much higher costs later on. Moreover, prevention is practiced at the industrial scale: preventing illness means avoiding expenses.

Second visit : The industrial aspect gives way to a more artisan feeling. Redwood is a more modestly-sized organization (100,000 members), founded by doctors reacting to KAISER’s imperialism. It is a rural organization, not-for-profit, which sub-contracts to hospitals and to teams of independents paid from the members’ fees. Redwood states that it emphasizes quality (it has received a good grade from the cost evaluators). It swears by the gatekeeper in order to make people responsible for their behavior. It avoids firing doctors who cost them too much - when this is the case, a «senior» person takes them by the hand and explains how to prescribe better.

Redwood is aware that to grow any further requires becoming a for-profit organization, for the financial base is on a whole other scale.

At the outset CIGNA was a traditional insurer - prosperous building, slick meeting room, very pro people. CIGN offers various types of coverage: from classic insurance associated with payment per act, to strict HMO with obligatory passage through the gatekeeper, all the possible options with varying degrees of independence are available, and are to the amount of payment. In this marvelously consistent world, if the client demands total freedom, like in France - the freedom to see who you want when you want, for « French-style » insurance, it’s 2.5 times more expensive than for an HMO.

CIGNA has made quite a noteworthy effort towards rationality in the distribution of medicine: lists of generic medicines, sent by mail with financial incentives, suppliers’ agreements, right to substitute pharmacists.

To be more precise, these are public buyers, such as here the State of Oregon, which uses HMO and which increases its participation in the payments so as to extend the health coverage for the underprivileged covered by Medicaid. The order giver is a public body, however to act in the social domain, the state uses private service providers, health care sales specialists - it’s a lot less expensive than traditional insurance. Moreover, the very first HMO seem to have the reputation of being the poor man’s doctoring. Where in France could one organize a HMO for those eligible for departmental medical aid ?

Our team visited three companies specialized in «cost reduction». In fact, the first FACCT, introduced itself as a company which assesses the quality of HMO care. However, once you know that quality reduces cost, you understand that the persons served by FACCT also buy its products. The technique relies on interviews with the insured party, and also on follow-up of the pathologies based on representative sampling. The purpose here is to go beyond the stage of «perceived quality», which is highly deceptive in terms of health care, to truly evaluate the «received quality», which requires a minimum level of medical expertise, which the insured do not have. French physicians who have been questioned and whose justification is their patients’ satisfaction have a long road to travel. The results are offered to the care buyers, and must be published in documents written for the general public, for some employers offer their employees the choice between several HMO.

The second firm, Millimar and Robertson publish and sell guidelines designed to limit costs, in particular in terms of length of hospital stay. The method consists of eliminating all useless time, all wait times. This is a procedure guide which must be implemented by a case manager who manages operations and optimizes down times and transfers. (A case manager is a nurse responsible for managing all the different steps in a patient’s hospitalization). The idea is that the structure must be adapted to the care, and that the structure does not have to a costly one such as the hospital, reserved for heavy technical acts. An operation, even a big one, can thus be reduced to 5 days of hospitalization, with follow-up occurring at home or in a convalescent home. Regardless, release from the hospital is always decided by a doctor.

The third firm visited, « CARE WISE » operates from the principle that the high rate of self-medication must be guided, in order to transform a public health calamity into a virtuous act which avoids unnecessary visits to the doctor. In France, we prefer to avoid the problem by pretending not to see it, worse yet we moralize, preaching about «irresponsible behavior». In the USA, they get down to work: self-medication guides, information sent to members on how to better evaluate their own diagnoses, for in the USA they have decided to transmit at least a minimal level of medical knowledge. These documents are sold to employers and to HMO for their employees and members. Furthermore, a «call center» helps prevent unnecessary visits, much like the «15» in France, but using nurses who regulate the calls, with the help of a few doctors. Specialized software helps the listeners respond to the callers. The call center offers services in over one hundred languages. There is one in South Africa, and another planned in Spanish. This makes it easier to understand why AXA has planned a call center in its organization. CARE WISE offers to reimburse its clients if it does not make them the promised savings: $3.6 for every dollar invested.

CARE WISE is in the process of being taken over by « PHY COR », the biggest HMO operator made up of doctors in the USA. PHY COR wants to turn the call center into the gate keeper. Physicians who create their own « telephone referral doctor». We have heard and seen absolutely everything in the USA ! MG France’s proposals suddenly seem quite moderate.

A French manager is surprised to see for-profit firms sell guides to good conduct, or even evaluate them. For example, the board of directors for FACCT is made up of employers, and some of these company managers appear to have a vested interest in the company.

Some of us were quite shocked to see that the government provides no guarantee to those involved, who act as both judge and jury, or who have financial incentives.

To be perfectly honest, we must point out that on FACCT’s board of directors there are also consumers’ associations and representatives of retired persons. Some of these firms have also informed us that they have had to resist pressure from those with a stake in the care system.

After all is said and done, the overall impression that we have is that all the pressures from these groups whose interests overlap and conflict actually cancel each other out, leaving the evaluators with a great deal of latitude. After all, the bosses have no objective reason to try to influence companies which are going to show them which HMO proposes the very best price/quality ratio for their employees.

What can be said about the situation in France ? We are totally powerless in the face of costly, and sometimes even dangerous medical abuse. We must not overlook the report from the national health consultant on «medical delinquency» which remains unpunished to this day. As for the national government, it has undergone such pressure from manufacturers and health professionals that it has taken years, for example, for hip prostheses to be registered on the TIPS (Inter-ministerial rates for health services). Patrick NEGARET, who has been in charge of this issue, has barely avoided being accused by the press and the courts on the subject - the height of irony !

Which is better ? Private, effective and efficient controllers who end up escaping from all the pressures - which are so manifold and so dispersed that they actually cancel each other out ? Or public service which can only barely resist the powerful stream of influences all brought to bear on politicians ?

Pressure groups against the government, or lobbies against lobbies ? The desperate public service agents are beginning to wonder .....

No actuarial study has been done in France, so who knows the average cost of a health insurance payment ?

In France, identical payment rates based on ceiling-free wages create solidarity between generations, active workers and the ill. Moreover, these rates ensure redistribution of income among rich and poor, among the payers and the eligible parties who are insured free of charge or almost free of charge (children, spouses who do not work, retired...). The introduction of the CSG, which is partially deductible, does not make it any easier to understand the system. ELAN SOCIAL will be publishing a series on this subject in the near future.

In the meantime, as a highly simplified example, we can state that the «personal insurance» payment which is paid (when indeed it is paid !) by the managers of the so-called «free» departmental aid is close to that paid by an insured person, around 12,000 francs per year. A minimum wage worker, between the so-called employer’s share and the alleged worker’s share, pays approximately the same sum, which is approximately 1000 francs per month. An employee at 10,000 francs a month pays more than 2000 francs monthly. An executive paid 25,000 francs per month net , pays more than 20% of this amount, which is less than 5000 francs per month, more in actual matter of fact, but one has to refine the CSG calculation more carefully in order to know the exact amount. To this must also be added the supplementary payments, part of which can be paid by the employer or workers’ council, plus of course all the VAT which applies to health services (medicine, laboratory work, etc...).

In the United States, average payments for the services of an HMO were calculated at approximately $150 per month, which is, for an exchange rate of one dollar at 6 francs, 900 francs per month, less than the amount paid by a French minimum wage worker. However, if you are talking about an entire family, this amount comes to $400 to $450, $450 for Medicaid (the elderly), which is 2700 francs per month.

These amounts represent the average contribution for which the HMO invoices the employer. The employer can pass on a varying degree of this cost to his employees. For example, the employer’s share can be higher for employees with a family (up to 50% of the payment). The elderly population’s payments are paid for by MEDICARE.

Assuming that the HMO cost is base 100, the POS payment (possible, but limited, direct access to a specialist): 120. PPO (direct access to a doctor): 180. Indemnity plan (traditional insurance of payment per act): 250. Likewise, the reimbursements are modulated (100% with no deductible in HMO), (80% plus deductible in indemnity plan).

PRECONCEIVED IDEAS THAT HAVE TO GO

HMOs are a failure,
the United States has the world’s highest cost of health care

Indeed, payments in terms of GDP are effectively the highest in the world. However, the HMO do provide the answer to the increased cost of the health care system. The amount of payments invoiced to the employers by the insurers is 2.5 to 3 times less expensive for those dealing with HMO than for those who remain with a traditional indemnity plan linked to payment per act. Moreover, HMO are making a profit. Is it even feasible to imagine that health insurance charges could go down in France and that national health care could turn its deficit into a surplus ?

HMO have only existed for a short time in the USA. If they were to spread, the cost of the care system should drastically decrease.

The facts behind the figures

«The seemingly inescapable increase in prices prevalent in the ‘80’s seems to be halted. The analysts who published their findings in the last issue of Health Affairs credit managed care, which currently enrolls 60% of the American people, for stemming price rises.»

In 1996, costs reached 1,035 trillion dollars. «This figure is a 4.4% increase over 1995. Once inflation is accounted for, the rise is only 1.9%, as compared to 2.2% observed in 1995, 3.3 % in 1994, or the 7% level reached in the 1986-1991 period ! One other sign of the times, the health expenses’ share in the GDP has remained at 13.9% for 3 years, whereas in the late ‘80’s it increased each year by 0.6%».

Structure: «The hospital’s share has been slowly but surely eroding since 1990. Today it comes to 34.6% of final costs». Doctors’ fees and salaries approach 20%, medicine has increased by 9.2%, and home care has risen by 5.3%.

(Excerpted from the journal « FILIERES et RESEAUX », dated 13 February 1998).

HMOs ration care

Given the squandering which takes place in France, there is a great deal of room for improvement before even beginnng to talk about rationing care. What is truly rationed is the income of the health professionals (physicians’ incomes have decreased by 5% in 3 years). HMOs convert waste and unwarranted income into profits. Justice reigns in this strictly free-market economy !

Today, we have all come to understand that quality is the very best guarantee of cost control. Instead of rationing, evaluate - it’s more proper and it makes money. In France, such a thing would be called « maîtrise medicalisée », or medicalized control.

The poor are excluded from HMO

There are more nuances than one may think in the American system. Medicare and Medicaid take care of the underprivileged and the elderly. The big companies pay for their employees. Between the two, there is a «gap», and, like in France, it contains those who are not rich enough to have health insurance and those who are not poor enough to be eligible for government services. However, among those who are uninsured in the United States there is also an important coterie of individuals who refuse insurance coverage in the name of personal freedom. We do not know who pays for it the day they do need major care - do they just die or does the taxpayer foot the bill ?

In this case, HMOs are «neutral». They are simply a tool for managed care, for sale to public insurers or employers alike, offering organized quality care at the lowest price. In fact, HMO performances could enable public bodies to actually improve the insurance coverage that they offer, as we have seen in Oregon.

Poor risks are left out of HMO

Once again, this aspect deserves to be handled with greater circumspection, particularly since this is the most sensitive point, the one which puts solidarity into play or not, between the ill and the well, between the payers and the eligible parties.

But here, once again, HMO is again a technique, a management tool: when an employer contacts an insurance company, the insurer conducts an actuarial study based on the wage-earners’ profile - age, family situation, etc... An average cost or payment is then proposed, varying in cost depending on whether the client accepts the HMO restrictions or requests total freedom in their insurance coverage - like in France.

However, the amount paid by all the workers in the company will be identical, whatever their health or family context. The workers with a family will pay a higher flat rate but less than the per capita rate, with the ceiling set at 3 children (the following are free of charge). The system is identical in Switzerland. Therefore it is the employer, and not the insurer, who «evens out» payment and, by allocating the employer’s share and the worker’s share, ensures solidarity among the individuals. This of course means that such solidarity is restricted to within the company itself. This could lead to think that a mining company with older personnel is going to have much more expensive average payments than a company of young computer technicians, unless interprofessional and demographic compensations are put into play, as they are in France. Nevertheless, partial solidarity in the face of risk does exist in the United States, but HMO techniques themselves are not responsible for such solidarity.

THE HMO SYSTEM IS AN ULTRA-MODERN SYSTEM
AND FRANCE IS BEHIND THE TIMES

In terms of the concept, and from a strictly technical point of view, France is not behind at all. The French system of «filières» (channels) and «réseaux» (networks) are actually purely and simply HMO organizations.

In France, all the techniques for cost reduction, referencing of medical acts, assessment of the quality of care and others are currently known, in the process of being prepared or even implemented. France could even take the lead with the coding of medical acts, which the Americans do not do, since they evaluate based on interview and based on representative sampling.

However, the Americans do use evaluation and reference techniques in a systematized and methodical way, using specialized competing firms. They do not necessarily know any more than we do in France, they are not necessarily ahead of France, but they are infinitely more proficient in using the same means in a much more effective manner. Clearly, the health professionals who work in HMOs are computerized, and do not have to «be paid to do the insurer’s job». Life on the American side of the Atlantic is so much more «normal». France is however, quite far behind in terms of temperament and perspective - in a word - attitude. The disproportional power wielded by the medical unions perpetuates the lethal stagnation of a profession which has not yet grasped the fact it will not eternally profit from a protected, reimbursed market. But how can we ask these unions, by their very nature designed to defend the corporate interests, to evaluate, discipline, computerize and provide official accreditation ?

A POST CARD FROM CALIFORNIA

CALIFORNIA WINE : «Techno» wines

We have tasted the California wines. They are quite pleasant, American, technological wines. There is no tradition of «terroir» in California, which is only natural given that the wine-making tradition is quite recent. In California they make varietal wines, and sell Merlot or Cabernet. This fashion for varietal wines has been unleashed in France, where it is a real disaster. A varietal wine is one third of a wine, for wine is normally produced from three indissociable elements: one or several varieties of grape, the terroir, and the vinification technique. Wine, in other words, is the combination of the plant, the soil, and the hand of man.

Thousands of years of empirical research and trial and error were required to discover that Merlot blended with other varieties would work splendidly in Bordeaux, that the Pinot grape and it alone would flourish in the soils in Burgundy, and that a blend of Syrah, Mourvèdre and Grenache, and others still, were absolutely indispensable to Côtes du Rhône, but that Syrah on its own, and only Syrah, could make a Côte Rôtie. The only French exception is the Alsace region, which names its wines after the variety. Yet there too, and elsewhere, it has taken millenniums to discover just how to vinify vin jaune, vin de paille, or champagne.

When you drink a « varietal » wine, for example a Merlot planted in Languedoc and vinified any which way, you are drinking a mercenary wine. It is a demonstration of a sorry lack of wine-related culture, sheep-like following of a fashion.

However California, which has not had the good fortune of enjoying thousands of years of viticultural tradition, has no other choice than to apply all its science to the technique of making wine. And it has made enormous progress. Extremely well vinified wines are very pleasant to drink. But they are lacking the alliance of terroir and varieties that only long, deeply-grounded tradition can bring. Lacking roots, the wines are good but somewhat soulless - they are techno wines.