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What The Media Tell Americans About Free Enterprise

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January 1998


Protection for Patients or Providers?
Guest Editorial, by Michael F. Cannon

The growing antipathy toward managed care is the most under-reported health-care story of this Congress.

Trying to weed out unnecessary treatments, HMOs have employed spending constraints that can actually impose higher costs on patients. By now, everyone has heard the horror stories about how HMO rules and restrictions subjected patients to unnecessary suffering. Americans are right to rage.

Some members of Congress believe they have the cure for these problems. The Patient Access to Responsible Care Act (PARCA), sponsored by Georgia Republican Rep. Charlie Norwood (H.R. 1415) and New York Republican Sen. Al D’Amato (S. 644), has collected 211 co-sponsors and claims to offer protection to managed-care consumers.

But will PARCA really protect patients? Or is PARCA a shield to protect providers from the spending constraints the federal government has unwisely left to managed care?

The media should be prepared to pursue four avenues of inquiry that cut to the heart of PARCA.

n Who’s to blame for managed care’s excesses? America’s turn toward managed care is largely the result of federal tax and entitlement policy that has shifted the burden of paying for health care away from patients to employers or the government itself. In this environment, patients have little incentive to keep spending down themselves. Why should they make fewer trips to the doctor, as long as someone else is paying?

As a result, employers and the government must control spending, or find someone who can. Managed care is nothing more than the market’s response to government’s meddling.

n Is PARCA "patient protection" or just what the doctor ordered -- for himself? Managed care controls spending by second- guessing, haggling with, and even refusing to cover many providers. Providers have responded by passing nearly 1,000 state laws that require insurers to cover -- and require consumers to buy coverage for -- their services.

These powerful special interests include chiropractors and psychologists (coverage mandated in 41 states), dentists (34 states), and nurse midwives and podiatrists (30 states). Twelve of the most common such laws increase premiums by as much as 30 percent.

PARCA, on the other hand, would require all consumers to buy coverage for every type of provider licensed in their state. Moreover, PARCA would apply these mandates to self-funded employer plans that state mandates can’t touch. PARCA’s remaining 140 mandates read like a list of provider complaints against managed care.

The actuarial consulting firm Milliman & Robertson, Inc. estimates that just a few of PARCA’s mandates would increase premiums an average of 23 percent nationwide, while some managed care enrollees would see their premiums almost double. According to Congressional Budget Office data, that would make coverage unaffordable for an additional 4.6 million Americans, leaving them completely unprotected.

n Assuming government is partly to blame, how can Congress correct it and what would it look like? Employers cannot measure a subjective factor like quality as well as they measure price. Thus, HMOs compete for their business chiefly on price, not quality.

When an unsatisfied consumer leaves his company’s low-price, low-quality health plan to buy his own coverage, the federal tax code hits him with a huge tax penalty that effectively forces him to pay twice as much as his employer did for the same coverage. Eliminating this penalty would expand consumer choice, allow employees to walk away from company plans, and force HMOs to compete for the customers they once held captive.

n Follow the money. Support for PARCA is coming not from patients, but from providers, particularly alternative medicine providers locked out of managed-care networks. Forcing consumers to buy coverage for their services would be a huge cash cow for these special interests.

On the other side are health insurers (who fear losing business) and employers (who fear higher premiums). Neither group is particularly interested in expanding consumer choice -- they just don’t want to see their ox gored.

Managed care is not perfect. The only way to improve it is to allow consumer choice and competition to govern its operation. If PARCA is passed, it will rob consumers of even more control over their health care, and reporters will continue to see a steady stream of horror stories about managed care and a sharp increase in horror stories about the uninsured.

Michael F. Cannon is a health-care policy analyst at Citizens for a Sound Economy Foundation. His full report on PARCA can be seen at www.cse.org.


Rich Noyes


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