Talking About HMOs

The Wall Street Journal
February 21, 2001

by Scott Hensley

Uwe Reinhardt, James Madison Professor of Political Economy at Princeton

"In the next recession, I think employers will make free choice more expensive to employees by adopting this defined-contribution approach."

WSJ: How do you think health care coverage will change then?

Dr. Reinhardt: "It will become a multitier system, by ability to pay. You would still have the uninsured as the bottom tier. The next-lower tier would be gatekeeper-model HMOs. There will be a primary-care gatekeeper and no free choice of specialists. There will be tight drug formularies. There will be generics whenever possible. And you may not
always get today's technology. You might, in fact, get yesterday's technology."

"I think Medicaid, for instance, will try to use that model as much as possible, which might not be bad - certainly better than the unmanaged fee-for-service Medicaid. No one ever proved that gatekeeper models are bad clinically. It is just simply annoying to us to have to get permission to go to an ear doctor when our ear aches. The low-wage workers with employer-paid insurance probably would have to opt for this low-cost model also."

"Eventually, the free-choice insurance models will cost more. But what you will be buying is not necessarily higher-quality care, just more choice. The middle and upper-middle class will be in HMOs with point of service, meaning patients can go outside the HMOs for care but pay substantially more out of pocket for freedom of choice or for PPOs -
which are loosely managed. And then, of course, there is emerging boutique medicine for the moneyed elite. Well-to-do people - of whom there are now quite a few - will probably keep forever the open-ended, fee-for-service, "Disneyland" health insurance policy most Americans had before the 1990s."

Comment by Dr. Don McCanne:

If we continue to passively accept the premise that the only realistic solutions to our health care system problems are to incrementally build on the current model dominated by health plans, then we can expect to realize Dr. Reinhardt's predictions. But why should we? We have the resources to provide high quality care for everyone. As long as everyone is provided access to all beneficial services, then there is no reason that the moneyed elite should be denied access to hospital penthouse suites or vanity cosmetic surgery if they want to pay for that independently. Employers will move further into defined contribution models which can only have the effect of impairing access
for lower income individuals due to lack of affordability of the out of pocket expenses that they will be forced to bear. Our health care delivery system is in fairly good shape, though sound policy decisions could improve it. Our system of funding and allocating our abundant resources is in critical condition. Incremental tinkering will only consume more funds, and perpetuate and expand highly flawed policy. It is indefensible that we leave off of the negotiating table the one reform that would correct most of these defects in funding and allocation. It is an ethical imperative that our national leadership
take a serious look at the model of a publicly administered, universal risk pool, and compare that model with our current one of incremental tinkering. We should demand no less.

Don McCanne