Communications Department

The Dangers of Managed Care

Jun 1, 2007 | Medical Ethics


“Managed care denies needed treatment, no doubt about it at all in my mind. And it happens all the time.”
–Neurologist Dr. Michael Schlitt, quoted in Investor’s Business Daily, 7/14/94

Managed care is “a cost-cutter’s invention that coerces doctors in certain types of health maintenance organizations to undertreat patients. … [P]hysicians are increasingly put at personal risk for the cost of treating their patients’ illnesses.”
–Dermatologist Dr. Harry M. Goldin in Los Angeles Times 7/11/94

Traditionally, health insurance has consisted of so-called “fee for service” plans that reimburse patients for the cost of treatment ordered by a doctor and agreed upon by the patient, as long as the doctor’s rates were considered “reasonable and customary” for the particular type of treatment provided. Under “managed care,” however, insurance companies either supervise what care doctors are allowed to give or bind them in contracts that create strong financial incentives to limit treatment.

How do “managed care” health plans supervise what care patients are allowed to receive? 

Some adopt “practice guidelines” (like those that would have been governmentally imposed under the Clinton plan) which specify when treatment may–and may not–be provided. Very common is “utilization review” under which a medical provider must first obtain pre-authorization from the insurance company before giving a patient many forms of treatment. Another method is to require that patients with any form of ailment first seek a “gatekeeper” primary care physician and only go to aspecialist if referred by the gatekeeper.

How do managed care plans create financial pressures to deny treatment?

Typically, managed care plans require that patients either go to doctors directly employed by the plan (as in a “staff model health maintenance organization”) or select from a limited number of “preferred providers” who operate their own offices but apply to be on the plan’s list. Through so-called “economic profiling,” plans periodically drop from their list of preferred providers any doctors who significantly exceed an average targeted cost per patient. Some plans give financial bonuses to physicians who manage to care for patients at less than the average cost. Writes Dr. Goldin, “A conflict of interest is established between the physician’s role as the patient’s advocate and the physician’s drive to make a profit.”

Categories: Medical Ethics