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Johnny-Come-Lately HMOs Need Scrutiny

June 23, 1985

Commendations to Jonathan Peterson for his article "HMOs Scramble for Health Care Funds of Elderly" (June 16), in which he details some of the hazards, confusion and pitfalls experienced by Medicare recipients who were induced to become subscribers as a result of voluminous full page ads, direct mail and TV ads.

It should be noted that these "Johnny-come-lately" health maintenance organizations are not similar to such long-established HMOs as Kaiser Permanente. Kaiser is a not-for-profit organization and has its own hospitals and an extensive staff of salaried physicians (and specialists) who are also an integral part of its administration.

Although some of these new HMOs may have neighborhood clinics and a minimal staff of some full- and part-time physicians, most of them do not employ their own doctors; instead, they have contractrual agreements with private doctors and hospitals. They are for-profit companies that are administered and owned, not by doctors but by promoters, investors and entrepreneurs. Many are owned by corporate giants and are in the business of health care only because it has now become such a lucrative field for profits, thanks to the passage in 1982 of the Tax Equity and Fiscal Responsibility Act. This legislation provides that "for each Medicare recipient it enrolled, the HMO would receive from Medicare, monthly in advance, a payment equal to 95% of the average cost of caring for a Medicare beneficiary." Although the amount varies regionally, it approximates $2,000 annually.

Despite the additional services being offered at low or no cost, all is not gold that glitters. From the patient's point of view, the paramount concern should be for quality medical care.

In a letter to the New England Journal of Medicine of April 27, Dr. Lee A. Fisher says, "As one who has been intimately involved in the controversy surrounding the demonstration projects in Southern Florida, all I can say is--physician and patient beware. With billions of dollars at stake, the commercial barracuda are poised and ready to strike. The deliberate under-use of medical services to maximize profits is becoming as much a concern as its overuse. In this high stakes game, with profit as its sole motive, the quality of patient care can only suffer. Many HMOs in the area hire itinerant physicians (and make liberal use of physician assistants) to deliver episodic care to Medicare recipients with chronic illnesses requiring ongoing care."

Even Rita Ricardo-Campbell, a member of the President's Economic Advisory Board who strongly favors HMOs as an alternative to Medicare, admits in her current book, "The Economics and Politics of Medicine," that "the California experience indicates that the major problem in the use of HMOs is the inherent conflict between cost containment and quality maintenance." She adds: "The monetary incentive is for HMOs to skimp on the quantity of services, including the number of hours that they are available, an aspect of care easily judged by anyone."

If the Reagan Administration is successful in its promotion to get the elderly to switch to HMOs, it will lower the quality of medical care and be disastrous to the health of millions. It will also dissipate and weaken the structure and financial solvency of the entire Medicare program and eventually lead to its self destruction.


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