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Managers May Help Cure High Medical Costs

August 13, 1989|LINDA WILLIAMS | Times Staff Writer

On April 9, 1988 catastrophe struck at the Tustin home of Keith and Edwina Charde. They were preparing for bed when Keith felt faint. Two weeks later, he was in surgery to repair an aneurysm that could have killed him had the weakened artery in his brain ruptured. The surgery was a success, but 45-year-old Keith would be an invalid for months.

Among Edwina's first calls was to Pacificare, the Cypress-based health maintenance organization that provides medical care for employees at Edwina's company. Pacificare immediately assigned a case manager to plan Keith's care and rehabilitation. More than a year later, Keith has made progress, but he can't walk or talk and has very little other motor function. For Edwina, there have been periods of panic, frustration and anger, but she says she's grateful to the Pacificare case management system. Without the program, she says, "I think I would probably be in an institution by now."

The well-being of patients and their families is a major goal of the program, Pacificare officials say. But the company's motives aren't entirely altruistic. Cases such as Keith's cost insurers many thousands of dollars in claims. Case management is designed to ensure that one person has the broad overview of an individual patient's illness so that the care will be better managed. Through close monitoring of cases and finding the lowest-cost care alternatives, Pacificare has saved itself $2.5 million in payments during the past year for claims that might have been incurred in unsupervised cases, says Dr. James Moffat, medical director.

As health-care costs soar seemingly out of control, insurers and employers who pay most health-care bills are once again straining for measures to control costs. Aggressive management of high-cost illnesses is among the most promising strategies cited by experts for controlling costs in the 1990s.

Years of effort thus far have produced few successes, but controlling costs has taken on a new urgency as health care becomes an increasingly contentious and divisive social issue in the U.S. High costs have put the system out of the reach of many Americans and battles rage over who will pay the cost of access for others. Thousands of Communications Workers of America workers struck three regional telephone companies last Monday, with health-care benefits as a major issue.

In the '80s, employers have experienced double-digit increases in health-care costs almost annually. At the same time, workers are paying more as employers are trying to shift the costs.

Fed up with escalating costs, Southern California Edison over the years has taken complete control of health care for some 57,000 of its workers and their families, eliminating many of the middlemen in the health-care services system. The company health plan is self-insured and self-administered. It processes all claims in-house and pays those claims from a pool of funds that it has set aside for the purpose. It also provides workers with clinics and pharmacies and offers discounted premiums to workers who opt to lead healthier life styles.

"In internalizing, we wanted maximum accountability. I am the responsible party," says Dr. Jaque Sokoloff, medical director. The company's costs have increased over the years, he says. But the utility had expected to spend $187 million in 1992, and is now projecting only a $136-million cost as a result of the changes it has made.

Overall, U.S. health-care spending is expected to top $600 billion this year--or 12% of the U.S. gross national product, compared to 9.1% in 1981. Attempts to control costs have been akin to squeezing a balloon. Tightening in one area has often led to expansion in another. There have been major victories in restraining hospital costs, but higher outpatient costs have generally outstripped the savings. There is no consensus on why costs keep rising.

"There is a lot of finger pointing going on in a very complex system," says Clark Bell, editor of Modern Healthcare magazine.

Few people have a good understanding of the economics of health care, says Carol Cronin, vice president of the Washington Business Group on Health. "I'm not sure the normal economic principles apply to health care. You have people who supply the goods also controlling the demand."

Some blame the federal government for precipitating cost shifting. When the federal government limited reimbursements to Medicare and Medicaid patients in 1983, "immediately, hospitals began increasing costs to everyone else," says Russell Coile Jr., a San Francisco-based health-care consultant. Private insurers bore the brunt of the cost shifting, he adds. While such cost shifting has "had the most profound effect on cost," he says the actual cost of medicine has also gone up because of technology and labor shortages.

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