Who Wins Witherisa Essays - Managed Care, Health Economics

Who Wins Witherisa David pham #63540197 Writing 39C Proposal Paper 3 June 1999 Who Wins With ERISA? The system of managed care began in the United States in the early 1900s, in an effort ?to provide coordinated health care in a cost-effective way?(Amer. Assoc. of Retired Persons). Until recently,? managed care has emerged from the shadows to become the dominant form of health insurance and delivery,? succeeding the older fee-for-service program (Zelman and Berenson 2). Today, about 160 million Americans are enrolled in some kind of managed care plan. Managed care ?has made health care more affordable andmore accessible for Americans. But sometimes cost cutting can lead to lower standards? (Clinton 1). Because managed care plans provide medical care to their members at a fixed rate, there is a substantial limit to the medical care each member can receive. Under this system of prepayment, managed care organizations (MCOs) can profit off every dollar of revenue that is not directly spent on patient care. This produces the problem of incentives, or temptations for MCOs not to provide sufficient medical care to their members, all too often resulting in tragedy (Fox, et al. 56). This problem explicitly impacts the estimated 125 million Americans who receive health insurance through MCOs that are provided by their employers. A federal law known as the Employment Retirement Income Security Act of 1974 (ERISA) governs these self-insured plans. Under the Employment Retirement Income Security Act, ERISA-regulated MCOs are not legally held accountable for their actions. Until Congress passes The Patients' Bill of Rights, MCOs will continually and wrongfully deny patients from quality care. Health costs have continually risen over the last decade. The average-income American family now spends an estimated $5,000 per year on health care alone, an amount that more than doubled from 1988-1996 (Maciejewski). In an effort to relieve working Americans from this burden, Congress devised a federal tax law that would enable employees to obtain tax benefits for health insurance through their employers. Today, the vast majority of insured Americans acquire their health insurance through the workplace. ERISA governs the employer-based health system to protect employees from the potential abuses from their health plans (Amer. Psych. Assc.). Although both the tax code and ERISA were concocted to help and protect employees, they play an indirect role in shaping the inefficiencies that envelop the employer-based system of health care. Subsequently, regulations imposed by managed care organizations (MCO) on physicians also contribute to the inefficiency. Under today's tax code, Americans can receive a discount on health insurance, granted that they attain it through an employer. The reason for this stems from a single provision of the Internal Revenue Code, ?which excludes employer premiums from the employee's taxable income? (Goodman). This means that health benefits provided by insurers are exempted from an individual's earnings, treating them as if they were expendable to the actual income. This tax alleviation ?can reduce the cost of health insurance by 30 percent or more for an average-income family? (Goodman). By calculation, ?an extra dollar of earnings can be used to buy a dollar's worth of health insurance as an alternative to 70 cents of take-home pay? (Goodman). In contrast, individuals who purchase their own health insurance receive no tax benefits; therefore, most employees choose to join their employer-based health plan coverage. Many employers want to ensure that their workers have good access to health care so that they are more likely to stay healthy. Despite having to provide health insurance for their employees, employers also have to worry about the competition in the market. Because of this added obstacle, ?employers will strive to push their employees into the least expensive insurance program in order to cut costs and remain competitive? (Gervais). Employers tend to favor managed care organizations because of their cost-cutting strategies. Doctor Robert P. Gervais, member and Board of Director of Physicians Who Care, explains MCOs' cost-cutting approach: managed care instruments promise to rein in medical costs by paying doctors, hospitals, and nurses more money to do less for patients?When fewer health care services are provided, health care costs should go down. It is clear that patients lose under a managed care system? (Gervais). Employees are also usually limited to the choice of one health plan?that which their employer chooses to provide (The Center for Patient Advocacy). This is unfair to employees because they cannot shop around to find a health plan that would best suit their needs. The whole medical system becomes inefficient. The tax code neglects that individual choice is ruled out in the employer-based health system. How could quality care be insured in the health care system if individual choice does not exist? Furthermore, the tax code fabricates health care as an invisible benefit, ?seemingly free to employees? because costs are directly deducted from