Consumer-driven health plans could mean end of capitation

Although employers aren't rushing yet to embrace defined-contribution health care, change is on the way and it will affect physician practices.

By Julie A. Jacob, amednews staff. Aug. 13, 2001. - Correction

Managed Care: What's Next?"
With the managed care system drawing complaints from all quarters, doctors, patients, payers and even insurers themselves found themselves looking for alternatives to a concept that hadn't met its promise of improving care while reducing costs. This 2000-02 occasional series highlighted what physicians and others were doing to come up with a way to improve the system -- or replace it with something else.

Managed care in its current form is nearing the end of its life cycle, and whatever form of health insurance takes its place will give consumers much more control and choice over their health care benefits.

That was the consensus of speakers at a defined-contributions conference sponsored by Global Business Research, held July 12-13 in Chicago.

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For physicians, a shift to greater patient choice and control over their health plans means that risk-bearing independent practice associations and physician-hospital organizations formed solely in response to the rise of capitated managed care will likely dissolve, said David Gibson, MD, president of Pacific Development Group, a corporate consulting firm in Sacramento, Calif.

The speakers agreed that it's not exactly clear what form a defined-contribution system -- in which employers give employees more choice and control of their health care, but set employer contributions at a fixed dollar amount and expect employees to pay premium costs above that amount -- will take. However, it's clear that capitated managed care with gatekeeper physicians is fading away, said Dr. Gibson.

As capitation dwindles as a form of reimbursement, more physicians will go back to practicing in solo or small-group practices, he predicted.

However, the transition from capitation-based managed care to a more patient-driven, fee-for-service form of health care won't be easy for medical practices that have become accustomed to the steady flow of income from capitated contracts, said Dr. Gibson.

"If your practice now holds capitated contracts, you will experience financial distress during the transition from managed care," said Dr. Gibson.

Other presenters at the conference discussed the employer and community views of defined-contribution health care.

Some sort of consumer-driven, defined-contribution approach is coming, the speakers said, but it likely will be a modified version of the current employer-sponsored health benefits system, not a radical switch to a system in which employers simply give employees money to go out and buy health insurance on their own.

Health care consultant Susan Kunreuther, a former director of health care strategy for Honeywell Inc., discussed how employers can empower their employees to become more savvy consumers by giving employees the information they need to make thoughtful decisions about their health care.

"Employees need in-depth, accurate information," said Kunreuther. 'The demand for data is growing."

For example, Honeywell started a program last year in which employees can call a consumer medical information service, staffed by physicians and nurses, to get more information about treatments for their condition or illness. Honeywell uses a service called Consumers Medical Resources, based in Duxbury, Mass., and affiliated with Harvard Medical School in Boston. (See correction) In one instance, said Kunreuther, the service provided information to a young woman with cancer about chemotherapy drugs that would not cause infertility.

For every dollar that Honeywell spends on the service, she said, it's estimated that it saves $1.81 in unnecessary or inappropriate medical care.

Nancy Kennedy, executive director of the Northwest Georgia Healthcare Partnership in Dalton, Ga., discussed the results of the organization's employee and employer focus groups on defined-contribution health benefits.

The partnership is an organization made up of employers, doctors, hospitals and community leaders, she said, that is working to improve health care services in the city, which has several carpet factories and a large population of blue-collar workers.

Although managers were skeptical about the ability of their employees to make wise choices regarding health plans, the hourly employees were very enthusiastic about having a choice of plans with different levels of employee contributions and benefit levels, said Kennedy. They made thoughtful decisions about which health plan they would choose, she added, with young, single employees choosing different types of plans than older workers or those with children.

Although no employer in Dalton has yet moved to a defined-contribution system, "there's a lot of conversation about it," said Kennedy.

"We just know that employers are saying they cannot continue to provide benefits in the way they have over the past few years," said Kennedy. "Patients need to have some skin in the game by understanding what the costs are."

Sally Trude, PhD, a senior health researcher with the Center for Studying Health System Change in Washington, D.C., noted in her presentation that employers have a mixed attitude toward their role in providing health benefits to employees.

On one hand, employers like the tax benefits of providing health benefits and are getting more involved with their employees' health care through initiatives such as wellness and disease management programs.

"On the flip side, employers would like to reduce the cost and hassles of administration, and they would like employees to be more aware of the full cost of [providing health benefits]," said Dr. Trude.

She predicted that a shift from managed care to a more patient-driven system will evolve gradually, instead of being a sudden change in health plan design.

"But I expect whatever it is, the national health plans will roll out their own versions," said Dr. Trude. "At that point, employers will be more likely to add this as an option."

ADDITIONAL INFORMATION:

Weblink

Global Business Research Ltd. (http://www.globalbusinessresearch.com/)

Consumers Medical Resource (http://www.inc.com/users/cmr.html)

Northwest Georgia Healthcare Partnership's delivery system (http://www.nwgahealthpartners.org/healthcare_services.htm)

Correction

Consumers Medical Resource, based in Duxbury, Mass., which was referred to in this article, is not affiliated with Harvard Medical School. AMNews regrets the error.