Hillary's Revenge

by Jonathan Cohn | August 12, 2009

'One of the things that will happen if we pass this [health care reform] bill is that you will have more and more health care provided ... by community-based clinics or comprehensive health centers that have salaried professionals, including doctors. ... That's what you have at the Mayo Clinic." If you've been following the health care debate over the last few weeks, then you've heard President Obama say something like this a dozen times. Over and over, he's held up places like the Mayo Clinic as an example of what medical care should look like--that is, places where medical professionals work together in order to coordinate the treatments they provide; where physicians earn salaries, rather than fees for every service they perform, in order to remove any incentives for superfluous care; where administrators are able to take advantage of such efficiencies to keep prices low.

Still, that particular quote about the Mayo Clinic is different from others you've heard lately in one key respect: Obama didn't say it. Bill Clinton did, in 1994. In those days, experts and politicians had a name for these kind of group medical practices: "managed care."

Today, the White House communications team would fire anybody who dared use that term. Obama and his supporters speak about the importance of coordination, integrated care, electronic medical records, using evidence to guide treatment decisions--in effect, all of the elements of managed care. But they avoid the label, or its close cousin "HMO," because people associate those with everything they don't like about American medicine: limited choice, insurance bureaucracies, and an inability to get care when it's most needed.

But managed care was never as bad as its reputation: The problems were very much a product of the peculiar way it evolved, particularly in the last decade, since the Clinton plan went down in flames. In fact, had the Clinton plan become law, it's quite possible--maybe even likely--that managed care would have done what Clinton and his allies had hoped: emphasized prevention and personalized, coordinated care, all while saving money. Although Obama and his allies might not admit it, they are basically trying to carry out that vision, albeit more gently. And they are absolutely right to do so.

 

Managed care was always controversial. But, for most of its existence, it was controversial primarily because it was seen as overly idealistic. The earliest managed-care organizations were medical cooperatives that popped up during the Great Depression, first in the Great Plains and, then, on the West Coast. In order to make affordable care available to the communities or groups of employees they served, groups of doctors charged flat, monthly fees rather than billing for every service. They sometimes had governing boards, with representatives chosen by the patients, who oversaw the finances and consulted on other areas of policy. They also emphasized preventative care. The founders of these clinics ranged from citizen do-gooders like Michael Shadid--the immigrant doctor who built a cooperative for the financially strapped residents of his rural Oklahoma hometown--to forward-thinking businessmen like Henry Kaiser, who created group clinics to make sure his shipyard workers had good health care.

Physicians, suspicious of the organizations' communal nature and perceiving a threat to their clinical autonomy, fought these group practices bitterly. And they succeeded in confining theirgrowth to a few isolated pockets around the country. But where group practices did establish themselves, they provided good care--really good care--at low prices.

Eventually, their example caught the attention of a physician and policy entrepreneur named Paul Ellwood, who developed his own variation on the concept. (The impetus was his experience running a rehabilitation hospital; he realized that the hospital lost money when it provided better care, since its patients left more quickly and thus racked up fewer charges.) Ellwood called his idea the "health maintenance organization" and got the Nixon administration--which was, in the early 1970s, seeking ways to control health care costs--to endorse it. Ellwood, who had spent time practicing in Minnesota, modeled his idea on the Mayo Clinic, which traced its history back to the late nineteenth century but had, over the years, adopted a group practice model with salaried physicians who closely coordinated care.

The medical community remained hostile to the idea and, partly as a result, HMOs proliferated slowly. But, as rising medical costs increasingly became a national political issue, experts in Washington and in academia started paying more attention--and touting HMOs as a possible solution. When Clinton came around looking for concepts on which to build health care reform, they sold him on it.

By this time, some insurance companies had started experimenting with their own managed-care organizations--largely to satisfy employers weary of paying so much for employee benefits. These new models didn't look quite like the original group practices: They weren't as tightly organized, they didn't have community boards, and so on. But they began moving away from fee-for-service medicine, paying at least some doctors based on the number of patients seen rather than the number of services performed. Some set up information networks to keep track of patients. And they began to involve themselves in actual medical decision-making by having doctors seek approval before doing procedures or referring to specialists.

These changes didn't sit well with the public, and managed care became a political liability for Clinton. At the time, many Americans still had wide-open, fee-for-service insurance. They could see any doctor, any time, with nobody telling them (at least explicitly and openly) what they could and couldn't get. The concept that patients might have to remain with one group of physicians still seemed strange. On both the left and right, critics warned that people wouldn't be able to get the treatments they needed--that good care would be sacrificed in order to make it cheap and uniform. Asked one official from the American Medical Association: "Do you really want your doctor to have to call an 800 number at an insurance company somewhere when you are sick and take orders from someone he doesn't know and who may know nothing about medicine?"

In fairness, the fears were not entirely irrational. As managed care had evolved, it had strayed from its idyllic roots. Many plans did little or no coordination of care at all. Instead, when they intervened in medical care, they did so crudely--setting sometimes arbitrary rules about what could or couldn't be provided, sometimes with more regard for profit than good medical practice. And, while there was some movement away from paying doctors for every service provided, the change was moderate. Oftentimes, when insurers wanted to extract savings, they did so simply by bargaining down the price per service-- which, if anything, encouraged doctors to do more procedures to make up for lost profits. (Not surprisingly, it also made doctors really angry.)

The old Clinton health plan, at least in theory, would have steered managed care in a different direction. It would have collected data about which plans were actually providing care that was both good and cheap, rather than simply cheap; it would have policed plans, to make sure they weren't denying care just to avoid enrolling sick (and expensive-to-insure) customers; and it would have defined a basic set of benefits and services, to which all people were entitled.

In a general sense, this is what Obama and his advisers are trying to do now. Even as they try to tilt financial incentives to favor integrated group practices, they would also establish basic benefit guidelines and closely regulate the behavior of insurers, to make sure companies are not skimping on care just to clear more profits.They would also change the way Medicare pays for services, so that more money goes to those medical providers who actually make people better. (The hope is that when Medicare does this, private insurers will follow.) If it all works out as planned--and, as always, that's a big "if"--places like the Mayo Clinic will thrive and, eventually, all Americans will have the option of enrolling in such a clinic.

The Obama reforms would push the U.S. health care system in this direction a lot more slowly than the Clinton plan would have: Among other things, if Obama gets his way, insurance arrangements for the vast majority of people won't change, at least right away. (Under the old Clinton plan, almost every working person would have changed plans.) This is undoubtedly because pushing more quickly risks the sort of patient backlash that helped kill reform last time. But Obama also has the benefit of time--and, perhaps, a slightly smarter electorate. In the early 1990s, everybody feared managed care in part because it was still pretty unfamiliar. Today, the basic concepts are at least familiar- -as is the idea that our health care system is awash in expensive, sometimes harmful excess. Americans, in short, may be a little more receptive to the idea of managed care than they were a decade ago. Just as long as nobody calls it by that name.

Jonathan Cohn is a senior editor of The New Republic.

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