By Spencer Rich
Washington Post Staff Writer
Wednesday, September 25 1996; Page A01

At first, managed care seemed like the magic elixir for the nation's health care problems. It would help rein in the escalating costs of medical care and provide a more effective system of delivering medical services to millions of Americans.

Now, lawmakers in Washington and in state capitals around the country are wondering whether the idea has gone too far.

Their concern, illustrated by a series of legislative initiatives being pushed nationwide, is whether, in the rush to cut costs by shifting millions of people into managed care, the health of patients is being jeopardized.

While a presidential commission has been appointed to evaluate the quality of all health care, including health maintenance organizations, there are no systematic studies to date that have shown managed care to be inferior medicine. But the proponents of efforts to put tighter restrictions on managed care argue that the dynamics of the marketplace in which HMOs operate make cutting costs a primary goal -- one that sometimes takes precedent over a patient's medical health.

In many HMOs, doctors act as "gatekeepers" from whom the patient must get approval before payment will be authorized for a specialist or other costly services. Many people fear that health maintenance organizations, which now cover 60 million Americans, will delay access to or refuse to pay for these specialists, X-rays or other treatments because it's in their financial interest to do so.

Convinced that managed care is focused on costs at the expense of medicine, lawmakers are backing efforts to limit how far these health plans, particularly HMOs, can go:

Last night Congress approved legislation requiring insurance companies to pay for at least 48-hour hospital stays for mothers giving birth. The legislation, which the president has said he would sign, also reduces discrimination in mental health insurance.

A bipartisan bill being considered in Congress would bar HMOs from imposing "gag rules" that critics say are often employed now by HMOs that want to prevent their physicians from fully informing patients about what their medical options are and which of those options the plan will pay for. Several other bills are also pending in Congress, dealing with such issues as the quality of emergency hospital care provided by medical plans.

In California, consumer advocate and presidential candidate Ralph Nader is backing an initiative that, along with other rules, would outlaw HMO bonuses to doctors who withhold treatment, ban gag rules and impose minimum staffing requirements for hospitals. The Service Employees International Union is pushing a similar initiative of its own.

In Oregon, a proposed ballot initiative would bar "capitation" plans that pay doctors a fixed amount per patient and then require the doctor to provide all or most services without further reimbursement.

According to the advocacy group Families USA, 33 states passed bills in the first half of this year relating to managed care, involving such matters as access to specialists, gag rules, emergency care, appeal rights on wrongful denial of care and maternity length-of-stay requirements.

The politically powerful American Medical Association is supporting many of these efforts and is pressing for a federal requirement that HMOs offer a special option that would allow patients to use an outside doctor if they're willing to pay part of the fees. The AMA also favors making HMOs disclose their criteria for selecting and retaining physicians, and for revealing all their limitations on care.

What is driving these moves, according to proponents and others following the initiatives, is the realization that doctors in many HMOs have an incentive to limit their services as much as possible.

That was the argument David Ching made when doctors failed to discover what was causing his wife's severe cramps a few years ago. The 33-year-old California woman went to a doctor group recommended by her health maintenance organization, but after examining her and conducting tests, they still couldn't uncover the cause of her distress.

Her husband tried to intervene by pushing for a specialist, but it wasn't until nearly three months later that she was sent to an outside gastroenterologist, according to lawyers for both sides of Ching's subsequent lawsuit against the doctors. Within 24 hours, the specialist determined that Joyce Ching had colon cancer, her husband said, but she died 15 months later.

In his suit, Ching charged that the doctors' motive in not sending the patient to an outside specialist sooner was financial, since they would have been liable for the specialist's fee from their own pockets under their compensation arrangement with the HMO. The judge ruled that Ching had not proved cost was their motive, but he did grant a $700,000 malpractice award after a jury found the doctors had failed to take steps necessary to detect the illness.

Ching, who later testified before Congress about his wife's case, is asking the same questions many others are about managed care and the proper balance between saving money and saving lives.

"In a health maintenance organization, the doctor doesn't have a financial incentive to do more. He has an incentive to do less," said Gerard Anderson, director of the Johns Hopkins Center for Hospital Finance and Management. Because the HMO is paid a fixed premium each year, no matter how much medical care it delivers, the less it does for the patient the more it makes, said Anderson.

This can reduce the amount of unnecessary care rendered by doctors, said Anderson, but it can also produce pressure to squeeze services beyond levels that are safe for the patient. The problem is particularly grave for the very sick, he said, because the 10 percent of the population most seriously ill uses 70 percent of all the health care dollars spent each year.

Gail R. Wilensky, former Medicare administrator and now chairman of the Congressional Physician Payment Review Commission, which advises Congress on issues involving doctor pay, agreed that on occasion there have been some bad incidents involving HMOs.

But she said a lot of the current furor about denial of services has been generated by doctors and hospitals feeling the effect of managed care on their wallets.

In addition, she said, patients who have grown accustomed to getting nearly any medical attention they wanted don't like the idea of being told they can't have it all.

Wilensky and others who question the need for government involvement also point out that the kinds of cases often cited in public debate "can and do happen in any system," including traditional fee-for-service medical plans.

"In the public arena, problems are often attributed to managed care plans that are the results of mistakes and misjudgments that doctors can make in any type of health plan," said Karen Ignagni, president of the American Association of Health Plans, which represents many HMOs. If anything, the AAHP argues, their members are providing a higher quality of medical attention than independent doctors.

The AAHP argues that, despite occasional "horror stories," HMOs have a better system for assuring quality care than individual fee-for-service doctors working in isolation. HMOs, they said, systematically review the medical literature and the records of their own patients to develop guidelines on the best methods of care to be used by participating doctors. They then provide feedback to doctors on what they learn from this process. AAHP vice president Rick Smith said HMOs stress preventive medicine, immunizations and other ways of averting or discovering illness early to prevent small problems from becoming big ones.

He cited studies reporting that back pain care in HMOs is less costly but results in comparable patient outcomes, that cancer is diagnosed earlier in elderly patients in HMOs than in those in fee-for-service medicine, and that women are more likely to obtain mammograms, Pap smears and clinical breast exams in HMOs.

In fact, argue the HMOs, what's really going on is that doctors who tend to provide their services for a higher price feel threatened by the emergence of medical providers willing to keep patients healthy for far more reasonable rates.

Said Wilensky, "Physicians and hospitals are getting squeezed by competition with HMOs on payment and don't like it."