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This page created October 2000 by Michael Wynne
This page was written as part of a criticism of Graeme
Samuel's market model of health care.
Samuel's model is built around competitive roles. I consider this
model to be a form of managed care. This page examines the health
care consumer's role in managed care and Samuel's model
Samuel claims that the consumer will control cost and quality by shopping for products which are paid for by the government. As I understand his model they will shop for a health care purchaser and possibly also a provider approved by the purchaser.
CONSUMERS AT ARMS LENGTH:- As I understand Samuel's proposal the consumers will exert influence on the care they get and exert their choice in an "arms length manner". Instead of being there and doing so themselves they exert it by indirectly exerting competitive pressures when they purchase from the purchaser. The purchaser transcribes the customers "demands" into contracts with providers and so gives them what they want. This arms length financial position will allow the customer to shop for quality and cost efficiency!
Much of the money will come via the government - medicare or some substitute. Consumers don't have the money and cannot directly buy care with it. These citizens are being removed ever further from care. To exert their consumer power they would be forced to act through the ballet box - but in Samuel's system the government is "at arms length" so unable to act for the voting consumer.
Is Samuel suggesting that by moving his discerning and enlightened customers and their consumer power further and further away from the actual service being purchased quality will be controlled - a complex system of economic levers. This is the sort of complexity which has made a mess of the US system of care.
It is all simply too tortuous - a Heath Robinson health system - one of those strange contraptions consisting of multiple mechanical levers so beloved by the cartoonists when they portrayed eccentric inventors for the English magazine "Punch" in the 1950's!
THE CONSUMER AND THE MARKET:- We need to examine this consumer more closely. She will presumably be sold an insurance product advertised by the purchaser, probably while young and healthy. With other commitments she will tend to buy the best priced "product". There is simply no way she can really know what she is going to get years later at the end of a contract the purchaser has reached with someone else. The contract she sees will be obsolete within a year as the purchaser will be making a new contract with a more financially competitive provider.
Because the purchaser contracts with a provider her choices are restricted to those this provider has contracted to provide. The services she uses over the years are likely to be relatively minor and not costly and she may be quite satisfied. She responds to HMO questionnaires positively and the HMO uses them to market its services.
The problems arise when usually late in life a serious and costly illness develops. What use her choice now? There is no incentive for Samuel's "purchaser", which differs from an HMO in name only, or for the provider to act in her best interests.
THE REAL PURCHASER/INSURER/HMO:- I have never had an insurer question a small claim. To do so would give them a bad name. The impact on the market would outweigh economic benefit. When a family member of mine incurred massive health care expenditure the response of the credible international insurer was immediate denial. This was done in an aggressive totally unfeeling way. Every legal impediment was used to frustrate the claim which was quite clear cut. It was not until three long and difficult years later when I paid a very considerable sum into a foreign court to cover their legal expenses if I lost the case that the case was promptly settled and all my legal expenses paid.
The money was no compensation for the effort and the personal costs involved. For me it was primarily a matter of principle. Any one less pig headed or perhaps less resourceful would have shrugged their shoulders and given up early in the process. The insurer did not believe that I would be so persistent, raise this sum or risk it in another country. In 9 out of 10 cases they would have succeeded. Lawyers, as I soon learned know that this is how insurers act - the reality is very different to the reassuring and promising public face. This is exactly the comment made by Ron Williams about multinational health care corporations in 1992.
This is how insurers operate and HMO's behave no differently. They seize every legal loophole. In the USA they hide behind the ERISA legislation. Most actions against an HMO for denying care do not get to court. The managed care company Aetna is notorious for this. When a very persistent widow found a loophole in the ERISA legislation and brought the company to court, the jury were so angered by what had happened that they awarded US $120 million in punitive damages. The appeal court upheld this.