In today’s America, the medical care payment system is like a three-legged stool that is so rickety that we won’t be able to sit on it much longer. The three wobbly legs are: government insurance for federal employees, veterans, the old and the poor; commercial insurance for those still employed in companies with benefits or rich enough to buy insurance for themselves; and the growing uninsured population that still get medical services when necessary, but then are either put in crushing debt or their costs are shifted to the rest of us. This stool is destined to collapse in the near future and a large part of the reason is that the commercial insurance concept of “managed care” is a fiasco.

The concept of managed care goes back to the 19th century, but the seminal event occurred in 1929. In that year, the Los Angeles Department of Water and Power contracted with two doctors to provide care to 2,000 workers. This pre-payment plan expanded to 12,000 workers and 25,000 dependents over the next few years. The cost was $2.69 per subscriber per month.

In the 1930s, another Los Angeles doctor, Dr. Sidney Garfield, formed a simliar plan, which impressed Henry Kaiser, and he used Dr. Garfield services for workers on the Grand Coulee Dam. During World War II, Kaiser set up a comprehensive medical plan to cover his workers in shipyards and steel mills. After the way, he opened his health plans to the public. Over the next 10 years, the Kaiser Permanente Health Plan in California had 500,000 enrollees and owned a growing network of clinics and hospitals. This was the origin of the health maintenance organization or what we fondly know as the HMO. Similar plans grew up in Seattle, Wash., and New York City.

Fifty years ago, there was relatively little medical care to be purchased. Most people, if they had health insurance at all, had indemnity plans to protect them from catastrophic medical expenses. Doctor’s visits and other routine medical care expenses were affordable. The HMO vision, though, was a wonderful one, because these organizations emphasized preventive care and offered health care with few exclusions, limits or co-payments. Since they owned their own clinics and hospitals, they could establish an environment of high-quality and efficient care.

Fast forward to our current century. Even routine medical care is extraordinarily expensive. For difficult or serious medical conditions or simply for demanding people, the amount of money that can be spent on scans, procedures and surgeries seems endless. There is no way for the modern insurance company to provide this care without limit because there is no natural limit to what can be spent.

Further, today’s version of managed care, including HMOs, is philosophically different than yesteryears. No longer does the typical managed care company own hospitals, laboratories or diagnostic equipment. They don’t even employ doctors. Doctors and hospitals participate in the plans, which means that health service providers join and bill as many plans as they want to be in. The relationship is not even like the usual one between a doctor and a hospital where doctor is on staff. Doctor’s don’t share the goals and concerns of the insurance company. The sole interest a provider has in the medical plan is to get it to pay the patient’s bill.

The upshot is that the only thing managed care companies really manage is money. No matter how they put it in their prospecti, their power is entirely negative. They neither initiate, nor offer care and only pay or not pay the bill. This power is often used to deny or reduce payments. Since an insurance company’s goal is to make a profit, it must take in more money in premiums than it dispenses in payments. The most efficient method for doing this is to deny or obstruct payment whenever possible.

This practice works best on the least powerful providers. Solo practitioners have little clout and unless they learn all the government regulations for fighting back, they can be squeezed unmercifully. Large, important groups and big hospitals can eventually win the payments they want because they have more inherent power than the insurance companies. For instance, if a dominant hospital in our area tells ABC Insurance Co. that it won’t see that company’s patients, ABC won’t stay in business in that area for long.

This situation is part of an underlying insurance company paradox, however. While in the short-run, insurers want to pay out as little money as possible to maximize profits, in the long-run, it’s in their best interests for medical costs to continue to rise. This is because the more money they take in, the more they make. For example, if ABC takes in $10 million and spends $9 million it has $1 million in profit. But if it gets the same 10 percent on $50 million, its profit is $5 million. The trick, then, is to be forced to pay out enough more money to powerful providers so that regulatory agencies and consumers will grudgingly allow the higher premiums. This political balancing act has nothing to do with efficient and appropriate medical care, but only with money. The game can only continue for as long as there is enough money to support the escalations, then something has got to give.

There is another paradox embodied in managed care. You and that I may be the patients, but the consumers are not us. They are the big employers. Insurers do not want retail business. Anybody who tries to buy an individual policy knows that. They market to the big companies that offer health benefits. That means that policies are not written in the patients’ interests, but to satisfy the purchaser of the insurance. It doesn’t matter how much trouble the insurer causes an individual patient or his doctor because only the employer can dump the insurer. This is a particular problem when there are a limited number of insurers in the local market, so there is no great pressure on them to please anybody.

So, why can’t managed care work? Because we need our health care system to manage more money. For a time, managed care did reduce medical expenses, especially hospital admissions. But cost reduction was accomplished without consensus, which resulted in a political backlash. Insurance companies had to slowly capitulate, discarding some restrictions on care, while closing a tight fist on what are often the most beneficial treatment strategies.

Mark Chassin, M.D., chair of the Health Policy Department of Mount Sinai Medical School (as reported by Consumer Reports, July 2002), summarizes the situation this way: “HMOs never attacked the fundamentals of how we develop and evaluate tests and treatments.” The result is that insurance companies could never really reduce the usage of inappropriate medical technologies, which are “the major controllable driver of health care costs in our system.

We, as a people, must decide what kind and the amount of medical care we will pay for. We know our society is unable to afford providing patients with all the medical care they want or their doctors want to offer them. Only by an informed consensus in our country can we redirect medical care away from the most costly, and often least thoughtful, test procedures and drugs we provide, especially to people at the end of life, the worried well and the people with psychosomatic illness. The failed experiment of managed care shows we can’t entrust these vital decisions to insurance companies. They can only be made through a political process.

We need to establish the panels of experts and engage in the political wrangling necessary to decide what should be done and how much we should pay for it. We can’t do any of this with a system that is part public, part private and part nobody pays. The decisions that are made about our medical care must apply to all of us and all of us must be covered. This means a universal health care system paid for by all of us as we do with Medicare for the elderly. I know that government bureaucracies can be frustratingly impossible at times, but over the long haul, they answer to the will of the people. Managed care never does.

Dr. Robert Gallon is a psychologist practicing in Bangor.