Making a Killing
HMOs and the Threat to Your Health
|Contents | 1 | 2 | 3 | 4 | 5 | 6 | Apdx 1 | Apdx 2 | Apdx 3 | Notes|
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A Deadly Fraud
Behind the Caring Image of HMOs and Managed Care CompaniesHeather Aitken chose the nation's largest HMO, Kaiser Permanente, as her HMO based on the company's holy triad message of "trust, caring, understanding." Of Kaiser, she said, "I trusted this facility to take care of my children," a sentiment at the forefront of any parent's concerns. "As a mother and a human being, I thought I was doing the right thing."
On July 18, 1995, Aitken took Chad, her five-and-one-half month-old son in for a checkup in Woodland Hills, California. According to Heather, her Kaiser pediatrician "became hostile with me and accused me of having used their facilities for six months without insurance."
"I was confused by this accusation because I had just had the baby five months ago, and another one of my children had a minor operation, and no one had mentioned our insurance coverage before to us," Aitken says. "Although we had been members for over five years, the doctor told us that we had been coming in under fraudulent circumstances and refused to see my son. This accusation was the result of a clerical mix up on our insurance coverage dates through my husband's ex-employer."
Heather says that because the Kaiser doctor thought Chad was not covered, he refused to address breathing problems Chad experienced after his first round of vaccinations. But Chad was given more vaccine shots, according to Heather, because the law required them and Medicaid paid for them.
Unfortunately, the July 18th vaccine caused more severe respiratory problems for Chad.
Heather says that Kaiser knew that all her children had a history of severe breathing problems. After Chad's reaction to his first shots, in fact, a Kaiser doctor prescribed antibiotics. This time, Chad went untreated.
"Refusing treatment after an invasive procedure like drug injections is not only unethical, it is unconscionable," said Aitken. "If doctors administer treatment, they are supposed to follow through with the job, not leave it half way. Chad's breathing problem was directly related to his adverse reaction to the vaccine shots. But without my HMO seeing and treating Chad for this reaction, what could have been prevented, became fatal."
By August 8, 1995, Chad was dead. "The microscopic report clearly indicated that the cause of death was due to Chad's reaction to the vaccine shots," said Aitken. "My life without my son has been devastating and I wouldn't want to see another parent go through the same nightmare as we have been put through."
Why did a little child, a citizen of the wealthiest nation on earth with doctors and medical technology that are the envy of the world, die over a dispute about whether he was entitled to care? The answer lies in the larger picture of how the U.S. provides health care.
As the nation's biggest HMO, Kaiser is an important barometer for the pressures and climate changes in the medical marketplace. A non-profit, Kaiser was once the gold standard for HMO care. But the company's recent history tells a sad story about a mission gone awry. A dramatic shift occurred during the 1990s as Kaiser was suddenly forced to compete for "customers" with for-profit insurers. Kaiser's 1995–1997 business plan in Southern California slashed the medical budget by $800 million even as the company increased its membership. The plan included adoption of such reckless care-cutting practices as outpatient mastectomies and replacing skilled nurses with less skilled workers. The business plan forthrightly stated the goal behind the cuts: attaining "an overall 3% median single party rate advantage over its major HMO competitors…and a 6% advantage when quoting new groups" in other words it intended to undercut its for-profit competitors' prices.1 Kaiser finally recognized that it competes in a nearly completely for-profit market, an economic landscape where those who rake in the most dollars in contracts for care while spending the least to get those dollars win. In an effort to stay on top, Kaiser downsized services and cut costs joining its for-profit competitors in the race to the bottom in health care quality.
Competition for new members had become so intense that by 1998 Kaiser had increased its membership by 20% but posted a $200 million loss because it so undercut its competitors' prices. It won those customers by selling its services below the actual cost of delivering those medical services a practice that can be called predatory pricing. In a traditional business, if the service is cut to the bone customers can in theory go elsewhere to pay for better services. But, in the managed care setting, while it is the patient who gets the care, it is the employer who often pays most of the membership costs. Employers can save money by using an HMO that controls benefit costs; the consequences of poor care are borne by the patient, not the employer.
Ironically, once the customers were in the door, Kaiser announced double-digit premium increases in March of 1998.2 The fact that Kaiser gained so much ground on its competitors even as it cut its medical-care budget dramatically demonstrates that competition in the managed care market is based on controlling cost, not providing quality care to win over patients.
By the mid-1990s, Kaiser's rapid medical downsizing took a toll on patients' safety and care. Responding to a pattern of problems with emergency medical care, Texas regulators in April 1997 required Kaiser to implement specific steps to assure high quality health care and levied a fine on the HMO of $1 million.3 On the federal level, regulators ordered Kaiser to correct life-threatening safety problems at California hospitals or lose federal Medicare and Medi-Cal funding. The safety issues included the handling of patients in the emergency room and transporting them without proper stabilization.4 In August 1996, California regulators found "systemic" problems at Kaiser. Among the auditors' findings: medical decisions at Kaiser, in apparent violation of state law, did not appear to be "independent of fiscal and administrative considerations."5 This was compounded by high-profile wrongful death cases, embarrassing disclosures about premature discharges of patients at its facilities and chiding by the conservative California Supreme Court about its tactics of delaying justice for a dying patient.
Even Kaiser's own physicians sounded off in the internal Kaiser newsletter titled Hope. "The root causes of these costly and humiliating developments perhaps unprecedented in our great organization are not clear. That the events occurred independently in two states made the publicity even more incriminating."6
Kaiser moved swiftly to address these issues, spending astronomical sums of money to increase not the quality of its medical care but its advertising. In an internal Kaiser video created to inform staff about its advertising effort, Joellyn Savage, Director of Member and Marketing Communications couldn't have framed the problem more clearly. "There were many challenges we faced, one of which was our reputation, and the only way to address the challenges in the reputation area was to develop a very aggressive advertising campaign to change the perceptions of the general public," she said.7 In 1995, Kaiser increased its advertising and marketing budget to $60.3 million a 641% jump from 1992. In 1996, the advertising budget grew still more, to $61.8 million.8
In a health care system focused on health, not profit, these dollars would have been used for patient care, a point not lost on Kaiser's physicians. Angered that money was being sucked from their patients to be spent on advertising, they noted in their internal newsletter that "Despite the budget cuts absorbed by our patients, hospitals and staff, our overall expense structure has not significantly improved and may, in fact, be slightly worse."
While physicians were frustrated, Kaiser televised the opposite message, placing the image of satisfied doctors at the core of its advertising and marketing campaign. In the late 1990s, Kaiser dumped tremendous resources into what they called "The Personalized Care" campaign. Billboards and television advertising featured smiling doctors in intimate settings with their patients professing the satisfaction of being able to take care of their patients correctly.
Sparing no expense, Kaiser created a video tape about the remaking of the Kaiser image aimed at its own employees. "We've known all along that the most important reputational message is in fact quality of personalized care and now we are finally able to use that," Kaiser's Savage intoned. "Although there are a great number of people who are involved in the delivery of health care as a team, the relationship that is most important to our target audience is the physician. Therefore we are providing primary focus on the physician in this campaign again."
But while Kaiser's advertising agency marketed the HMO's reputation for satisfied doctors delivering "personalized care," Kaiser physicians continued questioning its reputation and commitment to physician-driven care. Were most Kaiser physicians really satisfied about their opportunities to deliver the type of personalized care that Kaiser portrayed in its ads? A 1997 internal Kaiser physician satisfaction survey, cited in the HOPE newsletter, rated the average physician morale "2" on a scale of "10" ("10" = "excellent," "0" = "absent"). More than one-third of the respondents expressed a "0" confidence level in the Kaiser administration. Comments from the survey include: "I feel we have a totalitarian system" and that Kaiser should "Treat physicians as partners, not employees."10 What does it mean for a patient to be confronted with a doctor who has zero morale about the resources available to him?
Of the low confidence levels among physicians, the newsletter authors say:
In other comparable surveys (imagine such results in a M.A.P.S. or T.O.P.P.S. survey), scores so closely approximating zero (perhaps indistinguishable from zero if confidence intervals are taken into account) might have provoked widespread alarm, global reassessment, and the prompt imposition of stern disincentive measures.As the newsletter article notes, the Permanente Medical Group Board's response to the survey, like Kaiser's response to its deteriorating reputation, was swift:
…within months of this survey, partners saw the Board glibly vote its appointed members the subjects of this data an up to 20% increase in bonus compensation…Board enactment of these bonuses was seen by many partners as an open disregard of majority partnership sentiment. Many partners could not help but privately wonder, ‘Whose interest is the Board pursuing?'The physicians were not alone. Kaiser nurses, also portrayed in the advertising, expressed outrage that Kaiser deployed so many resources to improving its image at the expense of its care. In 1995, Kaiser paid out $96.1 million to its top four consultants alone: $41.1 million to Deloite & Touche, consulting, accounting; $24.8 million to Kresser, Stein, Robaire for advertising services; $16.2 million McKinsey & Co, strategic planning; and $14 million to Anderson Consulting for consulting. The California Nurses Association, which represents mostly Kaiser nurses, pointed out that the same $96 million could pay the total health care costs for San Diego County for about two-and-a-half years and could provide another 73,600 hospital days for California mothers and their newborn infants.11
The gap between Kaiser's image and reality underscored that patients were not receiving the personalized care from physicians that Kaiser promised.
"Through focus group testing, we have learned that personalized care translates to the general consumer in terms of relief of anxiety and respect," Denise Daversa, Kaiser's Director of Advertising and Meetings Services told Kaiser employees on the company's internal video. "And from that we have pulled out three key words which the three executions of Phase Two Reputation Campaign will focus on. Those words are trust, caring and understanding."12
Was Kaiser, even on reduced resources, living up to its slogan? Here are some of Kaiser's pitches to the public, made in advertisements featuring visually beautiful images of the most intimate doctor-patient relationships:
"There are times when a little caring goes farther than a long way. When a little time makes all the difference. Those are times when you can count on physicians with Kaiser Permanente. Physicians know this is one of the most important relationships you will ever have. Our team of medical professionals are on hand working together to deliver personal care. Because they know the art of medicine is really the art of caring."Turning to the reality behind the advertising, a Kaiser Los Angeles facility received national attention in 1995 for prematurely discharging newborns and their mothers as early as eight hours after delivery, which led to federal legislation in 1996 banning the practice.13 Medical experts recommend forty-eight hours as a minimum discharge time. Proper breast-feeding, for instance, is often a casualty of premature discharge. During post-partum, nurses typically can educate mothers, particularly new ones, about breast-feeding, and other aspects of child care. New mothers often do not realize how frequently their newborns need to eat or that they may need to be awakened in order to be fed. As a result, newborns discharged early are at heightened risk of suffering from malnutrition and dehydration. According to research by the American College of Obstetricians and Gynecologists, jaundice is a particularly serious health risk for newborns discharged before forty-eight hours, a malady that is not typically detected until the child's second day of life.
Just how often do these problems occur when infants and mothers are discharged early? Dr. Judith Frank, chief of neonatology at Dartmouth Medical School, found that newborns discharged at less than two days of life are 50% more likely to be readmitted to the hospital and 70% more likely to return to the emergency room.14
One infamous Kaiser memo announced the eight hour discharge policy. Entitled "Positive Thoughts Regarding the Eight Hour Discharge," it listed reasons for staff to offer patients in order to get them to accept the premature discharge time, such as "hospital food is not tasty" and "unlimited visitors at home."15
These were hardly isolated incidents of an ad campaign gone awry.
Kaiser Print Ad: "We don't have insurance administrators telling your physician how to treat you. And there are no financial pressures to prevent your physician from giving you the medical care you need."16
Kaiser Reality: Drastic reductions in critical patient services were disclosed in the confidential "Kaiser Permanente Southern California Region Business Plan 1995–1997." The document shows arbitrary business goals dictate to medical practitioners at Kaiser. The plan's goals include:
Kaiser reality: One of the most scandalous deprivations of patient care at Kaiser, given the advertising claims, is that mothers giving birth are not always allowed to see a doctor instead, a nurse mid-wife performs the delivery. There is nothing inherently inferior about midwifery but in problem births competent doctors are required. High-risk births have slipped through the system without doctors in attendance and newborns have been injured because no capable physician was on hand to deliver them. Kaiser has refused to respond to questions about the pervasiveness of the practice and its casualties.
One example is Colin McCafferey. "Unfortunately, during each of my wife's pregnancies, there were complications," recalls Colin's father, Kevin McCafferey, a Kaiser member and resident of Woodland Hills, California. "When my wife Pattie became pregnant the third time, our HMO doctor, during her initial visit, immediately classified Pattie as ‘high risk' and assigned himself to her case. That was the last time we ever saw him. Each subsequent attempt to arrange a visit with the doctor was met with resistance by the HMO's staff. Our repeated pleas went unheeded, and only a mid-wife was assigned to her case. This is standard practice at Kaiser. No doctors, just mid-wives."
During one of Patty's last examinations, just a few days prior to delivery, the sonogram revealed that the baby would be large, close to nine pounds. Pattie was concerned. Kaiser's staff assured the McCaffereys that everything would be okay. They were wrong.
"Colin was big," Kevin recalls. "During the latter stages of delivery, after the baby's head was out, all hell broke loose. The mid-wife began yelling for the doctor. Nurses ran in and out, and one actually jumped up on my wife and began pushing down hard trying to get the baby out. I was terrified.
"The baby was pulled out and placed on a table. The baby looked beautiful to me. I couldn't figure out what was wrong. Then I noticed the nurse working on his arms. In their attempts to get the baby out quickly, which I later discovered were completely unnecessary, Colin's shoulder had caught on my wife's pelvic bone and been severely stretched. They said it would heal. I wondered where the doctor was. It turns out no doctor had been covering the floor during my wife's delivery." Kevin remembers when the doctor on-call finally came in it was obvious that he was reading his wife's chart for the first time.
Colin's injury never healed. "They call it Erb's Palsy," said Kevin. "He will never have full use of his arm or hand. He will never be able to raise his hand over his head, catch a ball with two hands, hold a bat, or play any of the other games boys play."
Kevin later learned that there was no urgency to remove Colin. A doctor would have known this. On top of this, delivery techniques were available to handle the baby's quick removal. But they were not used because the mid-wife had either not been trained or simply had panicked.
"All in all, it was a nightmare that didn't have to happen," Kevin says now. "And Colin must now suffer for it for the rest of his life."
But that is not even the worst part of Kevin's ordeal. "Six months after Colin's birth, our HMO asked me to attend a clinic with Colin," Kevin recounted. "They wanted to evaluate him to see if some new procedure might be applicable to him. As I waited in the waiting room at the hospital, I began to well up. When I looked about the room I saw over fifty babies, all under the age of two, clinging to their parents. None of them were smiling. They all had Erb's Palsy. One little girl around one year had such a sad look to her. Her arms, both of them, just dangled lifelessly by her side. I got up, picked up Colin, hugged him tight, and walked out."
Fifty young children in one regional facility with a preventable malady like Erb's Palsy is a sight that modern medicine should not tolerate.
The McCaffereys, of course, were not featured as patients in Kaiser's commercials. The doctors were real Kaiser doctors, but the patients were actors. How fictional were the portrayals? Pediatrician Carol Woods was featured in one commercial: "When I saw what happened with exam rooms they created, to allow the sound to come in the walls were removed, there were fifty people around one little set, I saw that it couldn't be done in my exam room."18
"It was interesting how perfect every little detail had to be," said Milton Sakamoto, a Family Practice physician from another television commercial.
Dr. Alfredo Aparicio, a Urology specialist, noted that in one Kaiser ad, "I actually got the pleasure of working with an actress who was 80 years-old, her first name was May, she had been an MGM starlet, she had been in John Wayne's first movie, she had been acting since the thirties…her experience was just incredible…and she was trying to convey all these feelings of relief as I was giving her all the news she was in good health."19
Pediatrician Woods was featured in one heart-warming advertisement signing a little girl's cast with a drawing of a heart. "This little girl I just worked with had just completed a movie with Danny Devito," recounted Woods. "I thought she would come in and we would sign one cast. Instead, there were seven or eight casts made. We did this reenactment seven or eight times. I think more than the actual signing of the cast what was important in this commercial was to see the rapport the pediatrician had with the patient and that it wasn't just checking the circulation and the fingers but it was, Tell me about how this happened on the playground, and Tell me about summer camp."20
On the employee training video, Kaiser Advertising Director Denise Daversa made it clear what they were after with these commercials: "We have learned that personalized care translates to the general consumer in terms of relief of anxiety and respect."21
Americans are barraged by advertising all day long. But do consumers get lulled into complacency about their health care when they cannot afford to be?
Has Kaiser crossed the line from merely misleading advertising? Or did it just fail to comprehend the chasm between an image purchased at over $60 million annually and reality? Maybe the designers of Kaiser's ads didn't know of Chad Aitken or Colin McCafferey. Additional evidence indicates that Kaiser should have known its advertising was misleading at a minimum.
First, in addition to the internal Kaiser-produced video tape, "Kaiser Permanente On The Air Finally…The Personalized Care Campaign," Kaiser also produced a video that made crystal clear the reality for patients. Entitled "Straight Talk From Members," it contains interviews with frustrated patients who fume about the lack of personal care at Kaiser and the bureaucratic nightmares they endured. The same people who produced the commercials appear to have interviewed these patients. Remarks from real Kaiser patients, captured by Kaiser video makers, paint a portrait dramatically opposed to those broadcast through the HMO commercials.
One interview puts the lie to the slogan of personalized, physician-driven care.
"I came in today for an appointment today…I received a card in the mail…I came today…The receptionist…said class? She said this was not a prenatal class date. That I had to go through a prenatal class until I could see a doctor. My concern is that I am going into eight months of pregnancy. I was here a few weeks ago because I had a severe asthma attack where I had cracked some ribs and I started to go into labor. Doctor ___ called me at home to set up an appointment to see him. The nurse told me I could not just see him, that I had to go through prenatal classes…I have a history of high-risk pregnancies. My concern is I have been having cramps a lot, that I am going to go into labor and deliver this baby before I even get in to see the physician…This is not the first time I have talked to the nurses. Their attitude is very abrasive. They will not let me see any physician no matter what until I have these classes. This is my third pregnancy. I think I know what I am doing. I really, really would like to see a physician because my asthma is flaring up…but with ___ it is getting worse.."
What about the advertised image of caring?
"I had to wait six months to get my own doctor. Then I saw my doctor just once. Then she was on maternity leave. Then when I got to see her again she was so overbooked with patients she didn't have the time to really listen to what I had to say. I even told her I had a pain in my side. She told me that if I did not have that pain all the time, not to worry about it. But I'm worried about it. It comes and goes and it does hurt."
"Any time you come in they act like it is a machine. This is the way they do things and they don't vary from that routine. Not one iota, no matter what. You just fit in however, or they don't provide services. I have had several nightmare experiences here when I have been unable to get care."
Trust is one quality Kaiser seeks to attach to its reputation. "It's fifty years of attracting physicians from top medical schools and giving them the opportunity to practice medicine without being second guessed by an insurance company," says one commercial. This sentiment is echoed in another advertisement: "They are the kind of people you will find at Kaiser Permanente. Physicians who have chosen to work here where they can focus on your care rather than on the cares of running a business. Where they can practice medicine without someone else calling the shots."
A second piece of damning evidence suggests that Kaiser knew well the disparity between image and reality. Illuminated by an Austin, Texas lawsuit, a transcription of a December 1995 speech refutes Kaiser's claim on trust. It reveals the lack of autonomy physicians have and the mentality of corporate cost-cutting at Kaiser. In the speech, a Kaiser executive boasted to other HMO managers how Kaiser executives always put the bottom line first. A plan to cut hospital costs by 30% was drafted when he and a colleague were drinking heavily during a delayed flight from San Jose to Dallas that stopped in Los Angeles. Kaiser's Resources Management Director in Texas, Dr. John Vogt, celebrated how whiskey was a wonderful tool for honing the bottom line:
"I am a light chardonnay drinker. But the stuff that you're going to see in terms of the 1995 plan was generated in June on a Friday afternoon when Jim and I, I think I don't know how many Wild Turkeys on the Rocks I had, and he's Irish…so, he had Irish Whiskey, and we're flying over L.A. trying to land…a two hour, fifty-minute flight is now going to be seven-and-a-half or eight hours and we're going to get in at 1 o'clock in the morning."22During his speech, Vogt boasted about the HMO's true, cynical inner workings:
The discontent expressed by physicians in the e-mailed memo about the depersonalization of care at Kaiser could not be isolated and had to be known by the corporate designers of Kaiser's commercials.
According to the physicians' letter:
"Changes have become mandated, and the results of pilot programs are ignored in making sweeping changes (e.g. call centers) that negatively affect the patients and the staff. How will we finally know when a critical level of reduced quality has been reached, and will it then be too late?Is this the Kaiser system portrayed in its advertising?
Heather Aitken expressed it this way: "We feel the takeover of the medical profession by HMO administrators is a threat to the health and safety of everyone young and old."
Of course, Kaiser is not the only HMO with deceptive advertising. Because Kaiser houses its hospital and physicians under one roof, it is easier to trace the internal problems. The fact that the nation's last big non-profit HMO has engaged in such duplicity says a great deal about the widespread misrepresentations by for-profit heath care companies.
Advertising is not the only arena which diverges from reality, and Kaiser is not the only organization engaged in selling image over reality.
Keya Johnson and her family received their health care from various clinics and doctors. Eligible for public medical assistance, Johnson and her family had previously paid for their health care with a sticker from plastic Medi-Cal cards one for each service provided the family. If they did not like the care, they could simply go to another doctor who took the stickers. During her pregnancy, an HMO salesman showed up at her door making promises. By enrolling her in an HMO, the public assistance money that pays her health care would go to the HMO. "I was told I would get better care," said Johnson. "I would have one doctor…that I would no longer have to pay for medicine…that if I needed [transportation] to the doctor, it would be provided."
The solicitor's promises fell apart as soon as Johnson signed up for CIGNA Health Care of California, an HMO. CIGNA would "manage" all of the Johnsons' treatment within its own network of doctors, hospitals and clinics.
Under CIGNA's management of her care, Keya Johnson was never assigned the physician she said she was promised. Instead, a physician's assistant, who received less training than a nurse practitioner, became her primary caregiver. During her extraordinarily difficult pregnancy, Johnson gained eighty pounds and the fetus weighed more than twelve pounds. Despite these clear danger signs, no doctor was assigned to her high-risk case. During the grueling and painful delivery, Johnson's son was stuck in the birth canal for thirteen minutes and emerged, according to medical records, "blue and limp…without any pulse or respiratory effort." No doctor was provided and no Caesarean section performed.24
Keya's son, Adrian Broughton, had to be resuscitated. His left arm was paralyzed.
Johnson contends not only that the brain damage her son Adrian suffered was the result of CIGNA's cost-cutting, but that she was defrauded promised high quality health care by an HMO solicitor and forced to endure a preventable, medical horror story. Increasingly, consumers are promised high quality health care, lulled into a false sense of security, and end up injured.
CIGNA points out that it no longer enrolls Medicaid recipients in California. The company claims that Adrian Broughton's case is simply a medical negligence claim and that "when the matter is finally adjudicated and a decision rendered, the finding will be in favor of the health plan." If Johnson's allegations are true, it is fraud which is why the California Court of Appeal said Johnson could pursue her deceptive business practices claim outside of an arbitration agreement which normally prevents patients from suing. CIGNA would have breached its part of the contract by not living up to its promises. (As of this writing in June 1999, CIGNA has appealed to the California Supreme Court, which accepted review of the case.)
The for-profit corporations managing our care have broken their contract with all of us by promising accessible care and then forcing too many of us to fight for every service when we are sick and least able to fend for ourselves.
But how can you condemn an entire system based on one or two or one thousand or twenty thousand patients' bad experiences with managed care? CIGNA, in this example, claims that Keya Johnson's experience is anecdotal and aberrational. But the assumptions and conditions which thread the nightmare experiences of managed care casualties are always consistent the company intentionally promises the moon in order to maximize its profits. The system is based on a lie that is perpetuated daily by HMO advertising, marketing and public representations that patients come first and profits do not even enter into the equation.
How can one door-to-door salesman be held up as the paragon of a problem? Unfortunately, the CIGNA solicitor that approached Keya Johnson was no rogue operator. He is part of a core of HMO-backed hustlers preying upon low-income residents for the lucrative trade in "covered lives," as patients are called at HMOs. Both the company and its agent profit when another "head" is signed up because the HMO is paid a lump sum by the government for each "head" regardless of how much care it provides. With this so called "capitated" rate, the less medical care the HMO provides, the more it profits. When it comes time to live up to its promises, too often patients like Adrian Broughton pay the price. The price raises disturbing moral questions: Should financial profiteering ever cause preventable injuries? Should human health ever be priced out of existence, if there is a preventable and financially feasible way to preserve it?
In the door-to-door solicitation game a microcosm of the industry's pitch to us all for its continued survival CIGNA is only one offender. Foundation Health's deceptive door-to-door marketing campaign to Medi-Cal recipients has been a well-documented scourge on low-income communities. More than one hundred San Francisco Medi-Cal patients told the City's Department of Public Health that they were lied to or deceived by Foundation agents about the health care they would receive if they joined the plan, then denied access to that care once enrolled. The scandal grew so bad it prompted San Francisco's Department of Public Health to call for an end to Foundation's door-to-door marketing campaign.25
Just as Adrian Broughton suffered for CIGNA's profit, kids like Albert and Michael Rochin would pay for Foundation's. According to the Rochin family's lawsuit, Foundation Health's door-to-door solicitor met Albert and Michael's mother, Monica, at her stoop. He was sent into Monica's neighborhood because a large number of non-English speaking Medi-Cal recipients resided there. Monica declined to convert her family's Medi-Cal to the managed care plan because Michael and Albert had very special medical needs. She told the HMO salesman that her children had asthma and Michael was on a special milk and under the care of a specialist since his birth.
Monica's nightmare began when she tried to re-order the special milk for Michael. She was denied the milk and informed that her family was no longer covered by Medi-Cal, but by Foundation Health. The pharmacy told Monica that Foundation would not pay for Michael's special milk as Medi-Cal had in the past. According to the family's lawsuit, this abrupt shift happened, Monica learned later, because the salesman had forged her signature on a Foundation enrollment form.
Because six month-old Michael was unable to obtain his special milk, he became very ill with breathing problems, diarrhea, and a severe rash. Michael's Medi-Cal physician was unable to treat him because of the unauthorized enrollment. Worse, because of Michael's heart condition, Foundation Health's physician allegedly refused to treat Michael without records from his previous treating physician.
Albert, Monica's two year-old, suffered from chronic asthma, and required regular breathing treatments and medication. Without treatment, Albert became ill with a very high temperature and for the first time suffered a seizure. Foundation assured Monica they would disenroll her, but it would take some time to get her back on Medi-Cal. According to the family, Foundation ignored the Medi-Cal procedures that allowed it to expedite the processing of the disenrollment request and that would have restored the family's Medi-Cal status within two to three days. Instead, Foundation delayed processing Monica's urgent disenrollment request for over three months. Foundation's "excuse" was that it needed to investigate Monica's forgery claim. According to her lawsuit, which resulted in a settlement, Monica believed that Albert's seizure activity was the direct result of the lack of adequate medical care caused by Foundation's unauthorized enrollment of her family and its delay in restoring the family's Medi-Cal enrollment status.26
Reports of patients duped and pressured by Foundation's fast-talking sales people were so pervasive that public interest organizations filed a lawsuit against Foundation for "deceptive and abusive marketing practices."27 There were also serious problems in Florida for the company.28
In their treatment of our children, Foundation, CIGNA and other HMOs have failed the test.
The modus operandi is clear: treat patients like easy marks say anything, do anything, to get patients "in." Once they are in, don't deliver. Once patients are "in," as Monica Rochin's story shows, it is often difficult to get "out."
Plastered on billboards, on television, in magazines, at bus stops is a company logo next to what is usually a wholesome picture of a smiling American family with a healthy child in their arms. The values at the heart of the managed care system are not the family values portrayed in HMO advertising. Too frequently, the lives of children and their parents are handled with callous indifference. Too often, a goal of for-profit managed care is merely profit. Both social and private promises are broken.
Riverside, California resident Sara Israel rolls her eyes when she sees Health Net's billboards and advertising promoting the HMO's commitment to keep families healthy and well part of a big advertising push to promote the HMO as a "family wellness" provider. "They were not there for me," says Israel, a kindergarten teacher. "I just felt it was a lot of PR. There was no backing to the promises."
Israel was denied benefits for the birth of her son in April 1994 because she was sixty-nine miles from her HMO's doctors group even though she delivered at a Health Net facility.
According to the fine print in Health Net's policy, women were prevented from traveling more than thirty miles from their HMO's doctors group once they are eight months or more pregnant. The fine print was not in the "pregnancy" section of the coverage contract, but in the "emergency" section. In fact, Israel did not know of the provision until after the birth when Health Net denied payment of her $5,000 hospital bill. Perhaps assuaged by Health Net's feel-good advertising, Israel says, even then, "I was sure the HMO would come through for me. I felt that I had delivered at a facility that took Health Net and I had contacted my home clinic within forty-eight hours and, as soon as I got this letter denying this payment of bills I made a call to customer relations. She assured me that they would pay. It was an emergency. I could not make it back to the regular hospital."
But, Israel says, "Even though I appealed it and had gone through all their steps, Health Net still denied the bills twice. I spent my entire summer trying to get it cleared. I got bills. I had to tell the hospital they would get paid. I continued to get my bills. Day after day I would be making calls. I would tell the story over again. I put it in a letter. It was just the same letter of denial again and again. It was just a very cold letter. After all I had tried to do to take care of it, it was the same letter back to me. I knew I was being treated unjustly."
When Sara went to see an attorney, she found out that she could not take Health Net to court to recover the cost of the bills because her Health Net contract forced her into binding arbitration.
"I hadn't paid attention to that fine print either," said Israel. "You don't know these things until you are in the middle of these things. They say arbitration is quick, but it took a long time. It took from February of 1995 to December 1996 until a decision was made. It was long and drawn out. I was given the impression the process would be quick."
While Israel ultimately forced the HMO to pay her bills, she asked the arbitrator for damages to cover her time, energy and the HMO's bad faith. She waited a year before losing her claims. Ultimately, Israel's fight changed Health Net's policy but the company, like other HMOs, is constantly searching for "exclusions" to its contacts. They know that delay will not cost them much, so they stonewall.
This is the heart of the indictment against HMOs and managed care companies. They publicly profess that they value caring and delivering treatment, but the universal tendency the core rule of their business is to delay and deny at a great cost to the patient and a substantial savings for themselves.
Should we have to fight with HMOs and managed care companies for care they promised, marketed and contracted for? Are HMOs lying outright to us about their intentions and practices? How do they get away with it?
Most patients simply do not use their HMOs. Companies can produce patient satisfaction surveys showing popular contentment, because they poll their patients who are healthy those who rarely use the HMO not the sick and chronically ill patients who actually need treatment. HMOs must be judged by how well they treat the ill. These most vulnerable patients are the ones who know all too well the managed care mantra of deny and delay the stonewalling of services that the companies know they should provide, but do not until they are pushed. The companies know many people will give up and even the tenacious consumer, who receives benefits, will do so only after the HMO's money has more time in the capital markets.
Another artful means of lowering costs is to deny that care is covered under a plan, resulting in an increasing bone of contention between patients with chronic illnesses and HMOs.
Entire illnesses now fall outside of coverage categories. Autism, for instance, is medically known to be a biologically-based brain disorder. Because HMOs cannot restrict coverage of illness resulting from biological disease, many HMOs classify autism as a mental illness so that it falls under a coverage exception according to activists at the autism associations.
Any pervasive developmental brain disorder that is neurological in nature constitutes a "biologically based brain disorder" according to the medical experts. California Insurance Code Section 10123.15 spells out that insurance companies must cover biologically-based brain disorders and developmental disorders like autism. HMOs, however, are not regulated by the California Insurance Department. To avoid paying for treatment, they have reclassified autism as a mental illness, essentially rewriting the rules of medical science. Many insurers, until they are challenged by an autism association, also do this.
Autism is not the only condition where HMOs have cut back on coverage through reclassification. HMOs have tried to claim that breast reconstruction is outside policy limits, characterizing it as a cosmetic surgery, even after a mastectomy for breast cancer. Operations for birth defects, such as a baby born with one ear or a cleft palate, are also being denied under the cosmetic surgery exclusion. "It used to be that if you were born with something deforming, or were in an accident and had bad scars, the surgery performed to fix the problem was considered reconstructive surgery," said Dr. Henry Kawamoto, a surgeon at UCLA. "Now, insurers of many kinds are calling it cosmetic surgery and refusing to pay for it."29
HMOs, which promise families full-service protection in their advertising, also drastically limit coverage for conditions such as anorexia, bulimia and other eating disorders. While anorexia frequently requires years to treat effectively, as well as months of hospitalization, HMOs often have a $10,000 cap on treatment. Other HMOs apply a $30,000 lifetime cap, which translates to fewer than thirty days of inpatient care. For the five million women and young girls who suffer annually from an eating disorder, HMO medicine's message is one that is never advertised. "If you've got diabetes, no problem. If you've got anorexia big problem," said Dr. Hans Steiner, co-director of the Eating Disorders Program at Lucile Packard Children's Health Services at Stanford University. Steiner has noticed "astonishing" changes in how anorexia patients fared in recent years with HMO medicine's growth.30 National Public Radio reported that in the mid-1980s the average hospitalization for an eating disorder patient was between two and seven months, but managed care companies only cover hospital stays that "range from ten days over the patients' lifetimes to ten to thirty days per year."31
For years, HMOs covered impotence, until there was a cure. Kaiser and other HMOs announced in June of 1998 that they would not cover Viagra, even though their contracts with consumers included coverage for impotence. The State of California had to force Kaiser to cover the drug.32 While there is certainly recreational use of the drug, it is a temporary cure for impotence.
HMOs accept risk when they contract for coverage, they should not be able to dump risk when treatments are developed to cure a disease.
Foundation Health's problems are disturbingly similar to its competitor, Kaiser. Its marketing is similarly alluring: "When you need us, we'll be there. The things in life that count the most are things that can't be counted. A smile, a hug, a healthy mind and body. Employers and families depend on Foundation Health to be there when it counts. Foundation Health. When you need us, we'll be there."33 Yet its record is a disaster:
Listen to the soothing words of PacifiCare, based in Cypress, California, in advertising in the Los Angeles Times:
"If experience has taught us anything over the years, it's that no one should have to settle for less. Well, when it comes to health care, things aren't any different…Secure Horizons offered by PacifiCare. [And in a separate 1999 ad] Secure Horizons offers: Unlimited Annual Pharmacy Benefit · Unlimited Generic Medications · Unlimited Brand Name Medications [emphasis added]"37
But PacifiCare's approved drug list exchanges effective high-cost, anti-psychotic drugs such as the schizophrenia drugs Risperdal and Prozac, with less effective, but cheaper, alternatives. PacifiCare's formulary replaces Risperdal, which is recommended by the American Psychiatric Association and the National Alliance for the Mentally Ill, with Haldol, a cheap, older generation drug with severe side effects that include uncontrollable shaking and restlessness. While a thirty-day supply of Risperdal costs about $240, the same supply of Haldol is $2.50.38
Or take another managed care company, Aetna, whose "Informed Health" advertisements claim:
"THE MORE YOU KNOW THE BETTER YOU FEEL. When you have health questions, you want answers. You want to know about all of your options. You want info, info, and a little more info. Okay. Introducing Informed Health from Aetna Health Plans."39
In 1996 Aetna merged with U.S. Healthcare, whose agreement with physicians included the following gag clauses:
"Physician shall keep the Proprietary Information [payment rates, utilization review procedures, etc.] and this Agreement strictly confidential."
"Physician shall agree not to take any action or make any communication which undermines or could undermine the confidence of enrollees, potential enrollees, their employers, their unions, or the public in U.S. Healthcare or the quality of U.S. Healthcare coverage."
Such disparagement clauses prevent a physician from alerting patients and the public to unsafe medical practices.
Did such gag clauses continue in force after the merger? The American Medical Association (AMA) noted in a February 1998 letter to Aetna CEO Richard Huber the "presence of a ‘gag clause.' While you state that ‘Aetna U.S. Healthcare opposes gag clauses and our contracts contain anti-gag clauses,' this is flatly contradicted by the language of the contract. Provision 1.2 prohibits the physician from ‘imply(ing) to Members that their care or access to care will be inferior due to the source of payment.' It is disingenuous to deny that this clause functions as a ‘gag clause.' As we have already indicated, this clause could easily be interpreted to bar a physician from informing a patient that the treatment that he/she recommends is not covered by the plan even though the physician believes that it is medically necessary. The AMA is aware of other plans that have threatened to terminate physicians for precisely this type of communication, and there is nothing in the Aetna contract to assure against this occurring."40
In December 1998, the Texas Attorney General named six HMOs in a lawsuit charging them with rewarding physicians for withholding care. Four of the six HMOs are owned by Aetna. The Attorney General also charged, according to The Dallas Morning News, that Aetna "penalizes doctors who speak frankly with patients about the insurer's coverage."41
Ultimately, in October 1998, after a public outcry, Aetna U.S. Healthcare announced that it was altering its contracts to "emphasize our opposition to gag clauses" and other "protections for our members."
On January 18, 1999 the AMA confirmed that the new contracts were riddled with other problems including, "mandat[ing] the ‘least costly' treatment alternative" so that the contractual definition of medically necessary services is "the least costly of alternative supplies or levels of service." In February 1999, the AMA also complained about Aetna's right under its contract to unilaterally amend all terms of its contracts with physicians without any requirement to notify physicians. According to the AMA, this allows the HMO to "impose barriers to care in order to ratchet down medical expenses, especially if it is under financial pressure to meet shareholder expectations."42
In this historical light, consider Aetna's other advertising and marketing claims.
A print advertisement in the Columbus Dispatch on April 3, 1996 represents: "We will encourage strong patient/physician relationships in which all health care information including treatment options is freely shared."
Aetna U.S. Healthcare's certificate of coverage promises "Participating Physicians maintain the physician-patient relationship with Members and are solely responsible to Members for all Member Services."
Aetna's advertisement in the Wall Street Journal on October 29, 1997 says, "First of all, the paramount focus of health care must be quality. It should be the only reason we're in this business to help raise the quality of care."
Aetna's advertisements to Medicare recipients claim: "The way it works is that they [the government] give us 95% of what they would normally pay out on Medicare and, in exchange, we provide the coverage. The condition is that we have to provide at least as much coverage they do. The reality is that we are able to provide quite a lot more. We do it by reducing administration costs, which are a huge part of today's health care costs, and using the savings to increase the benefits we offer."43
In reality, Medicare administration for fee-for-service patients has a 2% overhead cost.44 Aetna's overhead cost administration, marketing, profit, executive compensation accounts for roughly 20% of the premium dollar paid to the HMO. In 1995, Aetna spent only 81.4% of its revenue on medical care, and in 1994 only 77.4% on medical services.45
California-based Inter Valley Health Plan advertises in its billboards:
"They treat you like a person, not a number. They go the extra mile to help. We not only care for you, we care about you. We get excellent doctors and hospitals."46In July 1997, an arbitrator ruled against Inter Valley in the case of a Medicare patient with kidney cancer who was denied care by the HMO. This was the judge's characterization of the HMO's behavior: "The actions of the defendants are not capable of any rational explanation. The refusal of authorizations, the delays, the lack of timely notice to plaintiff are unconscionable…The facts present a compelling picture of the problems and pitfalls of what has come to be called ‘managed care'."47
Unfortunately, those who HMOs aggressively market to, then fail most frequently, are the most vulnerable among us. Worse, it is not just those whose money is tight that are the targets of this pernicious salesmanship, but any group of people for whom the government pays a portion of health costs including older people.
Seniors are among the most lucrative "lives" that an HMO can cover. In urban areas, HMOs are paid approximately $500 per month for every patient in their plan regardless of whether or not medical services are provided to them. The companies go to incredible lengths to market to the healthier seniors, making bold promises, sending out so-called "senior ambassadors" who themselves are senior citizens paid to sell HMO programs like Amway sells soap. But when it comes time to deliver on that care, seniors are often given short shrift.
Angered by what he perceived to be deceptive advertising, New York City Public Advocate Mark Green referred a half dozen HMO ads in 1995 to the New York State Attorney General and the New York City Department of Consumer Affairs, saying that "For some HMOs, the letters stand for ‘Hyping Medicine to the Old'."48 Among the ads, Elderplan Inc. claimed it has "The $0 Premium Health Plan," when the elderly are actually charged a monthly premium of $46.10. Another ad from Oxford Health directed at seniors claimed "Oxford Health Plans is No.1" but the plan referred to in the ad is not open to the elderly.
An earlier investigation by New York state Health Department investigators, posing as enrollees, exposed a new sort of fraud they had problems getting appointments with doctors at thirteen of eighteen HMOs.49
This "bait and switch," where prospective enrollees are promised new health care benefits that fail to materialize is increasingly common. HMOs, for instance, attract Medicare recipients with promises of free eyeglasses, prescription drugs, dental care and other items that traditional Medicare will not pay for. But once seniors join the HMO, the inducements they were marketed dry up.
In 1998, premium increases or benefits cutbacks were announced by Medicare HMOs in California, Maryland, New Jersey, Pennsylvania, New York and other states. Only three months after Coalinga, California resident Mike Megarian, 81, signed up for California Blue Cross to "save ourselves some money and get the benefits," Blue Cross ended his free drugs, eye glasses and dental care benefits, and required a $65 monthly premium. "We let our good policy go and signed up with this," Megarian said. "We didn't think that after three months they were going to start raising prices."50 Megarian's complaint is an increasingly serious one. Once patients sign up for HMOs and terminate secure Medigap policies designed to cover what Medicare will not, it is cost-prohibitive to buy a new Medigap policy when their HMOs go back on their word. Once seniors that have paid into these policies for years abandon them, the Medigap insurers are all too happy to keep the premiums and dump the aging patient.
Federal investigators at the General Accounting Office (GAO) reported in April 1999 that HMOs routinely give false and inaccurate descriptions of costs and benefits to Medicare recipients.51 The GAO reviewed documents from sixteen HMOs and concluded that there were "significant errors and omissions." For instance, some HMO materials said that women needed a referral from a doctor to receive a mammogram, but federal rules do not allow this. Another GAO report on the same day found Medicare HMOs often do not tell patients that they can appeal HMO denials of services.
HMOs not only mislead consumers and break promises, but, because these companies can keep for themselves every dollar they take in that is not spent on the patient, they also shun the sick in favor of soliciting the well. HMO senior ambassadors give their pitches at shuffleboard centers, bridge clubs, golf club houses places frequented by healthy seniors, not the chronically ill. HMOs and insurance companies have been caught red-handed in this process of "cherry-picking" seniors whose health costs are likely to be lowest. This shifts a heavy burden onto the fee-for-service system that must cope with a disproportionate number of sicker patients.
In 1997 the GAO spelled out the costs of cherry-picking to the taxpayer when it concluded that the Medicare program paid HMOs $1 billion more than it should have because HMOs enroll people who are healthier than the typical Medicare recipient.52 Later that same year, the GAO found that "new HMO enrollees tended to be the least costly." Whatever the burden on the taxpayer, the fate of the sick was worse. The GAO stated that "the rates of early disenrollment from HMOs to FFS [fee for service] were substantially higher among those with chronic conditions,"53 meaning the sick were forced out. Moreover, the GAO found that as enrollment grows, the problems increase.
Just how bad is this tendency for the sick to be disenrolled? One out of every five Medicare HMOs had disenrollment rates above 20% in 1996. Most of the enrollees left because of problems receiving medical treatment.54 In stark contrast to the images presented in advertising and marketing, the ill elderly are running into so many obstacles that they are literally being forced out of HMOs.
In late 1998, Medicare HMOs began dropping out of counties where they felt their reimbursements were not high enough or their costs too high. While urban seniors were attractive to enroll at about $500 per month per head, caring for those with health care problems can be expensive. When HMOs could cherry pick the best risks among the older Americans, the companies set enrollment records. When the cherry picking was no longer so simple or tolerated, the HMOs suddenly pulled out, dumping their elderly patients, particularly in rural areas. As mentioned earlier, while the patients can get Medicare, any earlier Medigap policies which they left behind when they enrolled at the HMO are available only at a prohibitive price.
As of October 1998, three dozen private health plans that participate in Medicare said they would not renew their contracts in 1999.55 HMOs withdrew from more than 300 counties in at least twenty-two states. The pull-outs directly impacted more than 400,000 Americans one out of every fifteen beneficiaries enrolled in HMOs.56 In 1999, of the 39 million Medicare beneficiaries who are elderly or disabled, 18%, or 7 million, were covered by an HMO.57
Fifty thousand Medicare beneficiaries were left without an HMO option for health care, according to President Clinton, who condemned the exodus of HMOs from the Medicare market.
"We expanded the number and type of health plans available to Medicare beneficiaries, so that older Americans, like other Americans, would have more choices in their Medicare," said Clinton in October of 1998. "I think it ought to be said, in defense of this decision and the enrollment of many seniors in managed care plans, that one of the principal reasons that so many seniors wanted it is that there were managed care plans who thought for the reimbursement then available they could provide not only the required services under Medicare, but also a prescription drug benefit.
"Well, today there are 6-1/2 million Medicare beneficiaries in HMOs. As we all know, in recent weeks the HMO industry announced that unless all Medicare HMOs could raise premiums and reduce benefits all some health plans would drop their Medicare patients by the end of the year. We told them, ‘No deal.' That's what we should have done. We were not going to allow Medicare to be held hostage to unreasonable demands. So, several HMOs decided to drop their patients. These decisions have brought uncertainty, fear and disruption into the lives of tens of thousands of older Americans.
"Now these HMOs say they are looking after the bottom line…We were asked just to give all HMOs permission to raise rates whether they need to or not without regard to how much money they were making or not, and I think that was wrong,"58 Clinton concluded.
In 1999, the HMOs' demands increased. On July 2, 1999, the New York Times reported Medicare HMOs will raise premiums or reduce benefits for most of their senior enrollees, and at least 250,000 Medicare patients will be dumped by their HMOs because the companies will no longer provide service in their area unless the HMOs are paid more.
HMOs have, indeed, turned into fair-weather friends to taxpayers and Medicare recipients. False promises are not atypical for this industry.
Hundreds of millions of dollars spent annually on advertising paints a far more secure and pleasing portrait of our health care system than truly exists. How can they get away with it? While the answers will be explored in more detail in later chapters, it is clear that managed care companies and HMOs are pursuing profit with a vengeance.
In advertising, HMOs emphasize blanket protection and security. Yet before courts and legislatures, HMOs argue that they are not full-fledged insurers and they have limited responsibility for the provision of medically-necessary care within their coverage areas. To patients in need of treatment, HMOs say that "medically necessary" does not mean what the doctor, or traditional insurance, orders.
Ten year-old twins in Covina, California show just how narrowly the term "medically necessary" can be defined. Since birth, Steven and Bradley Sarver have had rare sleeping disorders similar to "crib death" called sleep apnea (cessation of breathing) and bradycardia (slowing of the heart rate). They are in constant danger of dying in their sleep as their heart beats slow like clocks winding down and their breathing stops. Since the condition affects the body only during sleep, and Steven and Bradley could die or suffer permanent brain damage as a result of just one of these events, the boys need professional home-nursing care, as well as sophisticated medical monitoring equipment. The home-nursing care prevented the boys from being hospitalized full-time and has enabled them to attend regular school and participate in most normal activities of children their age. But Blue Shield, a managed care company that offered the Sarvers a preferred provider option (PPO) plan, denied critical in-home nighttime nursing care, deeming it "not medically necessary." The same treatment was previously covered as "medically necessary" by their traditional indemnity insurer.
The entire cost of the boys' home-nursing care and treatment until October of 1993 was covered by their father's traditional group health insurance plan through the City of Beverly Hills. The problems arose when the Police Department changed to Blue Shield. The boy's medical condition did not change only their insurance company was "arranging" for their care, rather than indemnifying them against illness, a critical shift in service under "managed care."
Steven and Bradley's treating physician, a preferred provider who was approved by the new managed care company, insisted that the boys' care was medically necessary, and ordered that the boys have professional home nursing care. However, the company continued to deny coverage for the boys' treatment until a lawsuit was filed. In March of 1994, the Sarvers won a preliminary injunction forcing the health plan to pay for the twins' care until their trial was complete, and the company ultimately settled the case.59
Blue Shield's shield didn't cover Linda Sarver's children any more than Health Net's net caught Sara Israel during her pregnancy, Foundation supported Monica Rochin's twins, or CIGNA lived up to its word for Adrian Broughton.
If how well children and seniors are treated is a critical indication of any system's worth, then many managed care companies are failing our nation.
How secure, then, are patients in Secure Horizons? How healthy are Health Net's enrollees? Do Prucare patients really have a piece of the rock? Is Humana humane? Nowhere is managed care's pernicious downsizing more a threat to patients or communities than in hospitals across the nation, where seriously ill patients are supposed to be cared for. It is this transformed landscape of hospitalization that we examine next.