"Off The Charts" - Managed Care: Failed Promise?
Tuesday, February 15, 2005SUSIE GHARIB: The relentless rise of healthcare costs is one of the major problems facing America. Employers, employees and retirees are all affected. Tonight we begin a series of reports looking at those soaring costs. We`re calling it "off the charts." Can medical costs be controlled? Tonight Jeff Yastine takes a look at the promise and plight of managed care.
JEFF YASTINE, NIGHTLY BUSINESS REPORT CORRESPONDENT: Meet the Bernard family. That`s Amy on the piano, dad Steve and mom Alice and their youngest, Jake. An ordinary American household, except that Jake was born with a cleft lip and palate. That`s meant extensive surgeries and other medical treatments almost since the day he was born. Steve`s HMO covers a large portion of Jake`s medical costs, but the Bernards find themselves with ever-larger co-payments. And the premiums Steve and Alice pay for his employer-provided health coverage have also been rising sharply in recent years.
STEVE BERNARD, FATHER: It`s not a maybe. I know a car payment is definite and a mortgage payment is definite and groceries and gas and everything else is definite. But it never used to be, hey, I have to allocate 10 percent of our income to medical. I mean that`s not the sort of thing that we`ve ever had to consider, but that`s where we`re at now.
YASTINE: Rising health care costs are a nationwide problem, jumping sharply in recent years at the same time that health care costs as a percentage of employers` payrolls have also been rising. Managed care was supposed to fix or at least slow down that trend. But some studies suggest managed care companies are fighting a losing battle to keep costs down. For one, managed-care companies are no longer denying as many claims as they once did for expensive treatments and medicines.
MICHAEL CARTER, VICE PRESIDENT, HAY GROUP: A couple of years ago in Congress there was a patient care bill of rights which would have basically, among other things, not permitted HMOs to limit care in that way and it didn`t pass. But HMOs would rather do the easing up themselves than have the government regulate it. And also another major factor is that in some cases care was denied and it had a negative medical impact for the individual, and then they sued.
YASTINE: Hospitals and doctors` practices have also undergone a round of mergers in recent years. Analysts say that`s given them more bargaining power with managed care providers, who cannot call the shots the way they once did.
PAUL GINSBERG, PRESIDENT, CTR. FOR STUDYING HEALTH SYSTEM CHANGE: They couldn`t have as credible a threat to say a hospital, saying, if you don`t come to terms with us, you`re going to be out of our network because today, with so much emphasis on having all the major hospitals in a network, the hospital knows they need me more than I need them. So I`m in the driver`s seat. I can get the rates that I want.
YASTINE: And a third reason: rising costs for improved medical technology and prescription drugs.
CARTER: With these new drugs available, the good news is that it creates new options for people with needs for these drugs. But the bad news is from being able to afford it. It`s putting a significant pressure on the health plan and therefore the employer that`s sponsoring that health plan and therefore the employee who has to cost-share on that health plan.
YASTINE: No one knows that more than Steve Bernard, whose son has the cleft lip and palate or Steve`s boss, Ira Giller, who is dismayed that the cost of offering managed care to his architectural firm`s employees just keeps going up.
IRA GILLER, ARCHITECT, GILLER & GILLER: It`s one thing to expect a 3 to 5 percent increase. It`s another thing to see 10 and 15 percent increases, 20 percent increases depending upon where. And obviously that`s more money I have to bring in just to break even with the previous year and that`s not always easily done in a small business.
YASTINE: The problem for managed care providers is how to bring cost back into line without alienating customers like the Bernards. That`s not easy but experts say finding a way to reduce costs for patients with chronic problems is the key to any solution. Jeff Yastine, NIGHTLY BUSINESS REPORT, Miami.
