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Managed Care Puts Squeeze on Poor

March, 1999

A study recently published in the Journal of the American Medical Association shows that as managed care grows, it becomes more difficult for uninsured persons to get health care. There are at least two ways in which managed care has this effect. This study was paid for by the Robert Wood Johnson Foundation.

Managed care organizations focus on negotiating the lowest possible fees from clinics and hospitals. In the recent past, when fee-for-service insurance was normal, it was commonly understood that insured patients were overcharged, and the surplus was used to cover the cost of treating the uninsured. That is no more. Managed care is willing to pay only the bare cost of treating its clients, and sometimes not even that much.

In addition, managed care organizations such as HMOs strive for the lowest possible per-patient payment to each "primary care physician" in their employ. Doctors who get no part of their income from managed care typically put ten hours of their time per month into caring for indigent patients. Those who get 85 percent or more of their income from managed care give up about half as much time (5.2 hours per month) to this work. Doctors whose source of income is between these extremes allocate their time roughly in proportion. Those who are less dependent on managed care do more pro-bono work.

Peter Cunningham, the lead author of the research, said: "The evidence suggests that the holes in the safety net are getting bigger. In areas where managed care is more highly developed, it is more difficult for uninsured persons to get care."

A second study, financed by the Commonwealth Fund and published in the same issue, found a similar reduction in unsponsored research, for similar reasons. Medical schools now have fewer studies financed by faculty members or by the schools. Most are now paid for by the pharmaceutical industry or by the federal government. This effect has been most pronounced in communities where managed care organizations predominate.

In economic terms, "cross-subsidies" (the use of profits from insured patients to cover unreimbursed work) are being squeezed out of the system. Taken together, the studies suggest that as managed care takes hold, doctors and academic researchers are losing their ability to provide for "the common good," said Dr. David Blumenthal, an author of the first study.

Condensed from an article by Sheryl Gay Stolberg which appeared in the New York Times, March, 1999.