THE HMO REPORT CARD: A CLOSER LOOK

Transcription

1 THE HMO REPORT CARD: A CLOSER LOOK by Humphrey Taylor and Michael Kagay Prologue: in the current volatile health care environment, there is a vast amount of data generated from the government, academia, advocacy groups, and the press on the implications of various policy changes and on the effects of new trends. Despite this wealth of information, though, there are very few specifics on the attitudes of people affected by the changes. Humphrey Taylor and Michael Kagay, polling professionals at Louis Harris and Associates, are among the few people to have gathered such information. In the following article, Taylor and Kagay summarize a poll conducted last summer for the Henry J. Kaiser Family Foundation on the attitudes of physicians, employers, and the public towards health maintenance organizations (HMOs). This is the second such effort by Harris for the Kaiser Foundation the first was carried out in 1980 so that Taylor and Kagay are able to present some valuable trend data. Specifically, the authors have found that interest in HMOs by non-hmo members has continued to increase, employers are generally enthusiastic about HMOs' cost-effectiveness, and, perhaps most interestingly, the hostility of physicians is declining. The overall conclusion is that the stage is set for continued growth in HMOs into the 1990s. Between them, the authors have been conducting opinion polls for around thirty years. Taylor, president of Louis Harris and Associates, founded and managed his own survey research firm in his native Britain before it was acquired by Harris in His longstanding interest in and commitment to health care was shaped by his parents who were both physicians. Kagay, vice-president for foundation-sponsored research, joined Harris in 1982 after a decade of teaching at Princetons Woodrow Wilson School of Public and International Affairs. Five of those years were spent as a polling consultant for the New York Times. Kagay has a Ph.D. in political science from the University of Wisconsin. Taylor has a degree in mathematics and social anthropology from Cambridge University in England.

2 82 HEALT H AFFAIRS Spring Much has changed i n the health care delivery sphere sinc e Louis Harris and Associates conducted it s first survey of health main - tenance organizations (HMOs) for the Kaiser Family Foundation in Cost containment has become a major nationa l priority in both the public and private sectors, and alternative delivery systems, including HMOs, have expande d thei r reac h t o serv e a sizabl e proportion o f th e American people. An updated surve y of public, employer, and physicia n opinion regarding HMOs was conducted i n to track these change s and t o predic t th e force s mos t likel y t o influenc e th e futur e growt h o f HMOs. 1 HMOs Today The numbe r o f HMO s an d thei r member s hav e grow n rapidl y an d continuously durin g th e las t severa l years. Thi s growt h i s reflecte d i n many findings in the survey. In 1980, we found that 6 percent of privately insured household s nationwid e include d a t leas t on e famil y membe r who belonge d t o a n HMO. B y 1984, 9 percen t o f privatel y insure d households include d a t least one HMO member. Employers ' familiarit y with HMO s als o increased, wit h th e proportio n o f corporat e benefit s officers ver y familiar wit h prepaid healt h car e rising from 6 3 percent t o 77 percen t ove r th e fou r years. Mor e dramatically, amon g corporat e employers wh o offe r thei r employee s a n HM O option, th e number s reporting tha t a t least 1 0 percent o f their employer s had joine d HMO s almost doubled from 2 6 percent to 45 percent between and The growth o f HMOs and HMO membership ha s been parallele d b y substantial improvements in the image of HMOs with eligible nonmembers, employers, an d physicians. I n th e past, man y doctor s an d leader s o f organized medicin e were extremely hostile to prepaid practice. Now th e nation's physicians ar e becoming increasingl y positiv e about HMOs. By 1984, 50 percent of the country's physicians said they were at least somewhat favorable t o HMOs. In 1981, only 36 percent had been favorable. Many of the country's physicians still have deep reservations about HMOs, but th e tren d i s clear. Physician s ar e becomin g steadil y mor e positiv e about prepaid plans. Furthermore, th e surve y reveale d clearl y tha t HM O subscriber s ar e generally wel l please d wit h th e medica l car e the y receive. Indeed, 9 0 percent of HMO members were satisfied with the quality of their doctors, and 7 6 percent wer e satisfie d wit h th e qualit y o f hospital care. In bot h instances this level of satisfaction among HMO members slightly exceeded the satisfactio n o f patient s payin g o n a fee-for-servic e basis. However, many employer s an d mos t doctor s wil l be surprise d b y thes e findings. Sixty-four percent of all physicians and 47 percent of employers perceived wrongly that patients' overall satisfaction with health care services would

3 HMO REPORT CARD 8 3 be better with the traditional system. Prospects For Continued Growth One reason why, when we released the study, we were so confident in predicting a strong growth of HMO membership was the large number of eligible nonmembers who expressed a n interest in joining HMOs. At that time, 10 percent of eligible nonmembers said they were very interested in joining, and a further 2 8 percent said they were somewhat interested. In 1984, th e prospect s looke d eve n mor e favorabl e fo r HMOs. Th e proportion o f eligible nonmembers ver y interested i n joining a prepai d plan was still 10 percent, but the proportion who were somewhat interested increased 1 2 points to 40 percent of eligible nonmembers. HMO renewal s should remain high. Of course, the growth o f HM O membership depend s no t onl y o n th e numbe r o f ne w HMO s an d th e number o f ne w HM O members, bu t als o o n th e renewa l rat e amon g current members. In 1980, we predicted tha t HMOs would continu e t o grow becaus e th e overwhelmin g majorit y o f HM O member s sai d tha t they would renew their membership. The actual numbers were 75 percent who said they would certainly renew, and a further 1 7 percent who said they probably would do so, leaving only 6 percent who were negative or unsure. The picture in 1984 was almost, but not quite, as promising for HMOs. Those who sai d they would no t renew o r were unsure wer e stil l only 7 percent. However, th e proportio n wh o sai d tha t the y certainl y woul d renew, had fallen from 7 5 percent to 61 percent with more HMO members saying that they probably would renew (32 percent, as compared with 1 7 percent four years earlier). Conceivably, thi s coul d b e th e beginnin g o f a dangerou s tren d fo r HMOs, wit h HM O member s becomin g les s loyal. However, ou r ow n view is that this finding reflect s the rapid influ x o f new HMO members, many of whom have not yet become totally committed to prepaid practice. Indeed, amon g those who had been members for fiv e years or more, 7 5 percent sai d the y woul d certainl y renew, wherea s onl y 5 1 percen t o f those who had been HMO members for two years or less said they would do so. Members are satisfied with health care services. Another of the many pieces of evidence that HMO growt h wil l continue a t a rapid rate i s the relative leve l o f satisfactio n o f HM O member s an d nonmember s wit h their healt h car e services. In many importan t respects, HMO member s are no w substantiall y happie r wit h thei r healt h car e service s tha n ar e eligible nonmembers. And these differences have increased considerabl y since For instance, those who said they were very satisfied with their overall

4 84 HEALT H AFFAIRS Spring health care services included 4 8 percent o f HMO members, but only 34 percent o f eligibl e nonmembers. Full y 5 5 percen t o f HM O member s were very satisfied with their ability to see a doctor whenever they needed, as compared wit h only 3 8 percent o f eligible nonmembers. Forty-seve n percent of HMO members were very satisfied with the quality of hospital care, a s compared wit h onl y 3 4 percent o f eligible nonmembers, Forty - nine percen t o f HM O member s wer e satisfie d wit h th e availabilit y o f doctors and medical services twenty-four hours a day, seven days a week, as compared with only 32 percent of eligible nonmembers. And when it comes t o cost, th e differenc e i s even mor e striking. Full y 5 9 percent o f HMO members were very satisfie d wit h the cos t they and thei r familie s paid fo r healt h care, a s compare d wit h onl y 2 1 percen t o f eligibl e nonmembers. Indeed, when we look at the cos t issue in more detail, the difference s in satisfactio n betwee n HM O member s an d eligibl e nonmember s ar e enormous. Seventy-tw o percen t o f HMO member s wer e ver y satisfie d with the cost of major medical expenses, as compared with 47 percent of eligible nonmembers. Seventy-four percent of HMO members were very satisfied wit h th e amoun t pai d fo r thei r family' s treatmen t fo r mino r illnesses an d la b tests, a s compare d wit h 3 5 percen t o f eligibl e non - members. Seventy-tw o percen t o f HM O member s wer e ver y satisfie d with the amount paid for their doctor's visits, as compared wit h only 35 percent of eligible nonmembers. So in analyzing the survey we conclude that there were massiv e differences i n satisfaction particularly, but not only, with the cost of care, and tha t these differences ha d widene d substantiall y i n favor o f HMO s over the previous few years. HMOs attrac t a broad cross-section of Americans. Image s and per - ceptions do no t alway s move hand i n hand wit h reality. I n many area s the public image of an institution reflects the recent past as much as, or more than, the present. This survey shows that HMOs are changing, and that some of the old images of prepaid plan' s are no longer accurate. The image o f HMO s a s institution s whic h serv e mainl y blu e colla r o r low - income employee s no longer applies. We found indication s that HMO s are increasingly attracting nonunion, white collar workers. HMOs ar e less expensiv e tha n traditiona l fee-for-servic e practice. The mai n reaso n tha t governmen t an d man y employer s hav e looke d favorably o n HMO s i s the belie f tha t the y provide les s expensive care. The survey provided substantia l confirmation tha t prepaid healt h care is, indeed, mor e cost-effective. (Thi s wa s not, o f course, a direc t study o f th e actua l cost s o f prepai d an d fee-for-servic e practice. Th e Rand Corporation recently reported th e results of a major stud y on that subject, which found that HMOs are typically percent less expensive everything els e being equal mainly because HMO members spend fa r

5 HMO REPORT CARD 8 5 fewer nights in the hospital.) While HMO members have long felt that HMOs are less expensive, it has take n longe r fo r employer s an d physician s t o com e aroun d t o thi s view. But they are now doing so. We found tha t 85 percent of employers agreed that HMOs are effective i n containing health care costs, as did 7 8 percent o f physicians. These numbers compar e with only 59 percent o f employers and 57 percent of physicians in As physicians and employers have gained more experience with HMOs, they have become increasingly positive about prepaid plans particularl y about thei r cost-effectiveness. Whil e bot h group s stil l had reservation s about the quality of HMO care, they overwhelmingly applauded HMO s on cost-effectivenes s grounds. Indeed, i t is undoubtedly th e perceptio n of the cost-effectiveness o f HMOs a perception shared by both employers and employees tha t i s the mai n drivin g forc e behin d th e substantia l growth of prepaid plans. More tha n thre e time s a s man y employer s reporte d tha t HM O membership ha d decrease d th e cos t t o thei r companie s a s thos e wh o reported that it had increased costs. Thirty percent said HMOs decreased costs, 8 percent sai d the plans increased costs, and slightl y over half (5 1 percent) reported no effect. There i s dramatic evidence that competition from th e rapidly growin g HMO movemen t ha s ha d a significan t impac t o n physician s i n recen t years. For example, in only 2 7 percent o f physicians said that the y were considerin g affiliatin g wit h a n HMO. B y 1984, th e numbe r con - sidering an HMO affiliation ha d nearly doubled to 46 percent. Moreover, six out of ten physicians who were not part of an HMO or other prepai d plan said they believe prepaid plans would affec t thei r practices over the next te n years, and 2 6 percent believe d the y would b e affecte d a grea t deal. Furthermore, the competition generated by HMOs for traditional health care provider s ha s begun t o affec t th e cos t o f traditional fee-for-servic e care. Twelve percen t o f physician s i n traditiona l practic e reporte d tha t they had reduced thei r fees because of prepaid plans in the area, and 1 4 percent said they had reduced either the number or duration of hospital stays among thei r patient s becaus e o f competition fro m prepai d plans. And 1 8 percent o f fee-for-service physician s tol d u s that prepai d plan s operating in their areas had caused a reduction in their own total income. Quality of HMO care. The majority o f physicians (78 percent) believed HMOs ar e effectiv e i n containin g healt h car e costs. However, abou t two-thirds also believed that the cost-containment incentive causes HMOs to lowe r th e qualit y o f car e t o a n unacceptabl e level. Critic s o f HMO s and prepaid plan s have frequently focuse d o n this issue of quality th e quality o f doctors, the doctor/patien t relationship, availabl e specialists, and hospital care.

6 86 HEALT H AFFAIRS Spring On thi s qualit y issue, ou r result s wil l b e somewha t reassurin g t o proponents o f HMOs. Overall, HM O member s wer e mor e likel y tha n members o f th e genera l publi c o r eligibl e nonmember s t o be satisfie d with th e qualit y o f th e doctors. Ninet y percen t o f HM O members, a s compared with 84 percent of the general public and 85 percent of eligible nonmembers, were satisfied with the quality of their physicians. Employers, from thei r perspective, also disagree with physicians when it comes to quality. A majority o f employers (57 percent) said that HMOs do not lower the quality of care to an unacceptable level. Another common quality of care criticism is that HMO patients do not have a continuing relationship with one doctor. In fact, the difference o n this score between HMO members and nonmembers was not very great. Fifty-one percen t o f HM O member s sai d tha t the y ha d on e persona l physician compared t o 55 percent for nonmembers. Furthermore, HM O members were less likely than nonmembers to object to seeing a physician other tha n thei r usua l physicia n s o an y disparit y woul d no t appea r t o affect their overall satisfaction with HMO services. Yet the feeling that HMOs offer inferio r qualit y care, while not share d by either HMO members or employers, continues to be the view held by most physicians. Sixty-five percent of physicians, the same proportion a s in 1981, said tha t HMO s offe r inferio r care, mainl y becaus e the y wer e thought to perform fewer lab and diagnostic tests than may be necessary, employ les s qualified doctors, o r d o no t allo w fo r a n adequat e doctor / patient relationship. An objective measure of the quality of care is notoriously difficult, i f not impossible. However, our surve y did includ e two measures, though no t exhaustive, o f the qualit y o f physicians : whether o r no t the y ar e boar d certified an d how long they have been practicing. On these two measures we found n o significan t differenc e betwee n th e qualit y o f prepai d an d fee-for-service physicians. Adverse Selection Adverse selection is a term used when high-risk or unhealthy member s of an eligible population selec t a particular plan in greater numbers tha n average, causin g higher tha n averag e cost s to be incurre d b y that plan. Some people have feared tha t heavy users of health care services thos e with chroni c illnes s o r larg e families, fo r example woul d ten d t o us e HMOs becaus e o f th e benefi t t o the m o f th e coverag e provide d b y a prepaid plan. If this happened i n large numbers, HMOs would be in big financial trouble. Conversely, othe r critic s have suggeste d tha t on e reaso n wh y HMO s are apparently so cost-effective i s that they benefit from favorable selection, leaving heavy users of health care to be covered by traditional insuranc e

7 HMO REPORT CARD 8 7 plans. The surve y foun d tha t ther e wer e few, i f any, difference s between th e healt h statu s o f HMO member s an d eligibl e nonmember s nationwide, whether i n the incidence o f chronic illness, in days spent i n bed due to illness, or in health status. Insofar as there were any differences, HMO members appeared to have marginally lower health status, but the differences wer e no t statisticall y significant. An d th e surve y als o foun d that onl y 1 4 percen t o f employer s wh o offere d HMO s sai d the y ha d experienced advers e selectio n i n an y o f thei r healt h plan s becaus e o f HMO enrollment patterns. These findings support previous research concluding that the low cost of HM O car e i s no t du e t o favorabl e selectio n b y HMO s o f health y individuals i n th e population. However, on e shoul d not e her e tha t individual HMOs or individual health care plans may benefit from favorabl e selection or suffer fro m advers e selection due to local conditions or local factors that might cancel out one another in our nationwide data. Perceived Differences Between For-Profit And Not-For-Profit HMO s Until a very fe w year s ag o the overwhelmin g majorit y o f HMOs an d prepaid plan s wer e ru n o n a not-for-profi t basis. However, wit h th e dramatic growth of HMOs, major corporations and Wall Street investor s have been attracte d b y the potential profitabilit y o f HMOs, which hav e now become big business. Our surve y did not provide any hard data on the differences betwee n nonprofit an d investor-owned HMOs. However, employer and physicia n attitudes differe d markedly. O n balance, employer s tende d t o favo r investor-owned HMOs as being more likely to offer hig h quality medical care an d mor e likel y t o contro l costs. Physician s tende d t o agre e tha t investor-owned HMO s ma y do a better job o f controlling overal l costs, but, by a small margin, physicians thought tha t nonprofit HMO s woul d be better a t controlling premium cost s and would als o be more likely to offer high quality care. Comparing HMO And Fee-For-Service Practice Most o f the question s which w e aske d physician s concerned, directl y or indirectly, th e benefit s o r disadvantage s t o consumer s an d societ y generally of HMOs. In addition, however, we asked physicians to compare HMO practice with traditional fee-for-service practice. Regarding thei r ow n satisfaction, physician s i n prepai d plan s an d physicians in traditional fee-for-service practic e showed comparable levels. However, physician s i n HMO s wer e mor e satisfie d wit h thre e area s o f their practice professional pee r support, affiliation s wit h a major medica l center, an d th e tim e availabl e t o devot e t o nonprofessiona l interests,

8 88 HEALT H AFFAIRS Spring family, an d friends. On man y other aspect s of their practice, there wer e only small differences betwee n the levels of satisfaction o f fee-for-servic e physicians and HMO physicians. The only criterion on which fee-for-service physician s were more satisfie d related t o curren t income. HM O doctor s wer e marginall y les s satisfie d with their incomes than were fee-for-service doctors. On the other hand, they wer e marginall y mor e optimisti c about thei r earning s prospects i n the future. Th e hig h level s o f satisfactio n amon g doctor s i n prepai d practice were underscored by the fact that 86 percent of doctors in prepaid group practice planned to continue working in prepaid practice. Conclusion The mos t importan t singl e conclusio n o f ou r stud y i s tha t HM O membership will continue to grow very rapidly for the rest of this decade and into the 1990s. It will grow very rapidly because the great majority of HMOs satisf y th e need s o f thei r member s bette r tha n fee-for-servic e practice satisfie s th e need s o f many fee-for-servic e consumers ; the y ar e generally see n a s successfu l i n containin g costs ; employe r suppor t fo r HMOs is rising and i s likely to continue to rise; physician hostility is now declining; and prepaid practice will look increasingly attractive to consumers during an era of rising insurance premiums, deductibles, and copayments. We do not mean t o imply, o f course, that ever y individual HMO wil l succeed and grow. Some will surely stagnate or even fail, depending o n the quality of their management and of their marketing efforts i n dealing with local conditions. HMOs will need to contend with competition fro m other HMOs in their catchment area, an area which they may previously have had to themselves. In such a competitive environment, some HMOs may decid e t o targe t a n upscale, quality-consciou s marke t whil e other s may targe t a more cost-consciou s marke t o f consumers. Som e o f thes e strategies in some local circumstances are bound to prove wrong. Moreover, HMOs are not, of course, the only alternative to traditional fee-for-service medicine. The last few years have seen a rapid growth in a variety o f alternativ e deliver y system s includin g preferre d provide r organizations (PPOs), urgent care centers, surgicenters, and other ambu - latory car e services. W e ar e surel y goin g t o se e eve n furthe r increase d competition of this sort in the health care marketplace. While th e fee-for-servic e secto r wil l remain stron g fo r year s to come, PPOs i n particula r ar e becomin g increasingl y popula r wit h employer s because they combine prepayment with attractive aspects of the traditional system. I f PPOs thrive, the n HMO s wil l face eve n furthe r competitio n from within the ranks of prepaid health plans. What i s certain is that new delivery systems will continue to grow an d to influenc e th e futur e o f th e healt h car e industry. America n families,

9 PREPAID LONG-TERM CARE 8 9 employers, and physicians are becoming more willing to embrace alternative methods of funding healt h services, and the number o f alternatives has never bee n larger. Eac h syste m ha s it s supporter s an d critics, an d a n increasingly large segment of the country is willing to try the various new alternatives. NOTES 1. A Report Card on HMOs is available in two forms from the Henry J. Kaiser Family Foundation, 52 5 Middlefiel d Road, Suit e 200, Menlo Park, Californi a One i s a forty-page summar y report which includes all key findings an d tables. The second is the 250-page full report which includes extensive cross-tabulations, methodological discussion, and al l questionnaires. I n addition, th e actua l dat a se t ha s been archive d a t th e Inter - university Consortium fo r Politica l and Socia l Research, Universit y o f Michigan. We are grateful t o th e Henr y J. Kaise r Famil y Foundatio n fo r supportin g thi s research. Loui s Harris and Associate s i s responsible fo r fina l selectio n o f topics, question wording, dat a collection, and interpretation of results. Project directors at Harris were Elizabeth Montgomery and Asha Paranjpe, Ph.D. The survey solicited data from five separate samples, each of which was surveyed with a different questionnaire : (1 ) A representative, nationwid e cross-sectio n o f 1,00 4 adult s within the continental United States, with a subset of 230 adults who lived in areas where one or more HMOs were located, who were under sixty-fiv e years of age, and who were members o f households wher e th e mai n wag e earner wa s employed i n a n organizatio n with twenty-five or more employees. Such people are, by definition, eligible to be members of HMOs, and w e describe the m throughou t th e repor t a s eligible nonmembers. (2 ) A nationwide sample of 1,004 adult members of HMOs. (3) Two separate samples of employers, comprising 200 benefits managers and 20 3 senior executives in 320 companies located in areas served by HMOs. (4) A nationwide cross-section of 501 physicians. (5) An oversample of 171 physicians affiliated wit h HMOs.