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Kids and Health Care: How Managed Care Works Conclusion

Some industry experts suggest that what's disturbing about managed care isn't that the health care is worse -- it's that the plans shine a light on what a highly variable, random approach doctors and managed care companies take toward medicine. In fact, some researchers suggest that there is little evidence that managed care has nudged doctors toward producing the most cost-effective outcomes.

In the early 2000s, with various proposed "patients' Bill of Rights" proposals circulating around Washington, D.C., the Feds began drafting laws that would limit the limits -- reducing the discretion HMOs can use in delivery of health care services.

Ultimately, the biggest issue facing managed care in the United States is whether all the talk of a patient's bill of rights will lead federal regulators or the court system (federal or state) to erode HMOs and PPOs so much that they cease to have any cost-saving advantage over other health coverage plans.

An example of this erosion came up in early 1999, when a California jury ordered Aetna/U.S.Health Care to pay $116 million in punitive damages for refusing to cover experimental treatment for a cancer patient -- who eventually died.

In 1992, David Goodrich was diagnosed with a rare form of stomach cancer. Doctors in the Aetna HMO recommended that Goodrich undergo high-dose chemotherapy and a bone-marrow transplant. But the system's administrators denied the coverage.

However, nothing in the plan's handbook -- the main document about coverage issues that members received -- said that the treatments recommended by its own doctors were excluded.

One California-based managed care expert summed up the issues wrapped in the big verdict: "This shows the issue that is driving the consumer debate is the fear that plans are looking over the shoulders of doctors and are denying what a doctor perceives to be medically necessary."

Managed care advocates would argue that the problems reflected in the Aetna/U.S.Health Care case had been resolved years before. But the tide of public opinion was continuing to flow against managed care cost controls.

In another case that involved a managed care plan's coverage for prescription drugs, NYLCare Health Plans of the Mid-Atlantic Inc. was accused of noncompliance with a law that entitled certain patients to a 90-day supply of prescription medication.

In 1997, the Maryland Insurance Administration brought a sanction against the company after it received complaints between April and September that NYLCare denied members covered by its prescription drug rider the 90-day supply, according to the order signed by Maryland Insurance Commissioner Steven Larsen.

Under the Maryland law, health plan members who require maintenance medication for chronic conditions are entitled to a 90-day supply each time a prescription is refilled. The 90-day supply cannot be limited to purchase through a mail-order program.

NYLCare contended that it had complied with the law by making 90-day supplies available exclusively through its mail-order service. The HMO said administrative problems prevented it from providing wider access to members whose plans were effective prior to July 1998.

It didn't prevail.

Most states have passed laws that give people who join managed care plans specific legal rights demanding medical coverage. One good example: Beginning in July 2002, North Carolina passed one such set of guidelines. The state required "external review" of managed care disputes: This meant an independent review done by independent medical professionals. The review was binding on managed care plans.

If the external review determined that the plan was wrong in denying coverage, it must reverse its decision and pay for the requested service.

According to the North Carolina Department of Insurance (NCDOI), the law does not cover self-funded employee health plans covered under ERISA (the Employee Retirement Income Security Act), Medicare or Medicaid. And it doesn't cover denials for reason other than medical necessity.

However, members had to exhaust all internal appeals procedures with the plan before being eligible for the external review -- and that could take some time.

State laws like the North Carolina appeals process have had their intended effect on managed care plans. Most are careful about denying needed medical care. With this liberalization of benefits, and with the understanding that all health care in the U.S. requires a more aggressive approach than it did before the 1980s, managed care plans usually make the most sense for families with children.

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