In 1997, several newspapers, including the Wall Street Journal, and other news reporting media reported the effect of the “Baby-Boomer” generation on the economy, politics, finances, and in particular, the effect on health care.
With the Baby Boomers generation starting to turn 50, states are enacting hundreds of new restrictions as to how HMOs limit care, and these restrictions are a direct result of the political clout of the boomers.
The managed-care industry is still new and is feeling its way along. The past couple of years has not been as profitable as expected for health care providers or plans. It is bad enough that doctors and hospitals are clamoring for higher fees, big employers are sticking to their demands for the absolute lowest health care employee benefit prices, states are passing restrictive laws and stock traders are punishing health care and insurance companies whose profits do not take double-digit leaps.
Now, adding to all those woes, baby boomers are revolting against the strictures of Managed Care. This generation that has set the social and political agendas of the nation for the last three decades is beginning to suffer the aches and pains of middle age. To win them over, HMOs are loosening the rules for those willing to pay a premium, thereby slowing a trend that just a couple of years ago seemed unstoppable.
Executives of large HMO’s have stated that the market is telling them that the HMO as we know it, is on the decline and that it is a product whose time has come and gone. It has been difficult lately to recruit members to various classic, tightly controlled, health-maintenance organizations. More and more consumers want to have a say in their own medical treatment.
As a result of the boomers' political clout, states are enacting hundreds of new restrictions on the way HMOs limit care; such as requiring hospital stays after mastectomies and forbidding rewards to physicians for denying care. Congress is debating bipartisan proposals for a health-care bill of rights that would force managed-care companies to be more flexible by establishing independent reviewers to consider appeals of care denial. Opponents, including the majority of the health insurers, insist that the new laws can only push up the cost of health care.
But still health insurers are rethinking their positions on health care, which had been considered to be “etched in stone”, and they are giving in the political strength of their customers, and are yielding to marketing pressure. The results are more-or-less what they hear their customers telling them and the news is not good for the typical HMO.
At last, the news organizations accurately reported that Managed Care is a growth industry covering a broad range of health care providers, including not only HMOs, but also other, looser forms of medical care such as preferred provider organizations, etc. They awakened to the fact that increasingly, new customers are gravitating to open - access or point - of - service plans where members can go directly to a specialist, without prior approval from a primary-care doctor. They have discovered that many patients have no reluctance in paying more of the bill - which had almost been heresy to some of the news reporting organizations.
It was discovered that one of the largest HMOs that showed a respectable 20 percent membership growth in the New York area in 1997 and almost as well nationally, was "almost entirely" in plans featuring open access plans that attract customers, primarily from more expensive, traditional fee-for-service plans and networks of "preferred providers."
Also, when one insurer purchased the health insurance business of two other large insurers two years ago, it added 255,000 members in New York, of which only 15,000 joined the classic and restrictive HMOs.
Unfortunately, they felt that the flexible plans are more likely to increase health costs, often just shifting much of the cost burden from employers to their employees.
A research group reported that nationally, HMO membership rose 13 percent to 66.8 million early in year (1997) while that of point-of-service health plans shot up twice as fast to 7.8 million. Some researchers say the point of service total was even higher, as high as 14.2 million.
Consumers’ growing fussiness is putting added strains on the managed-care industry just as it is experiencing numerous other growth pains.
Several big managed-care companies struggled in 1997 with embarrassing financial reporting adjustments that upset Wall Street and drove down stock prices.
Some say the industry is also suffering from a glut of too many players. It is not just consumers' growing insistence on making their own choices that is putting upward pressure on prices. Doctors are fighting for pay increases after years of seeing their incomes erode. An actuarial firm reported that there is so many doctors, that the country actually needs only 300,000 of the 425,000+ doctors. Many physicians don't feel any particular incentive to practice more conservatively as most are paid a discounted fee for each service.
Another huge expense to managed - care companies is the administrative cost of controlling costs. The companies are spending hundreds of millions of dollars on computerized information systems that monitor patients, doctors and other providers of care. The companies report the results to the providers and try to promote cost effective practices. Some Managed Care companies organize committees of local radiologists, orthopedists and other specialists who weigh the results and urge their peers to conform.
Because of all these factors, many HMOs have lost money or made only small profits in the last few years as premiums were lowered and they put emphasis on recruiting new members. Revenues per member have actually declined every year since 1995.
Some HMOs have been willing to absorb losses to get new members, planning to raise prices later, but many HMOs will be frustrated all over again when they try to raise prices for 1998. Some of their biggest customers have banded together and forced the HMOs to settle for small increases or even decreases.
A few companies bring their own actuaries to negotiate prices based on the size, age, sexual mix and medical history of the employee group. In some cases their costs decreased significantly.
Where consumers lack negotiating strength, they often face higher fees. The Minnesota state government, for example, as well as smaller employers in the region, will all be facing 12 percent increases in HMO premiums next year.
Contrary to frequently - held beliefs, adding new members is no panacea.
Experts say that enrollment is only indirectly related to profit. Indeed, adding members can be costly. With growth it is necessary to add more personnel, and more personnel will create a need for more capital, with the result that physician networks are expanded in order to bring in more enrollees. This creates a Catch-22, or vicious circle.
New HMO members, particularly elderly people in Medicare HMOs, have a difficult time with the restraints of Managed Care. Handling their complaints creates an added cost that is essential to keeping them from joining another health plan.
The more an HMO grows the more sick people they must serve. The older HMO’s originally enrolled healthier people as those who are less healthy have a natural hesitancy to change insurers. Therefore the young and healthy people were insured. Now the HMO’s must start providing health benefits to those people who are not as healthy and have more of an inclination, and in many cases - need - to seek medical assistance.
Changes in Managed Care are inevitable and the news organizations are united in their belief that the onslaught of Baby Boomers will change the industry more radically than any other event.
Rhonda and Chris are approaching 40 and they are proud to be considered as "Yuppies", as well as Baby Boomers. Rhonda is a stay‑at‑home Mom for their two little girls, and Chris has been a Vice President of a specialty manufacturing firm for 15 years. The company provides them with a good benefit program, with health insurance being provided by a large HMO.
Both of their parents live in a small city 500 miles south. They had both graduated from the same high school where their parents now live and have many friends and relatives there. While visiting their parents last Fall, both daughters apparently contacted a virus and was running high temperatures. When one would improve, the other would worsen. The pediatrician that Rhonda had when she was a child in this town was called, and would be glad to see her daughters. Rhonda called their PCP who told her to give them aspirin, then plenty of liquids and rest, and would not refer them to her former pediatrician. After 2 more days of sniffles, headaches and sore throats, the PCP still refused the referral. Chris canceled his planned hunting trip with relatives; they bundled the girls up and headed home.
The girls only had a childhood virus, but their vacation was cut short, Chris did not get his deer, and they were all upset with their PCP. This is no way to treat a "boomer" and since Chris is on the Human Resource committee for Employee Benefits, guess what happened the next month!
Nearly twenty percent of the illnesses that can be related to lifestyle, it is estimated, costs over $171 billion dollars per year. One of the most easily identifiable lifestyle illness, heart attacks, are reported to cost employers an average of about $80,000 in hospital costs, and over $15,000 in disability benefits. In addition to the costs related directly to medical care and disability, lost productivity is very expensive. There are approximately 200,000 employees - ages 45 to 65 - each year disabled by heart problems and which cost employers more than $700 million to replace these employees. Obviously, it is in everyone’s benefit to reduce the financial toll that lifestyle illnesses bring to employers.
When a business has healthier employees, the business will make more money, be more successful, and can afford to expand a wellness program. Many businesses work with local health clubs to promote wellness programs. The health club industry has developed statistics that show productivity (and profit) can be increased by as much as 20% with an active and professional wellness program.
Absenteeism due to illnesses and injury is reduced dramatically for those participating in such a program.
A well-designed wellness program is an attractive recruiting tool and soon becomes known as an employee benefit. For those employees that use the program on a regular basis, it becomes a social as well as fitness aid. Productivity increases as the employees are able to see the results of the program and they start to feel better about themselves.
Coors Brewing Company was mentioned in particular, at a recent IRSA (Association of Health Club owners) meeting as they have had a wellness program installed for several months. A cardiac rehabilitation program at this brewery has shortened the length of time that an employee lost due to heart problems, from 7 months to just 5 weeks, and with excellent results with no negative effects. Medical claims for Coors employees who regularly use (two or more times a week) its wellness center are 13% lower than those for non-users. Coors’ wellness program includes a program designed to help temporarily disabled employees get back to work as soon as possible. In addition, they offer nutrition counseling and smoking cessation classes. Coors attributes cost savings in excess of $4 million for a recent year.
Typically, a corporate wellness program will return in excess of $3 for every dollar invested, and can have a measurable value to the company.
While typically a Wellness Program is provided or installed by a local health club, in some situations it will include preventive screenings, and non-medical programs designed for behavioral changes such as stress management and smoking cessation.
Managed care is not restricted to reducing employee benefit and health insurance premiums, but also can be used for the prevention of accidents in the workplace. Since over 10,000 workers are killed on the job each year, and 6 million are injured, this is of prime importance to all employers.
The prevention of illnesses and accidents in the workplace is primarily designed to reduce Workers Compensation costs but it also affects employee benefit costs. Employees, who are taught to recognize workplace hazards, and how to respond to such hazards, generally continue with these practices even while not on the job.
Employees are human beings, and all humans have problems serious enough to affect their job performance at some time or other. When these problems arise, many will go away without any professional intervention. However, those that do not will probably continue to worsen and will be reflected by a decline in work habits and product quality. Inevitably, absenteeism, injuries on the job, and increasing medical costs will arise.
Originally, these types of programs were designed to help those with alcohol problems. In the 1940’s, many returning servicemen had alcohol problems so many employers instituted formal programs to assist those to overcome their problems and to better assimilate into society. These programs have grown to encompass counseling and referral services, financial and legal counseling, marital counseling, childcare issues, chemical dependency and psychological problems. Large companies offer plans like this today and are quite popular, with an estimated 80% of large employers participating
If employees will use such a program, a recent study shows that medical claims averaged 30% less than for employees who did not use the program. Another study found that early intervention in chemical dependency could reduce medical costs by up to 69%, reduce the number of employee sick days by 47%, and lower accident benefits by 48%.
CASE STUDY: Patching a Sick Corporation
The Cordea company opened a new manufacturing plan in South Georgia, which was picked because of availability of employees and the business climate in that area. The main plant was still located in New York and the top executives at the Georgia plant were from New York, many from New York City.
After being in operation for about 3 years, their absenteeism rate kept climbing and they continued to see a decrease in productivity. Also, they had an increase in their Workers Compensation rate because of increased accidents and on‑the‑job injuries. The main plant sent their company Medical Director to the Georgia plant to see if there was any reason for the illness and injury problems,
The doctor noted that the greatest majority of the employees were used to manual and outdoors labor prior to working at the plan. Since working at the plant, their physical activities had greatly reduced, with the result that their overall general health condition had severely deteriorated.
In addition, the steady income from the plant had allowed the standard of living of nearly all of the employees to increase. Their eating habits were still rural South and consisted of a lot of fried foods, meat that contained a lot of fat, and desserts and drinks that were sweetened heavily.
Also, he discovered that many of the workers had an alcohol problem, Fortunately there was little drug use, but excess beer drinking in particular, seemed to be a local cultural problem.
The doctor recommended that a wellness program be instituted immediately at the plant, There was a Gold's Gym only 3 miles from the plant, and arrangements were made to subsidize memberships at the Gym. The Manager of Gold's worked with the doctor in establishing certain programs, including aerobic classes held at the end of each shift, that would specifically benefit the workers at the plant. Classes in martial arts and bodybuilding were created, and arrangements were made to baby‑sitters for plant workers using the Gym.
The company established a series of sports leagues, including industrial softball, which would compete inter‑company, and also with other leagues in South Georgia.
A counseling program was established for those who needed some help in controlling their alcohol intake, with special help for those who cooperated fully.
The employer even hired a nutritionist to supervise the company cafeteria, and regularly would hold cooking seminars, food‑tasting expositions, and cooking contests in an effort to change the eating habits of the employees, from a high‑fat diet, to one that was low in fat and high in vegetables.
After two years, the results were:
1. The eating habits changed but they still had their annual pork barbecue with baked beans, corn, cole slaw and Brunswick stew. By now, the New Yorkers were the biggest fans of the barbecue.
2. The plant won the regional industrial softball championship. They also had Martial Arts, basketball and bowling teams competing with other businesses in the state. A Supervisor was runner‑up to Miss Georgia in bodybuilding. They ran 3 aerobic classes each day, and 45% of all of the female employees attended the classes, as did many of the wives of male employees.
3. Absenteeism was reduced by 45%, injuries were nearly non‑existent, and the company feels that the wellness program was a great investment.
STUDY QUESTIONS
1. The group of Americans that are causing Managed Care organizations, particularly HMOs, to make the greatest changes in providing health care is
A. the Baby Boomer generation.
B. the senior citizens.
C. the “unions.”
D. the teenager generation.
2. The growth of HMO’s as compared to point-of-service health plans over recent years, indicates
A. that HMOs are growing more rapidly than any other type of health care plan.
B. that while HMOs are growing, point-of-service plans are growing more rapidly.
C. point-of-service plans will soon be obsolete.
D. indicates that no HMOs are profitable.
3. Many experts believe that
A. doctors are fighting for pay increases after years of seeing their incomes erode.
B. there are not enough doctors.
C. hospitals are full most of the time.
D. the more an HMO grows, the more healthy young people it serves.
4. The Baby Boomer generation is primarily revolting against
A. the restrictions of Managed Care.
B. the low cost of medical technology.
C. doctors performing abortions.
D. not having socialized medicine.
5. As a result of the political clout of the Baby Boomers
A. Congress is creating legislation to make HMOs more strict,
B. new legislation will lower the cost of health care dramatically.
C. more liberals will be elected to Congress.
D. states are enacting hundreds of new restrictions on the way HMOs limit care.
6. Wellness programs are designed to
A. treat sick people.
B. sell vitamins and herbs.
C. keep employees healthy and productive.
D. get people to join health clubs.
7. Industrial accidents
A. can be reduced by Managed Care.
B. are more severe in Idaho than in California.
C. are not covered by insurance.
D. occur only in factories.
8. Employee assistance programs
A. are designed to loan money to employees
B. encompass counseling and referral services and financial and legal counseling.
C. provide trained temporary personnel
D. are used primarily in several companies.
9. The primary reason for preventing illness and accidents in the workplace, is
A. to lower employee benefit costs.
B. to keep the Federal Government out of their hair.
C. to reduce Workers Compensation costs.
D. reduce the service of Para-medics.
10. The Health Club industry was worked with large industrial corporations
A. but it has been a total waste of money.
B. but it was found that employees who use a health club are the ones who normally are healthy anyway.
C. and statistics indicate that productivity can be increased by as much as 20% with an active and professional wellness program.
D. by recommending certain Chiropractors to employees.
1A 2B 3A 4A 5D 6C 7A 8B 9C 10C