Health Plans, Health Care Costs, and Medical Ethics

This week I had occasion to review the eight page report from the July meeting of the Harvard Pilgrim Health Care Ethics Advisory Group (which I chair) on "An Ethical Framework for the Health Plan Role in Containing Health Care Costs." I characterized the situation of health plans as follows:

Health plans are in the middle of the health care system. They design and sell benefit programs, receive premium income from corporations, government agencies, and individuals, contract with and pay providers for delivering care, and monitor/analyze all the transactions. From one perspective, health plans are powerful players in the system – without reliable payment for services the system would screech to a halt. From another perspective, health plans are – in a term President Nixon used – “weak, pitiful giants” that control neither the inputs (money) nor outputs (care delivered), but are held responsible when things go wrong.

The group reviewed U.S. experience with managed care. During the managed care era (approximately 1980 – 2000), U.S. health care policy asked health plans to take central responsibility for managing costs. Health plans used network contracting and utilization review to shape practice patterns. For a few years the cost trend decreased. But the public rebelled against the imposition of limits, and “managed care” became a term of abuse. Insurers backed off from managing care, and the cost trend went back to double (or more) the rate of inflation.

Given that the discussion took place in a group devoted to reflection about ethics, it isn't surprising that the group saw ethics - meaning (a) identification of the values actually being applied in a domain (like health care), (b) deliberation about the values we believe should be applied, and (c) specification of ways to move towards the preferred state, as potentially important for the effort to get a grip on health care costs. Values play a major role in determining the choices we make (as individuals and as a society) about how much and what kinds of medical care to provide, and, more broadly, in determining the way we govern our health care system. Without shifts in values, our society will not make the hard choices required to control health care costs.

On reviewing the discussion, four points stood our for me:

1. A physician participating in the discussion felt that in principle it is ethically acceptable for third party payers not to pay for high cost/low benefit interventions. But he emphasized that physicians largely do not want to be put into the role of making judgments about the cost-worthiness of interventions for their patients (unless the patients are self-paying and ask for the physician’s help in making decisions about their own expenditures). And, even if physicians were willing to make these decisions, there would be too much variation from physician to physician for that approach to be fair. The physician concluded that “we need rules about cost-worthiness to be set at a high level in society…not at the level of the individual doctor and patient.”

2. Human nature leads vendors – from retail stores to hospitals – to seek maximum profit. Similarly, it leads individuals who (a) believe that a medical intervention offers them more benefits than risks, and (b) have insurance that will pay for the intervention with other people’s money, to (c) become vigorous advocates for receiving the intervention, since (d) cost is not part of their equation. This is the rationale for the movement to Consumer Directed Health Care. The hope of CDHC is that consumers will begin to include cost-worthiness in their health care decisions, just as we do in our decisions about food, housing, education, and charitable donations, as well as the more commonly cited domain of consumer electronics and automobiles. The Ethics Advisory Group endorsed the aims of CDHC, but was largely agnostic about what the impact of this form of insurance design will turn out to be.

3. The discussion emphasized the potential for employers to take a strong role in the effort to manage costs. Employers are not simply purchasers of insurance. They are also small communities in which the employer and the employees have a shared interest in getting maximum bang for the buck with regard to health benefits. Every dollar spent on health care that produces less than a dollar’s worth of benefit reduces employee income and impedes the enterprise's success. One participant described how the employees of a small company met as a group each year to discuss their health insurance choices and to reflect on trade off decisions. This process heightened employee understanding of the interaction between health insurance, wages, and the company’s success, and led to innovative planning that kept the company's recent renewal close to the increase of the CPI.

4. Several Ethics Advisory Group members cited the tiered pharmacy benefit as an exemplary health plan contribution to ethical cost containment. With regard to physicians, the tiered benefit does not put them into the middle of cost management. Instead, physicians can act as advisers to their patients as to the least costly way to achieve the desired result. Patients retain a wide range of choices, though higher tier options will cost them more. And, the evidence base is relatively stronger for pharmaceuticals than for many other areas of medicine, which makes the tier assignments potentially more understandable and acceptable for patients and providers.

Ethical deliberation about cost containment requires facts about the drivers of costs and values that guide decision-making. Because health plans have distinctive access to data about the care experience of their enrollees, they can support ethical deliberation about costs by providing potentially actionable information to consumers, employers, providers, and the concerned public.