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“Managed care” can refer to widely varying arrangements in the financing and delivery of health care. However, a common description, articulated by Marc Rodwin, will be used here. Managed care refers to health insurance combined with … controls over the delivery of health services. Managed care organizations (MCOs) exercise control over the kind, volume, and manner in which services are provided by choosing providers, or by controlling their behavior through financial incentives, rules, and organizational controls. Under traditional indemnity insurance and fee-for-service medical practices, the insurers enter into a contract with the insured party and reimburse the individual for certain medical expenses that are incurred. The individual receives medical services from any provider he or she chooses and usually pays a fee for each service rendered, with the insurer having no control over the choice of provider or provision of services. Managed care changes this relationship either (1) by directly providing the contracted-for services; or (2) by exercising control over the services provided. Many indemnity insurers now provide managed care in that they exercise control over their beneficiaries' use of medical services. They require preauthorization for … expensive referrals or procedures. They do not reimburse claims from medical providers for services rendered if the organization decides they were not necessary. Rodwin, M.A., “Managed Care and Consumer Protection: What are the Issues?,” Seton Hall Law Review, 26 (1996): 1007–54, at 1009.Google Scholar

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Bedrick v. Travelers Insur. Co., 93 F.3d 149 (4th Cir, 1996). By the same token, people needing motorized wheelchairs or other specialized durable medical equipment may find their health plans exceedingly reluctant to authorize them. See, for example, Iezzoni, L., “Boundaries,” Health Affairs, 18, no. 6 (1999): 156–64; Batavia, A.I., “Of Wheelchairs and Managed Care,” Health Affairs, 18, no. 6 (1999): 177–82.Google Scholar

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Many HMOs now participate in national quality evaluations called “HEDIS” (Healthplan Employer Data Information Set) that require the HMO to conduct annual reviews to ensure quality of care along a number of parameters such as immunizations, mammography, and the like. McDonald, C.J., “Quality Measures and Electronic Medical Systems,” JAMA, 282 (1999): 1181–82; Epstein, A.M., “Rolling Down the Runway: The Challenges Ahead for Quality Report Cards,” JAMA, 279 (1998): 1691–96; Bodenheimer, T., “The American Health Care System: The Movement for Improved Quality in Health Care,” N. Engl. J. Med., 340 (1999): 488–492; Spoeri, R.K. and Ullman, R, “Measuring and Reporting Managed Care Performance: Lessons Learned and New Initiatives,” Annals of Internal Medicine, 127 (1997): 726–32.CrossRefGoogle Scholar

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In some cases such listed services include procedures traditionally done by specialists, including dermatologic procedures such as skin biopsies, casting of undisplaced fractures, colposcopies, sigmoidoscopy, joint aspiration and injections, stress tests, and the like. Terry, K., “Surprise! Capitation Can Be A Boon,” Medical Economics, 73, no. 7 (1996): 126–138; Cheney K., “What You Can Learn From An M.D. Mutiny in a Managed-Care Plan,” Money, December 1995, p. 21; Novak, J., “How We Wrote Our Own Managed-Care Success Story,” Medical Economics, 75, no. 15 (1998): 116–27; “How Do Non-Physician Providers Function in HMOs?,” HMO Practice, 8, no. 4 (1994): 151–56.Google Scholar

“Ultimately, medical necessity can be thought of as a continuum, whereby services at one end of the continuum are clearly necessary for the diagnosis and treatment of an illness or injury, and services at the other end of the continuum are clearly unnecessary, and in between are services that have some degree of likelihood of benefiting a patient. As one moves along the continuum from clearly necessary to clearly unnecessary, the percentage of likelihood of a benefit from the provision of the health care involved decreases. The value judgment that must be made is how large the percentage of likelihood of a benefit should be for care to be provided. The closer that percentage is to 100%, the more likely it is that some individuals will be harmed by the withholding of care that could have benefited them.” Hirshfeld, E.B. and Harris, G.H., “Medical Necessity Determinations: The Need for a New Legal Structure,” Health Matrix, 6, no. 3 (1996): 3–52, at 24–25. See also Rosenbaum, supra note 50.Google Scholar

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Studies have found that, depending on the type and size of corporation, somewhere between 56% and 85% of the costs of health care are directly shifted back to workers through reduced wages. Another study found that, with respect to states' assorted mandates for health plans cover various specified services, from 59% to 90% of the costs of these mandates are translated into wage reductions. Blumberg, L.J., “Who Pays for Employer-Sponsored Health Insurance?,” Health Affairs, 18, no. 6 (1999): 58–61, at 58.Google Scholar

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Admittedly, one barrier to exposure of such guidelines is the fact that some of them are proprietary, and require the plans that purchase them not to disclose their contents. If open, guidelines-based contracting is to become the norm, some resolution—perhaps a broad-based buy-out—must be found for this problem. See, for example, Rosenbaum, Frankford, Moore, and Borzi, supra note 50, at 231.Google Scholar

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Though controversial, and perhaps not duplicable on a national level, the state of Oregon has attempted just such a prioritization with considerable success. Bodenheimer, T., “The Oregon Health Plan—Lessons for the Nation,” First of two parts. N. Engl. J. Med., 337 (1997): 651–55; Bodenheimer, T., “The Oregon Health Plan—Lessons for the Nation,” Second of two parts. N. Engl. J. Med., 337 (1997): 720–723.Google Scholar

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See Section IV-B-1, above. As noted there, even choices among antibiotics to treat a life-threatening infection challenge the black/white notion of “necessary,” e.g., as one drug may have a slightly greater chance of success, but at the price of riskier side-effects and high financial cost.Google Scholar