Ethical Issues in Managed Care

Ethics of Managed Healthcare

Healthcare policy has emerged as one of the most important issues in American politics and will continue to drive significant aspects of contemporary American public policy debates in the near future. That is because, on one hand, the United States has maintained a system of economic Social Security programs since the post-Depression era of the 1930s and government funded healthcare since the 1960s that reflect a fundamental ethical concern for the needs of the elderly, the indigent, and the most vulnerable segments of the population. On the other hand, the realities of contemporary managed healthcare could quite conceivably bankrupt the nation within the next generation if significant changes cannot be introduced to reduce costs, improve the quality of care, and eliminate waste and healthcare-system-caused human illness.

In the most general sense, the quality of care simply means that healthcare services are widely available, affordable, and as effective and safe as possible. Unfortunately, the American healthcare system is seriously flawed and currently incapable of providing high-quality care in many respects. Most of the problems are theoretically capable of being resolved, largely by adopting policies and practices already in use in other nations. However, there are tremendous barriers in the form of bureaucratic inefficiency and political partisanship. In all likelihood, the future quality of American healthcare will depend on the degree to which those barriers can be overcome in the near future.

The Concept of Managed Care -- Theory vs. Practice

Managed healthcare is not a particularly modern concept, having been implemented in some respects by the Weimar Republic in Germany and much more comprehensively in the middle of the 20th century in Britain, particularly in connection with the evolution of the "poor laws" of the 18th century into the growth of nationalized healthcare services recommended in the "Beveridge Report" commissioned by the Queen of England and produced by William Beveridge in the 1940s (Reid, 2009; Starr, 2002). Today, Britain maintains a National Health Service that provides all the medical needs of the entire British population at no cost to patients. Most other European nations have adopted similar approaches in addition to Canada and even Mexico albeit with varying degrees of success and convenience to patients (Reid, 2009; Starr, 2002).

By contrast, the U.S. still relies on a system of managed healthcare that is entirely unsustainable in its current form. Public healthcare programs are incapable of continuing to operate in the manner in which they were originally conceived, largely by virtue of the tremendous changes in the demographics of the population and the economics of the funding mechanisms responsible for maintaining those programs (Kennedy, 2006). Private healthcare is currently based on a managed care system that is entirely dominated by a for-profit industry that has been the principle obstacle to effective political decisions toward desperately necessary healthcare reform Kennedy, 2006; Levine, 2008; Reid, 2009; Tong, 2007). That raises a fundamentally important ethical issue (Beauchamp & Childress, 2009; Rosenstand, 2008) because, at present, it is not an exaggeration to suggest that American healthcare reform is being opposed at the highest political levels because of the degree to which lobbyists from the private health insurance industry have successfully promoted their interests to congressional representatives through campaign contributions (Dykman, 2008; Kennedy, 2006; Levine, 2008; Reid, 2009; Tong, 2007).

The Problems with Contemporary Managed Healthcare in Practice

Demographic Changes

When the American Social Security system, and later, the Medicare and Medicaid programs were first conceived and designed, they were based on the fact that the financial contributions of the working population was entirely sufficient to pay for the medical and social services needs of the indigent and elderly populations (Kennedy, 2006; Reid, 2009; Starr, 2002). However, in the modern era, the impact of several demographic changes attributable, most notably in relation to the increase in life expectancy of the population and the post World War II-era "baby boom" generation, have radically changed the sustainability of those programs (Kennedy, 2006; Reid, 2009; Starr, 2002). That was true even before the post-2007-era economic recession that severely reduced earnings and depleted retirement funds while simultaneously increasing unemployment for the foreseeable future. In combination, those demographic and economic realities suggest that American healthcare requires a fundamental restructuring very soon if it is to meet the healthcare needs of the population and avoid a highly unethical social dynamic in which quality healthcare services are available only to the wealthiest segment of society (Kennedy, 2006; Levine, 2008; Tong, 2007).

The Dynamics and Realities of Political Lobbies

Without a doubt, the most serious impediment to the achievement of necessary healthcare reform in the U.S. is the relationship between the private-sector, for-profit health insurance industry and political representatives in Washington DC (Kennedy, 2006; Levine, 2008; Reid, 2009; Tong, 2007). Currently, healthcare industry lobbyists outnumber congressional representatives by ratio of almost six to one, for which the healthcare industry pays hundreds of millions of dollars annually (Dykman, 2008; Goldhill, 2009; Kennedy, 2006; Levine, 2008; Reid, 2009). The purpose of those efforts are primarily to promote congressional support for legislation that is beneficial to the financial interests of private healthcare conglomerates that provide managed healthcare in the form of health insurance in the U.S. At an profit of approximately $700 billion dollars. That represents no less than one-third of the $2.2 trillion total annual healthcare expenditures in the country. Moreover, by (thus far, successfully) opposing the formation of a national single-payer" government-funded healthcare system of the type that has proven so successful abroad, private health insurers have created a virtual monopoly that can (and has routinely) allowed them to continually raise the price of heath insurance and healthcare to the point that it is projected to reach forty percent of the country's GNP in less than a decade (Goldill, 2009; Kennedy, 2006; Reid, 2009).

Essentially, the private health insurance industry now extracts one-third of the $2.2 trillion spent on American healthcare while contributing no healthcare services whatsoever (Goldill, 2009; Kennedy, 2006). By comparison, the two largest federally-funded medical services programs, Medicare and Medicaid, manage to perform all of the same administrative functions for approximately one-tenth of the amount absorbed, mostly in profit, by the private health insurance industry (Kennedy, 2006; Reid, 2009). Therefore, if the U.S. is ever to establish meaningful and ethically sound national healthcare, the single most important achievement will be fundamental changes to the process of political lobbying by the private health insurance industry whose financial interests are diametrically opposed those of the American population and the nation.

The Paradox of Compassionate Indigent Healthcare

Currently, one of the paradoxes of American managed healthcare is that those who contribute the least to the system often receive the highest quality care and almost entirely at the financial expense of those who do contribute to the system. That is because Medicaid provides free healthcare for those living in poverty (who do not pay into the system). Likewise, federal laws require all healthcare facilities that maintain emergency departments to treat any person who requests treatment, even when they present with non-emergent medical issues such as ordinary colds, as well as with requests for routine primary healthcare services that should be rendered by primary healthcare providers (Goldhill, 2009; Kennedy, 2006; Reid, 2009; Tumulty, Pickert, & Park, 2010).

As a result, those who rely (inappropriately) on emergency departments in hospitals receive the most expensive care that must be paid for by federal funds while those who pay for their health insurance plans are limited to the services authorized by their healthcare plans that frequently do not provide many desired services (Kennedy, 2006; Reid, 2009; Tumulty, Pickert, & Park, 2010). Even worse, hundreds of hospitals have had no choice but to close their emergency rooms altogether to avoid financial insolvency caused by the institutional share of the expense associated with the obligation to provide inappropriate non-emergent healthcare services to patients who rely on them for all of their medical care (Kennedy, 2006; Reid, 2009; Tumulty, Pickert, & Park, 2010).

Fee for Services vs. Compensation for Results

Another tremendous problem in the contemporary American managed healthcare model is its continued reliance on a fee-for-services healthcare professional compensation format. That scheme provides no real incentive for physicians and other healthcare professionals to achieve results or to avoid financial waste such as unnecessary testing and duplication of services (Kennedy, 2006; Levine, 2008; Taylor, Lillis, & LeMone, 2008; Tong, 2007). As a result, multiple physician specialists routinely prescribe duplicative tests, particularly for patients whose costs are absorbed by federally-funded programs (Kennedy, 2006; Reid, 2009), at tremendous financial waste. Admittedly, medical malpractice issues also contribute greatly to the waste represented by testing that is, in a practical sense, largely unnecessary medically (Halbert & Ingulli, 2008).

By contrast, a results-based compensation scheme such as that in use in Britain provides specific incentive for physicians and other healthcare professionals to achieve positive results (IOM, 2006; Kennedy, 2006; Levine, 2008; Rosenthal, Frank, & Li, 2005; Taylor, Lillis, & LeMone, 2008; Tong, 2007). In principle, that approach to health professional compensation utilizes a matrix-type of analysis that rewards improvements to human health instead of merely authorizing a menu of fees that, if anything, reward the professionals who prescribe and perform the highest volume of healthcare services irrespective of necessity or benefits to human health (Kennedy, 2006; Levine, 2008; Taylor, Lillis, & LeMone, 2008; Tong, 2007).

Reactive Healthcare vs. Preventative Care

The American fee-for-services compensation model instead of positive-results-based managed care compensation in other countries raises another fundamental ethical concern: namely, the essential focus on human health (Beauchamp & Childress, 2009; Rosenstand, 2008). Specifically, the entire approach of the American healthcare system relies on (1) treating human disease after it manifests itself in acute illness, and (2) an isolated system whereby multiple physician specialists rendering concurrent treatment for the same patients do not coordinate their respective care except in the most superficial manner designed more to protect them from potential liability for malpractice for delivering medically contraindicated care than to achieve the best possible comprehensive care and results for their patients (Goldhill, 2009; Levine, 2008; Reid, 2009; Tong, 2007).

Treating disease after it manifests itself in acute illness is precisely analogous to performing no periodic maintenance on an automobile and servicing it only whenever a major component system malfunctions or deteriorates to the point where the vehicle requires repairs to operate. In both cases, that approach is tremendously more expensive that preventative maintenance. In the U.S., it is not atypical for physicians in isolated specialties to completely ignore (or make only cursory mention of) medical concerns that to not pertain directly to their specialty (Reid, 2009).

Meanwhile, in Britain, every physician has a natural incentive to encourage and assist overweight patients lose weight and smoking patients to stop smoking (for just two of the most obvious examples) because their compensation is tied directly to their patients' overall health status rather than to the volume of services they render (IOM, 2006; Kennedy, 2006; Reid, 2009; Rosenthal, Frank, & Li, 2005; Tumulty, Pickert, & Park, 2010). In essence, the American managed care system that guarantees third-party and government subsidized payment rewards illness while the British system (and those of other nations that have already embraced the preventative medicine perspective) reward optimal health and the combined and coordinated efforts of all physicians and other healthcare professionals in that regard (Kennedy, 2006; Reid, 2009).

Waste, Fraud, and Abuse

With respect to major problems in American managed healthcare, it is a system that is fundamentally predisposed to waste, fraud, criminal abuse, and negligent care. The fact that patients do not pay for their healthcare costs directly and that either health insurance companies or government programs pay negotiated bulk-service-based prices for healthcare services rendered provides a natural disincentive to worry about keeping the costs of healthcare services down (Carey, 2009; Kennedy, 2006; Reid, 2009). Since physicians receive only a fraction of the prices that their services would command in a direct-payment market, they have a natural incentive to increase the volume of services they render. Similarly, since patients pay for healthcare premiums instead of paying the actual costs of their healthcare when rendered, they have no incentive to worry about cost or unnecessary or redundant care (Carey, 2009; Kennedy, 2006; Reid, 2009).

Those factors are even more of an issue in connection with government-funded healthcare programs because they pay the least for specific services and generally impose the least stringent criteria for the types (and amount) of service for which they reimburse providers (Carey, 2009; Kennedy, 2006; Reid, 2009). In addition to providing no real incentive to reduce costs, that managed care format also creates a ripe situation for criminal abuse of federally-funded healthcare programs that drains billions of dollars of public funds annually (Halbert & Ingulli, 2008; Kennedy, 2006; Levine, 2008; Reid, 2009; Tong, 2007).

Healthcare-Caused Illness

Finally, perhaps the best illustration of the manner in which the American managed healthcare system contributes to unnecessary waste as well as directly to preventable human disease is the situation involving hospital-acquired ("nosocomial") infections (Goldhill, 2009; Kennedy, 2006; Levine, 2008; Reid, 2009; Tong, 2007). Every year, approximately two million patients acquire nosocomial infections that are entirely unrelated to their reason for hospitalization American in hospitals and other clinical healthcare facilities such as nursing homes. The treatment necessary to resolve those unnecessary infections costs as much as $50 billion annually, almost all of which either comes directly from public funds in the form of institutional reimbursements or indirectly from private patients who must absorb ever-increasing health insurance premiums raised to prevent those costs from reducing healthcare insurance company profits. Furthermore, those two million preventable infections end up costing the lives of approximately 100,000 patients annually. (Goldhill, 2009; Kennedy, 2006; Levine, 2008; Reid, 2009).