
                         Roanoke Times
                 Copyright (c) 1995, Landmark Communications, Inc.

DATE: THURSDAY, June 9, 1994                   TAG: 9406100006
SECTION: EDITORIAL                    PAGE: A-12   EDITION: METRO 
SOURCE: 
DATELINE:                                 LENGTH: Medium

ENTER THE HMOS, UNFASHIONABLY LATE

WHERE there was none, finally there was one. One day later, there were two. Before the year is out, it is said, we can expect a third, as yet unidentified.

Health maintenance organizations, already fixtures in some parts of the country, are at last coming to Western Virginia. The first to be unveiled last week is a partnership between Carilion Health System and Blue Cross and Blue Shield of Virginia. Announced a day later was the arrival of Heritage National Healthplan. As health-care benefits grow increasingly expensive for businesses, and coverage becomes prohibitively expensive for individuals, this most-managed form of managed care is an option long overdue.

Experience elsewhere has shown that HMOs can reduce costs for insurers and patients significantly. The trade-off is the restrictions placed on consumer choice - HMO members must stay with the doctors and medical facilities in their HMO network, or they aren't covered. Many members find the savings worth that price. Certainly, many businesses do.

The kicker: Evidence suggests that the improvement in cost-efficient use of the health-care system is not the most significant source of savings for HMO insurers and patients.

According to a recently released study by the Healthcare Leadership Council, many of the savings enjoyed by HMOs are simply the result of their bargaining leverage, which causes costs to shift to fee-for-service health-insurance plans. The council, which supports managed care, is a group of about 50 chief executive officers in the health-care industry. It found that only slightly more than 20 percent of the savings offered by HMOs are derived from cost efficiencies through better preventive care, less unneeded surgery, restricted access to expensive specialists and the like. The balance of the savings, according to the study, is financed by inflated costs to patients covered by traditional insurance.

If so, Western Virginia businesses that want to reap the greatest savings would be wise to join early. The appearance of HMOs and other managed-care plans is likely to create ever greater demand for them. Employers footing the bills for traditional private health-insurance plans are sure to notice that they now are not only subsidizing the gap between the cost of treating Medicare and Medicaid patients and the amount of government reimbursement, and much of the cost of treating patients who have no health insurance at all, but also the gap between costs and reimbursement negotiated by private managed-care plans.

Unfair? Of course. And also unsustainable. In self-defense, more and more health plans will have to be brought under some system of managed care, whether as an HMO, a Preferred Provider Organization (which allows patients to go outside their network of doctors, but at a higher cost to them) or a similar Point of Service network.

At some point, the cost-shifting will have to be reversed. There just won't be enough people covered for traditional fee-for-service treatment to subsidize bargain-basement discounts negotiated by managed-care plans. Then the hard business of finding additional real savings to keep medical costs under control will begin - and the need to bring everyone under the insurance umbrella will be unavoidable.

With everyone paying their fair share, longtime managed-care plans probably will see their costs go up from the golden days of cost-shifting. But the sustained, unified pressure to deliver high-quality health care at an affordable cost will be all the stronger, and the conditions right for effective reform.

by CNB