NCPA - National Center for Policy Analysis

Dangers Of HMOs

September 4, 1995

A number of studies and press reports indicate that the financial arrangements Health Maintenance Organizations (HMOs) make with doctors reward physicians and hospitals for deferring or withholding care that is deemed too expensive, pitting the financial interest of the doctor against the medical needs of the patient. For example:

  • The brain tumor of a 5-year old Florida girl was repeatedly misdiagnosed as the flu until her mother took her to a facility outside the HMO - which refused to pay for the surgery resulting from the correct diagnosis.
  • Long Island Jewish Hospital in Queens replaced private doctors in its anesthesia department with lower-paid and less-experienced salaried physicians, and in one 10-week period four patients died from anesthesia-related complications after successful surgery.
  • A California HMO was fined $500,000 by the state for refusing to refer a young girl to a specialist for her Wilm's tumor and instead assigning a physician who had never operated on children or on a Wilm's tumor.

A Department of Health and Human Services survey of more than 4,000 enrollees and disenrollees from 45 Medicare HMOs across the country found an "alarmingly high level of dissatisfaction" among chronically ill and disabled patients.

  • It found that 20% to 25% of disenrollees said they failed to receive primary care, referrals to specialists and HMO coverage of emergency care they needed.
  • Of those who received care, 16% of enrollees and 18% of disenrollees reported waiting more than 12 days to see their primary care doctor.
  • And, 24% of enrollees and 26% of disenrollees reported having to wait more than 12 days to see a specialist.

HMOs often reimburse doctors a fixed amount of money per covered patient, together with "withholds" and bonuses for delivering frugal care. Thus, incentives discourage doctors from referring patients to a specialist, authorizing high-tech procedures or approving costly operations. There is usually a review board the doctor can appeal to if HMO management refuses to cover a treatment or procedure, but it also has the power to deny care.

Source: "More Trouble with Managed Care," Consumers' Research, September 1995.


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