Good afternoon. My name is Laura Remson Mitchell. I'm a public policy analyst, consultant and writer specializing in economic, disability and health-care issues. I'm also the Government Issues Coordinator for the Multiple Sclerosis California Action Network (MS-CAN), a coalition of the California chapters of the National Multiple Sclerosis Society. I appreciate this opportunity to talk to you about some of the problems facing people with disabilities and serious chronic health problems in typical managed-care settings. (For simplicity's sake, I'll use the term "people with disabilities" to include those with serious chronic health problems as well, whether or not I specify chronic illnesses separately.)

Before I get into the main body of my comments, I want to make it clear to members of the Task Force, to the audience, and to anybody else who might see or hear these remarks why it's so important to address these problems.

People with disabilities are not some kind of "special interest group." We are, for all practical purposes, the "canaries" of the health- care system. If the system is breaking down, we are likely to be the first to suffer. But we won't be the last. An August 1996 report by the Institute for Health and Aging at the University of California, San Francisco, pointed out that 100 million people in America are living with one or more chronic conditions. If managed care continues to expand, many of these people will wind up in managed care plans. Unfortunately, however, with few exceptions, the managed-care industry as a whole still seems more interested in avoiding high-risk populations than in meeting their needs. Unless that changes, health care for everyone will be in serious jeopardy.

The problems faced by people with disabilities in managed care plans fall into two general categories: access and benefit design. Overlaying the entire situation is a widespread lack of sensitivity and awareness that permeates not only managed care but the entire health-care system, giving it an acute-care bias and a tendency to treat concerns related to chronic conditions as an afterthought, if not as risk factors to be avoided.
 
 

Because of managed care's record of poor service to people with disabilities, many in this population will avoid such plans if given a choice. Similarly, it is widely acknowledged that managed health-care plans, like traditional indemnity insurers, try to avoid covering people they consider to be high risks. Although requiring people with disabilities to enroll in managed-care plans would be a disaster, this group is just as entitled as nondisabled people to have a full range of health-care options. However, many managed-care plans have honed risk avoidance to a fine art. To the extent that it remains legal, applicants with disabilities and expensive chronic conditions are simply rejected for coverage. But while recent reforms at both the state and federal level have limited the ability of plans to do their "cherry picking" outright, the risk avoidance continues.

• Plans can and do manipulate their benefit packages and their list of contract providers to avoid attracting high-risk enrollees.
• They can and do limit access to information about specialty providers and about new treatment options, at least to the extent that the law allows.
• They can and do discourage enrollment by those viewed as high-risk. This can be done in some rather subtle ways. For example, marketing materials may not be provided in alternative formats for those with visual impairment; informational meetings may be held in inaccessible locations; and "customer service" telephone lines may not include TDD and/or relay options for those who are hearing- impaired.

• Physical access issues affect the entire health-care system and should have been resolved by now through compliance with the Americans with Disabilities Act and state access laws. But in fact, many health facilities still have areas that are inaccessible and offer tests or treatments that are difficult if not impossible for people with certain kinds of disabilities to access. One example is mammography. Not all mammography equipment can be adjusted to accommodate a patient in a wheelchair. Unlike a fee-for-service patient, however, a disabled woman in a health plan with such inaccessible equipment wouldn't be able to simply go elsewhere to get a mammogram covered under her health policy.
• Communication barriers also are a problem, especially in capitated plans, which by their nature encourage health-care providers to see large numbers of patients but to spend as little time as possible with each one. This incentive may or may not be harmful for the average, generally healthy enrollee who needs treatment for a cold or a broken arm. But it can be a disaster for those who have complicated conditions and/or multiple disabilities. As for those whose disabilities directly affect their ability to communicate -- those with significant vision, hearing, speech or cognitive impairment -- the problem is even worse.

One change that might improve the specialty referral situation somewhat would be to require health plans to contract directly with specialists, rather than through provider groups, and to allow enrollees access to those specialists regardless of the enrollee's provider group. It's also important to recognize that for many people with disabilities, a specialist may be much more appropriate as a care coordinator than the internist or general practitioner who typically serves as the managed care "primary care physician" and "gatekeeper.

But the most avid specialist-advocate in the world won't be able to help a health plan enrollee if the benefit design fails to recognize the needs of people with disabilities, as most of them do. Benefit design problems include:

• Unreasonable limits on physical therapy and other rehabilitative care.
• Limitations on coverage for durable medical equipment that fail to recognize the need for customized equipment to accommodate individual differences and efforts by people with disabilities to live independently as full members of society.
• Restrictive prescription drug formularies and incentives for therapeutic drug substitution, which can interfere with the necessary doctor-patient partnership in trying new treatment regimens that may be necessary to accommodate multiple health problems, impairments and side effects.
• A narrow definition of "preventive care" that ignores the need to prevent deterioration of a chronic condition--and which, in many cases, assumes that people with disabilities can be ignored entirely in providing basic preventive care, since this population is already "sick."

Some of the problems I've described so far -- like the acute-care bias -- exist in the fee-for-service system as well as in managed care. The difference is that except for the affluent, the closed nature of managed care eliminates the option of looking for more enlightened providers.

Although many HMO "horror stories" tend to be dismissed by the managed-care industry as merely anecdotal, I'm convinced that many of the problems experienced by people with disabilities are systemic. Many are an outgrowth of the structure of a particular managed-care plan and the financial incentives at work within the plan. For example, as I mentioned earlier, capitated payments -- the most characteristic payment method in HMOs -- encourages providers to treat more patients but spend less time with each. By so doing, it also penalizes providers who specialize in treating patients with complicated health problems and multiple disabilities. More importantly, it penalizes the patients of those providers. If managed care is to meet the needs of people with disabilities, this perverse effect must be eliminated.

I'm sure the members of this Task Force have been exposed to a host of studies and surveys about managed care, including many generalized surveys that show people in managed care are at least as satisfied with their health care as those in fee- for-service. I urge you to consider such surveys in context.

A very worthwhile article on this subject is "How Surveys Answer a Key Question: Are Consumers Satisfied with Managed Care," by Karen Donelan, which appeared in the February 1996 issue of Managed Care magazine. The article compares three surveys whose results are negative for managed care and three others whose results are favorable. (Interestingly, two of the three surveys favorable to managed care appeared to be a review or analysis of earlier surveys, rather than new surveys).

One of the "negative" studies cited in this article was a Robert Wood Johnson Foundation survey of so-called "sick" patients (including people with disabilities), which showed statistically significant differences in 16 of 53 items reported. All but two of these were negative for managed care.

Another study, published in the Journal of the American Medical Association, compared the health outcomes of patients in HMOs with those of patients who had coverage under the traditional fee-for-service system. After four years, there was no significant difference in outcome for the average patient. However, poor and elderly patients did significantly worse in HMOs. Elderly Medicare HMO patients with chronic illnesses experienced significantly more declines in physical health than a similar group of Medicare fee-for-service patients. Taken together, these two reports bear out the concerns that many of us in the disability community have had for years but which the managed care industry has, for the most part, ignored or dismissed as a tiny blemish on their generally favorable "report card."

But those of us with disabilities represent far more than a blemish. These reports are an advance warning, and ignoring the message they carry will endanger not only people with disabilities but, ultimately, everyone enrolled in managed care and, perhaps, the entire health-care system.
 
 

In theory, managed care relies on economic ("market") incentives to keep costs down and quality up. The problem is that while markets are very good at reflecting individual preferences for goods and services, they don't reflect costs or benefits involving those who aren't direct participants in the market transaction. In other words, the market doesn't take into account the fact that your treatment for an infectious disease helps protect me from getting infected with that disease.

Nor does it reflect the fact that if my health plan fails to meet my needs as a person with a disability, and I ultimately have to stop working, the community will lose the value of the goods and services I otherwise would have produced, as well as the taxes I would have paid. Furthermore, taxpayers would be stuck with the bill for any public benefits I would then need to rely upon.

Economists refer to these "spillover" costs and benefits as "externalities." In the health-care market, externalities often show up in the form of "cherry picking," adverse selection, and health plan coverage decisions that save money for one plan by shifting cost onto other plans, onto other segments of the health-care system -- both public and private -- or onto the rest of the community.

If market strategies are to work at all for health care -- if managed care is to live up to its promise and produce a positive result for society as a whole -- then public policy must deal with these externalities.

I understand the Task Force already is very much aware of the need to improve consumer choice and to make more information available to consumers so that their choices can be informed ones. These are worthy goals, and I endorse them. But a critical piece is missing from this picture: The competitive "playing field" between health plans must be made level, so that a plan offering good coverage and treatment for high-risk patients won't be penalized for its efforts. If this last piece isn't included as part of the "improvement" of managed health care, I'm convinced that market forces will result in a ratcheting down of health care quality and access for all of us. Or, in the words of what I call "Mitchell's Corollary":

In the absence of a level playing field, the "bad" plans will drive the "good" plans out of business.

There are several approaches that could be used to level the playing field. In the interest of time, I'll mention just a few.

First, I think it's important to establish a set of ethical ground rules by which all health plans will be required to operate. These need to be worked out in partnership by all the stakeholders. The guidelines should be reasonably broad, yet enforceable.

Second, the cost of caring for high-risk patients must be shared throughout the industry. One way of doing this is to develop risk-adjustment mechanisms, although I've been told this is almost impossible to do without a standardized benefit package. In the past, there has been a great deal of resistance to the idea of standardizing benefit packages.

Another way to try leveling the playing field is to establish what I call a mutual-risk point-of-service option requirement for all health plans. I've described this concept and its rationale more fully a paper that I am submitting to the Task Force. Essentially, the idea is to require all health plans to include a point-of-service option that could act as a safety valve for enrollees who feel they can't get the health services they need within their plan network. A deductible and higher co-payment for going out of network would be an incentive for enrollees to stay within the plan network as much as possible. "Mutual-risk," a key part of this concept, refers to the fact that the plan, like the enrollee, also would be at risk for higher costs if the enrollee went out of network. The financial risk to the plan would create an incentive for it to include a broad range of high-quality providers within its network, since that would minimize the likelihood that large numbers of enrollees would seek out-of- network care.
 
 

As I mentioned earlier, our entire health-care system has an unfortunate and outdated acute-care bias. Managed care could help correct this imbalance by actively involving patients as partners in management of their chronic conditions, by changing its focus from a strict "cure" mentality to one of "maximizing functional capability" and by delivering acute care as needed within this chronic-care framework.

Unfortunately, this is not happening in managed care today, and it is unlikely to happen as long as health plans continue to focus on risk avoidance and relatively short-term financial considerations. Furthermore, it won't ever happen if economic incentives continue to discourage providers from spending enough time with individual patients to correctly ascertain what kind of health services each patient really needs.

I'd like to conclude by quoting from the U.S. General Accounting Office's 1996 report on state Medicaid efforts to enroll people with disabilities (Medicaid Managed Care: Serving the Disabled Challenges State Programs). [NOTE: I have added italicized material in brackets below to generalize from the report's original Medicaid context.]

"Prepaid care has operated in both the public and private arenas as a system based on averages. For example, population-wide averages drive the expectations of what services should be provided and how much they will be used. Likewise, prepaid rates are calculated on average costs, and quality has been monitored, in part, using aggregated average utilization rates. To adequately safeguard the interests of disabled beneficiaries [enrollees], however, state programs [state policy] must recognize that these beneficiaries [enrollees] are quite distinct from the general Medicaid [managed-care] population. Not only are their health needs greater than those of the general population, but included among them are a small number of highly vulnerable individuals whose needs are extensive and critical to the prevention of death or further disability. Not addressing these differences heightens the risk that prepaid care plans will try to hold down their costs by (1) discouraging enrollment from high-cost segments of the disabled population [which ultimately would shift the cost of caring for these individuals to other segments of the health-care system] or (2) inadequately serving those high-cost beneficiaries they cannot avoid."

This last point is critically important, and in fact, it describes much of what currently is happening in private-sector managed care.

To sum up, managed-care plans generally avoid people with disabilities when they can and underserve us when they can't avoid us. They have many creative ways of doing both. And those few plans that try to meet our needs run the risk of being driven out of business by market forces that focus almost exclusively on short-term cost factors.

On behalf of Californians with multiple sclerosis and other disabling and chronic health problems, I urge you to make it very clear in the final report of this Task Force -- and in your recommendations to the Governor -- that this is not acceptable. Managged care must not be permitted to continue ignoring the needs of people with disabilities and serious chronic illnesses!