Managed Care Practices Every Patient Should Know About
(With emphasis on mental health care)
By Ivan Miller, Ph.D.
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Americans want more than affordable health care--they also want ethical health care.
Ethical standards are needed to protect patients, to assure honesty, to maintain minimum
standards of quality, and to prevent the wasteful and fraudulent use of health care funds.
Without the safeguards of ethics, the health care system will be a financial jungle where
the quick and the powerful will have great economic advantage over the sick and the
vulnerable. Such a jungle is not a place where anyone would go or send family and friends
when frightened, weak, sick or vulnerable.
As Americans are discovering, the managed care system often does not give consumers
what they want or need. Managed care's primary focus is on cutting costs and raising
profits; its concerns about ethics and quality of care are only secondary. Although health
care professionals and the media report widespread unethical managed care practices, the
managed care industry is not correcting its ethical problems.
Consumers who learn about the unethical managed care practices will be better equipped
to navigate today's managed health care system. In addition, something must be done to
stop the moral decline in health care. As Americans become more aware of the ethical
problems in managed care, consumers and professionals can join together and call for an
end to these unethical practices.
Eleven Unethical Managed Care Practices
personal and medical privacy.
2. Using false advertising.
3. Using deceptive language.
traditional scientific ethics.
5. Practicing outside
of a professional's area of competence.
and intensifying conflicts of interest.
secrets about financial conflicts of interest.
informed consent procedures.
"kickbacks" to keep patients away from specialists.
money entrusted to their care.
information about harm to patients.
personal and medical privacy.
Health care ethics call for the greatest respect for patient privacy and
confidentiality. Privacy is especially important in mental health because patients talk
about sensitive and personal topics like being a victim of physical or sexual abuse, drug
and alcohol use, personal sexual behavior, and family problems. Managed care, on the other
hand, disrespects privacy:
- True privacy and confidentiality means sharing sensitive, personal information with a
single, trusted professional chosen by the patient. Managed care, on the other hand,
usually requires sharing private information with several people who are not chosen by the
patient, such as gatekeepers and utilization reviewers, and storing it in files accessible
to hundreds or thousands of employees.
- True privacy and confidentiality means protecting records so that they cannot be seen by
anyone who is not involved in treatment. Managed care, on the other hand, usually protects
records only to the extent of federal and state law which, in the case of insurance
records, is poor protection. In fact, insurance records, under current laws, are at times
even available to employers.
- True privacy and confidentiality means patients have freedom to control, without
coercion, who can see their personal and confidential information. In managed care, on the
other hand, patients are often forced to give up all privacy as a condition of using their
2. Using false advertising.
Professional health care ethics set a high standard for truth in advertising. Managed
care, on the other hand, often engages in advertising that deceives many consumers.
- Managed care, particularly in states that have so-called parity laws, often claims that
mental health benefits are unlimited, when in reality, hidden policies and rules make even
ordinary treatment unavailable.
- Managed care often claims to provide all mental health services at times when it offers
only ultrabrief therapy a short-term and frequently ineffective treatment.
3. Using deceptive language.
Professional ethics emphasize giving patients accurate and straightforward information.
Managed care, on the other hand, uses misleading language at every level Companies which
intentionally restrict choice call themselves names like "Choice Health" or
"Options Health." Companies who are hired to restrict and control access to
treatment call themselves a name like "Access Health." Cost cutting programs are
called "quality improvement programs." Gatekeepers, hired to divert patients
from treatment, are called "patient advocates." Such misleading language does
not belong in health care.
traditional scientific ethics.
According to scientific ethics, the research support for new treatments must be
reported in peer-reviewed journals so that the community of science can debate the new
treatments' potential benefits, possible risks, and effectiveness. Even when the research
is conducted in secret, such as during the development of new medication, before the new
medication is given to patients, the scientific evidence, research support, and
description of the medication must be publicly disclosed. In this way, patients are
protected from hoaxes, unscientific manipulation, and harmful treatments.
In managed care, on the other hand, new methods of delivering treatment are decided
according to secret and proprietary guidelines. Managed care claims that these are
scientific guidelines, but does not reveal the guidelines or the supporting evidence. As a
result, health care scientists and professionals cannot independently evaluate if science
really supports the new managed care methods of treatment. Using secret treatment
guidelines is just as unethical as giving a patient a secret medication.
Practicing outside of a professional's area of competence.
All ethical codes forbid professionals from practicing outside of their area of
competence. In managed care, on the other hand, professionals are encouraged and, at
times, even required to practice outside of their competence.
- Because managed care limits referrals to specialists, it forces many professionals to
treat special problems for which they do not have the training or experience.
- Commonly, utilization reviewers do not have the credentials or training to qualify them
to overrule the treating professional. For example, utilization reviewers are often
nurses, and a nurse is not qualified or competent to overrule the decisions of a social
worker, psychologist or psychiatrist who is treating the patient.
- A utilization reviewer's decisions may overrule the decision of the professional who is
conducting the treatment. However, the reviewer's decision often is based upon the limited
information obtained by reading a two page form and discussing a case for a few minutes
with the treating therapist. When evaluating the treatment of a patient with a condition
as complex as a mental health problem, it is outside of all professionals' areas of
competence to overrule the treating professional based on such meager information. Unless
a professional conducts an in depth evaluation, the most appropriate action is to defer
judgment to the person who is treating the patient.
Creating and intensifying conflicts of interest.
Medical ethical codes require that health professionals avoid and minimize conflicts of
interest regarding their primary obligation to the patient's welfare. Managed care, on the
other hand, does just the opposite. It seeks out and develops conflicts of interest in
which professionals profit the most when the patient receives the least treatment.
The conflict is most serious with case rates and capitation in which the professional
is paid a set fee regardless of how much treatment the patient is given. Competitive
mental health case rates may be as low as $200 per patient, regardless of whether the
patient is seen once or fifty times. If patients are seen for as few as an average of
eight one- hour sessions, simple arithmetic shows that a $200 case rate yields $25 per
session. After subtracting a modest overhead cost estimate of $20 per session1,
only $5 is left. That is too little to pay the therapist for each session and paperwork.
When case rates are this low, professionals have a terrible conflict of interest because
they cannot stay in business unless the patient is given much less treatment than is
really needed. It is no wonder that the vast majority of professionals refuse such
contracts even when it may mean leaving the profession or the financially risky option of
working outside of managed care.
While sometimes the conflict of interest is obvious as it is with case rates, other
times it is more subtle but just as harmful to the patient. For example, professionals may
avoid dealing with important long-term issues or cut therapy short because managed care
prefers to refer new patients to therapists with a record of short-term treatment. The
therapist has a conflict here between treating current patients for the necessary length
of time, or cutting treatment short to assure future referrals.
Keeping secrets about financial conflicts of interest.
Whenever the involvement of a third party creates a potential conflict of interest,
according to professional ethics, the professional must fully disclose both the
arrangement with the third party, and how it may influence a patient's treatment. Managed
care, on the other hand, usually hides these arrangements.
- Managed care companies often pay a "case rate" or "capitated
payment" for each patient regardless of how much treatment the patient receives.
However, the company rarely reveals this important payment arrangement to the patient.
- Many managed mental health care companies will stop referrals to therapists who provide
more than ultrabrief therapy, but patients usually are not told their treatment is
restricted by this hidden managed care policy.
- Some companies have contractual "gag clauses" which forbid professionals from
giving patients any information that would make the patient unhappy with their managed
care company. Due to intense public pressure, most companies have dropped these gag
clauses, but many still use what they call "managed care unfriendly" behavior
ratings which perform the same function as gag clauses. These ratings are used to control
therapists in the following way. If a therapist commits an "unfriendly
behavior," it shows up as a low rating. Professionals are regularly notified of the
ratings, and low ratings serve as a warning that unfriendly behavior may result in
terminating the contract. The forbidden "unfriendly behavior" includes even
telling patients when they may benefit from a treatment not paid by the managed care
company. Patients are not told that their therapist's professional freedom is constrained
by these rating systems.
informed consent procedures.
The rights patients have to control the treatment of their own minds and bodies are
protected through a procedure called informed consent. According to this procedure,
patients are given the important information about treatment and the major treatment
options, and then after being informed, they can decide if they will consent to treatment
and choose which treatment.
Managed care, on the other hand, often fails to inform patients of any treatment
alternatives outside of the plan. This failure to inform serves the purposes of the
managed care company because patients who do not know other treatment is possible are more
likely to report satisfaction with the managed care treatment. Unfortunately, this failure
to inform also undermines the patients' control, because the patient looses the choice to
self-pay for the preferred treatment.
- Medication is frequently presented as if it is complete treatment. In truth,
psychotherapy for many problems, either in place of medication or along with medication,
is better treatment than medications alone, and psychotherapy is a treatment that many
patients will pay for out-of-pocket if they believe it will help.
- Patients who are sent to psychotherapy are usually told that ultrabrief therapy is the
treatment of choice, and if they don't improve, they are told that there are no realistic
alternatives. The reality is that longer-term psychotherapy is a more effective treatment,
and many patients find it so helpful that they will self-pay for longer psychotherapy.
- Patients, particularly children, are rushed through treatment, either therapy or
medication, without being informed of the benefits of psychological and educational
testing to evaluate and diagnose problems. Again, some patients or parents choose to
self-pay for this testing when they know it is available.
Using "kickbacks" to keep patients away from specialists.
Most states have laws against medical specialists making hidden referral payments
called "fee splitting" or "kickbacks." An example of such a payment
occurs if a family doctor refers a patient to a cardiologist for a cardiac evaluation and
the family doctor receives a hundred dollars "kickback" for the referral. This
is illegal because patients believe that referrals are based on their best interest, when,
in fact, the referrals are strongly influenced by the hidden kickback.
In managed care, on the other hand, the family doctor is often the gatekeeper and may
be paid a financial bonus for avoiding referrals to specialists. These bonuses violate the
same ethical principle involved in the laws against kickback and fee splitting. The
non-referral may appear to be based on the patient's needs when, in fact, the
non-referrals are strongly influenced by hidden kickback. Although unethical, these
bonuses avoid the laws that were specifically designed to protect patients against
kickback or fee splitting.
Squandering money entrusted to their care.
When insurance is sold, the company promises that it can be trusted to handle the funds
prudently in order to pay for health care. Managed care, on the other hand, commonly
spends over 30% of health care money on administration and profit and pays its executives
more than any comparable sized industry. In mental health, managed care creates
administration and profit expenses that consume over 50% of the money that was previously
available for treatment. When money is entrusted to a managed care company's control, it
is not ethical to divert large portions of the funds on the company's own administration
and profit. It is even worse that this financial irresponsibility leads to some patients
being prematurely discharged from hospitals and other patients having their treatment
ended before they have healed.
Disregarding information about harm to patients.
Health care ethics require that professionals publicly report potential harm from a
treatment, attempt to evaluate possible harm, and consider possible risks along with
potential benefits when making treatment decisions. Managed care, on the other hand,
usually reports only those statistics that show the benefits of managed care and does not
adequately examine of the potential harm to patients.
- Managed care has many policies that can have a negative impact on patients but does not
report evaluations of this negative impact. For example, managed care executives have
reported that the hassle of going through gatekeepers will stop 10-20% of the patients
from seeking treatment. It is well known also that depressed and shame-ridden patients are
easily discouraged from treatment and often need outreach rather than another barrier like
a gatekeeper. However, in spite of numerous reports that gatekeeper systems keep patients
from needed treatment, managed care reports do not estimate the harm resulting from such
barriers to treatment.
- When managed care considers cost effectiveness, it often does so only on the basis of
cost to insurance, not the costs to the patients or their families. For example, when
ultrabrief therapy is used for the treatment of depression, fewer patients will recover.
The many patients who don't recover will suffer damages through missing work, losing a
job, a divorce, inadequate parenting of their children, or suicide. Their families also
may need to take time from work and be less productive. Both the patient and their family
will suffer emotionally. However, when reports about managed care cost-effectiveness
decisions are revealed, these reports do not consider these important costs to the
patients and their families.
- Managed care does not adequately assess its potential to increase death rate. Human life
and quality of life are simply not entered into the managed care formulas for measuring
the treatment cost-effectiveness. The cost- effectiveness calculations show only insurance
expenses. As a result, these formulas actually indicate that cutting expenses as a result
of a speedy death is a cost-effective disposition for any patient whose treatment will
cost more than their monthly premiums.
Managed Care Excuses for Unethical Practices
Managed care industry ethicists and lawyers created the following rationalizations for
the industry's unethical practices.
The unrestrained free market gives the greatest benefits.
Managed care claims that traditional health care ethics can be ignored because free
markets create the best systems. Unfortunately, managed care is not a true free market and
consequently, cannot give the benefits of a free market. In a true free market, consumers
need to have power equal to the managed care company, but in health care, consumers have
lost much of their power for several reasons: (a) employers, not consumers selects
insurance policies; (b) consumers can't change insurance when they are sick because a new
company will not treat pre-existing conditions; and (c) consumers can't get the truthful
and accurate information needed to compare managed care companies.
Moreover, the history of managed care shows that the so-called free market forces are
not creating a better system. As managed care has taken over health care, the quality of
health care has drastically declined. In places like California where managed care has
operated the longest, the system is not improving with time, but it is getting worse with
time. The free market is not working and should not be used as a rationalization to
abandon ethical and moral behavior.
Managed care has a higher ethical purpose, the greatest good for the
Managed care claims to be ethical because it purports to maximize the health of a
population rather than individuals. In other words, they claim that because health care
dollars are scarce, it is best to avoid spending too much on one patient and make sure
that the greatest number of people are treated with the limited money.
This argument hides two important deceptions. First, managed care has not been truthful
about this purported higher ethical purpose. What it calls "maximizing the health of
a population" means rationing treatment services deciding that some patients will get
needed treatment and others will not. Yet, managed care does not tell its beneficiaries
that it is in the business of rationing services. In fact, it advertises just the
opposite, complete and comprehensive care without rationing. If managed care believes that
it is serving a higher ethical purpose by rationing care, it should truthfully advertise
that it is rationing treatment, and stop saying that it provides all recommended
Second, if resources are scarce, it is not ethical for managed care to squander vast
resources on administration, profit (often over 50%) and enormous executive salaries,
while patients are dying.
Managed care should not be required to follow ethical behavior because
no one does.
When confronted with ethical abuses, the managed care industry defends itself by saying
that fee-for-service health care had some abuses as well. It argues that because everyone
does unethical things, focusing on managed care ethics is unfair.
First, this argument does not consider the degree of abuse. It is similar to justifying
grand larceny on the basis that some have committed petty theft. The severity of ethical
abuse in managed care is enormous compared to the problems that occurred previously in
Second, it is not true that everyone does unethical things. In fact, most professionals
are highly ethical. If professionals are behaving unethically, they should be confronted
as should the managed care industry.
Professional ethics committees have not punished managed care
professionals, and therefore, they must not be unethical.
Each profession has an ethics committee that passes judgment on complaints against
members of their profession. Unfortunately, these committees have not been able to control
ethical behavior in managed care. Professional ethical codes are usually written in vague
language that is intended to encourage voluntary compliance, and they are not designed to
catch clever violations of ethics. Consequently, while many managed care practices miss
the spirit of the ethics codes, there may be nothing specific enough in the ethical code
to warrant a judgment against managed care professionals.
In addition, these committees can only hear complaints against individual professionals
who work for managed care, not the managed care companies themselves. Professional leaders
and ethics committees are concerned that ethical judgments against individuals will only
harm the professional who must work in the managed care industry in order to make a
living. As a result, the professions have been reluctant to use their ethical codes to
address the problem.2
Fortunately, professional ethics committees are not the only ones who have the right to
determine ethical behavior. Every person can tell the difference between right and wrong.
The public, consumers, patients, and individual professionals can speak out when something
is wrong. These eleven common practices are not the behavior that most people want from
health care professionals, and even though the professional ethics committees may not be
able to stop the behavior, the public can still protest.
Consumers want managed care to continue its cost cutting practices.
Managed care says that surveys report consumers don't want government regulation and
reform if it raises the cost of health care. Therefore, the industry argues, consumers
approve of its practices without regulation. However, the truth about these surveys is
that they do not ask consumers if they approve of cutting costs by using dishonesty and
unethical behavior. Saving money is a concern of consumers, but generally, the consumer
wants only honest and ethical cost cutting.
The market makes us do it.
This argument is the economic version of "the devil made me do it." Absolving
themselves of responsibility, most managed care leaders claim to be passive victims of
market forces. They say that the only programs that can be sold to employers are ones that
use these eleven unethical methods of cutting costs. Such an argument misses the point of
ethics. Ethical and moral standards are intended to be guides to conduct in addition to
money and market forces. If money is everything, then cheating, lying and stealing are all
okay as long as one is not caught.
Furthermore, managed care has not been passive. The industry is actively promoting
itself and influencing the market. It actively hides these ethical abuses. When
legislation or regulation is proposed, the industry aggressively opposes efforts to
restore ethical principles to health care. The truth is that managed care is not a victim
of the market, but it has actually made the market the way it is.
How can managed care continue this unethical behavior?
The managed care industry has used its power to convince business and government that
there is no other choice to contain health care costs except managed care. State and
federal governments believe that they need managed care methods to contain Medicaid and
Medicare expenses in order to balance their budgets. The business community is frightened
of escalating health insurance expenses and believes that only managed care will stop the
cost escalation. As a result, the big players have a financial interest in believing
managed care will work, and consequently, they have overlooked the severity of managed
care ethical problems. Unfortunately, the industry's tremendous profits enable it to
continue to promote itself, and manipulate the government even more.
In reality, managed care is not the only choice to control costs. Ideas for alternative
cost-containment systems that respect ethical values are being developed. Managed care not
only uses unethical practices, it is the least efficient system. The enormous
administration and profit expenses take more money away from treatment than would be lost
in any other system that could be developed today. Two grass roots movements, the National
Coalition of Mental Health Professionals and Consumers, Inc. and the Ad Hoc Committee to
Defend Health Care, are calling for an end of managed care and the development of a
pro-consumer cost- containment system for health care.
What Can the Consumer Do?
The first step in righting any wrong is speaking out and saying that it is wrong.
Making a statement about what is right is a powerful beginning whether confronting
slavery, segregation, McCarthyism, child abuse, drunk drivers, marketing cigarettes to our
children, or the mistreatment of the vulnerable patients of managed care. Many of these
historical examples of immoral behavior were ignored by large organizations, big business
and government until large numbers of concerned citizens confronted them, spoke out, and
demanded that the immoral behavior be stopped. The process of speaking out begins by
talking to individuals, and then moves to public speaking and writing.
The public and professionals can make appeals to the health care professional ethical
boards. These complaints should be filed with the request that the board issue a decision
that restores the high standards of ethical behavior to health care. Although initially it
is unlikely that these boards will make any ruling that adversely impacts a major
financial interest within the profession, they will respond eventually to public pressure.
Some change will come through the malpractice lawsuits. While ethics are different than
illegal behavior, unethical practices can be used to show that treatment was below the
standards of good practice and, consequently, can raise malpractice judgments.
The greatest immediate impact will come through the media. Journalists are sensitive to
the unethical treatment of the sick and vulnerable patient and will help create public
pressure on the managed care industry.
As public pressure builds, it can eventually overpower the lobbying of the managed care
industry and relief can be obtained in legislation. The electorate can change public
Although, as one individual, a person may feel powerless, many people joining together
in a consumer and professional movement offers the greatest hope of changing the current
system that is putting corporate profits ahead of honesty, ethics, and quality health
care. Together we can begin by speaking out and saying that these eleven practices are
unethical and wrong. We can say, "Stop it!" We can overcome the ethical abuses
of managed care.
1 Overhead costs may be much higher than $20/hr., particularly for
psychiatrists whose overhead is often $70-$80/hr. or more.
2 In September 1997, the American Psychiatric Association made a step
forward in addressing managed care ethical abuses by passing an addendum,
("Guidelines for Ethical Practice in Organized Settings,") to the Principles of
Medical Ethics with Annotations Especially Applicable to Psychiatry. This addendum
addressed the managed care ethical abuses of privacy, confidentiality, informed consent,
conflict of interest, secret treatment guidelines, and disclosure of conflict of interest.
Hopefully, the other health care professions will also become more assertive in addressing
managed care ethical problems.
Join with the people who are leading the battle to expose managed care abuses and
are doing something to create a pro-consumer health care system.
The National Coalition has effectively alerted the media about the abuses in managed
mental health care. Now it is working to tell people that a pro-consumer system is
possible. No amount of regulation can ever make the managed care system ethical, and the
enormous bureaucratic expenses of managed care make it the most inefficient system
possible. America needs to build an ethical and pro-consumer health care system that
controls costs while preserving consumers' rights to choice, privacy, and control over
health care decisions.
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