Therapy in L.A.


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May 2000
By Joyce Parker, Ph.D.

Are we seeing the beginning of the end of managed health care? According to an article in the Wall Street Journal, printed February 23, 2000, Holman Jenkins Jr. believes that "managed care is a doomed model because it can't do what it's supposed to do-control costs-without antagonizing its customers". He reports that HMOs are moving out of the cost-control business because they're tired of customer complaints, lawsuits and threats by politicians to control them through laws and regulations. Aetna Healthcare, one of the companies on the forefront of managed health care in the early 90's, has watched its stock which soared to $100 a share, fall below $40 because the market no longer believes in managed health care. Aetna's total market value has fallen to less than it paid for U.S. Healthcare; it's biggest HMO acquisition.

The logic of the entire managed care experiment is now under assault in the courts. Richard Huber, the CEO of Aetna, admits that capitation (the practice of paying a flat fee for each patient and having the doctor or hospital bear the financial risk for providing all the medical needs to that patient) is a dying duck. It's dying because doctors and hospitals haven't been able to manage the risk. More and more of them are going bankrupt or providing inadequate care. A survey of managed care executives in January, found that 60% expect to see a decline in risk-sharing arrangements in the coming year. "Great fortunes were made in managed care in the 1990's, doing the dirty work for employers of braking the acceleration of health-care costs. Now the ball is back in the court of the employers." The jury is still out as to whether this will be an improvement.

The author of this article, and founder of the website, Joyce Parker, passed away in 2011. To honor her we are keeping her articles posted at this website.

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