Introduction:  The Quality Imperative: Model State Legislation For Managed Care

The organization of health care delivery and financing through managed care plans is arguably the most important development in America's health care system since the establishment of Medicare and Medicaid in 1965. A majority of employed individuals with health insurance coverage are enrolled in managed care plans. Over 60 million Americans are members of health maintenance organizations (HMOs), the most organized form of managed care. Medicare and Medicaid beneficiaries are currently enrolling in managed care plans at unprecedented rates.

Managed care emerged as the dominant form of health care delivery and financing, however, without the consent or even the knowledge of the American health care consumer. Instead, it was driven by the interests of the health care purchaser community. In response to declining profits and rising budget deficits, employers and, in more recent years, large public purchasers (e.g., Medicare, Medicaid) vigorously pursued a managed care strategy for the purpose of controlling health care expenditures. These purchaser interests and this cost containment imperative produced the first generation of managed care.

The second generation is now approaching. This next generation of managed care should not be driven by purchaser interests and a cost containment imperative; it should be driven by consumer interests and a quality of care imperative. No longer should managed care's success be measured by meeting the bottom line demands of business and government; it should be measured by its ability to ensure access to high quality and ever-improving health care services - a product the consumer values like no other.

Is managed care up to the task? Time will tell. What can be stated confidently is that managed care represents both great risks and great opportunities for the health care consumer. No less an authority than the Institute of Medicine analyzed the impact of managed care on quality in this way, "... the paradigm shift call for health plans to provide needed services to a population in the face of stringent resource constraints, and the incentive, will likely be to underserve people. These changes make monitoring the quality of care imperative, especially for the sickest individuals and other at-risk populations." The potential for managed care plans to impede access to needed services and providers is the leading consumer concern under managed care.

Managed care also shows promise. By moving away from the fragmented and unmanaged fee for service system and emphasizing an integrated and multi-disciplinary approach to disease management and preventive care, managed care provides the opportunity to produce high quality care at lower costs. Moreover, this new paradigm holds a single, integrated delivery system accountable for maintaining and improving the health status of an enrolled population.

Recent consumer experience with managed care reflects these risks and benefits in the most personal terms:

• The employee upset to find that the company's new and only health care plan excludes his or her long-standing doctor in the preferred network of physicians;
• The grateful welfare mother that, after years of trips to the emergency room, finally has a designated family physician for the care of her child;
• The mother who is angry over being discharged from the hospital within 24 hours of giving birth;
• The relieved parents no longer saddled with arcane and unreadable insurance forms and exorbitant out of pocket expenses;
• The individual frustrated with the endless approval process to see a specialist, particularly the disabled or chronically ill patient with special care needs;
• The appreciative Medicare beneficiary who finds prescription drugs included in the basic benefit package and can now forego the purchase of a Medigap policy;
• The bitter hospital worker who lost his/her job because the managed care marketplace is driven by a rush to the lowest premium price and the maximization of plan profits and not by quality of care measures and performance.

Yet in the same breath, states are inundating the federal government with requests to expand Medicaid participation in managed care and all Medicare reform bills contemplate an expanded role for managed care. The business community shows no signs of relaxing its push for managed care, even while employees complain of plan restrictions and reduced choices. Sensing the mood of the country, the President announced his intent to establish an Advisory Commission on Consumer Protection and Quality in the Health Care Industry.

Amid consumer hopes and fears of managed care, the time is ripe for a comprehensive debate on managed care with the goal of adopting policies on consumer protection, informed choice and quality of care. This model bill, The Quality Imperative: Model State Legislation for Managed Care, contributes the perspective of the consumer to that debate.

The Quality Imperative was written by the Consumer Coalition for Quality Health Care, a national association of consumer advocacy organizations dedicated to quality health care for all Americans. The Coalition is currently active in supporting national and state level consumer groups that are organizing around managed care issues (see attached for more information on the Coalition and Coalition activities).

The Consumer Coalition recommends model state legislation and policies for quality oversight of managed care plans doing business in the commercial health insurance market. With the collapse of federal health reform and with states holding the primary responsibility for regulating the business of insurance, the managed care debate will be increasingly concentrated in state capitols throughout the nation. However, most of the recommendations for regulation and oversight of managed care are directly applicable to, and partly derived from, the Medicare and Medicaid programs. The model legislation can be easily translated into policies for these and other public programs.

Any state legislation for managed care faces the obstacle of federal ERISA (Employee Retirement Income Security Act) preemption. Self-insured ERISA plans are not subject to state regulation, as is the commercial health insurance market. The Quality Imperative acknowledges that ERISA poses a barrier to state reform but proceeds forward given the importance of the policy issues under discussion and the scope of the private market still affected. It is hoped that federal regulation of ERISA plans might be influenced in a manner consistent with the bill's recommendations.

The broad aim of The Quality Imperative is to recommend a model state system for holding managed care plans publicly accountable to consumers for quality protection, assurance and improvement. It balances the present policy discussion of cost containment with quality of patient care. It balances the need for comprehensive internal plan standards with external quality oversight programs administered by the state.

Consumers and consumer advocates must lead the debate over the future of managed care. The model legislation will provide policy direction and structure for emerging consumer advocacy efforts in managed care at the state level. While pro-consumer, the legislation is not anti-managed care. It adopts a neutral position, reflecting the belief that managed care can be good or bad for the consumer depending on each plan's commitment to consumer protections and health care quality.

In similar fashion, the model legislation adopts both a regulatory and competitive framework for the managed care industry. Neither regulation nor quality-based competition alone will be sufficient to protect, assure, and improve quality under managed care; the legislation builds on tested models of managed care plan standards, informed consumer choice strategies, independent quality oversight mechanisms, and consumer protections employed in public and private managed care programs today.

Finally, The Quality Imperative is driven by an important policy principle: shared responsibility. Managed care plans and the health care professionals and workers delivering care at the bedside must do their part to deliver compassionate and ever-improving quality care to the populations they serve. Government must provide common sense and efficient regulation of the managed care market. Purchasers - small and large employers, the Medicare and Medicaid programs - must be committed to expanding informed choice for consumers and monitoring the quality of care provided by all participating plans. The health care consumer must take responsibility for full participation in the health care decision-making process, including choice of plan, provider, treatment, and lifestyle.

This model state legislation recommends policies and programs that build, from this foundation of shared responsibility, a comprehensive system for protecting, assuring, and improving quality under managed care.

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