Cigna has now joined Aetna in settling with the physicians who have sued it for downcoding. Essentially the suit promises that no longer will Cigna automatically downcode claims from providers, and will go as far as to allow "questions of medical necessity for services…be decided by doctors" and  "to jointly decide (with the doctors) how to handle experimental and investigational treatments". Cigna’s "system for processing doctors’ claims will become more transparent by allowing doctors to e-mail Cigna, using the Internet to spread news about policy changes, limiting changes in reimbursement rates to once a year instead of monthly and creating a method for independent claims appeals". In many ways this is the corollary of Tenet, Columbia/HCA and others upcoding on their Medicare billing, and then settling with the government.

When I learned about managed care at the feet of Alain Enthoven, he correctly explained that all this gaming back and forth was an inevitable result of having payers and providers in conflict in a fee-for-service system.  His solution was to give them shared incentives to deliver population-based cost-effective medicine, such as he saw in the Kaiser system, within a framework of "managed competition".  Of course for the rest of the world outside Kaiser, "managed care" was never about that.  Instead US Healthcare (later Aetna) and others used managed care as a battering ram to a) risk select against unhealthy individuals and groups, b) exclude high-cost providers, and c) operate as what Ian Morrison calls "virtual single payers" to cram down on providers’ fees.

But America’s doctors and hospitals were only going to take that for so long. The hospitals merged like crazy to increase their market power.  Physicians couldn’t successfully do that, so they started a campaign in every examining room in America–my doctor used to call Prucare "Zoocare"–that reached its height in the scene in the movie As Good As It Gets when Helen Hunt slagged off HMOs for stopping her son going to the emergency room. As HMOs don’t actually have much say about what goes on in ERs, this was a great case of Hollywood getting the mood of the nation right while getting the facts of the matter wrong.  The backlash against managed care as measured by Harris grew steadily until about 2000, when even Al Gore noticed and tried to incorporate it in his campaign. Humphrey Taylor’s quip was that "it doesn’t manage and it doesn’t care". The net result was that health plans threw out any attempt to do real care management along with the removal of any serious attempt at cost control.  Double digit premium increases have been the result. 

Now Cigna and Aetna have settled these provider law suits, and made their subsequent mea culpas, it puts pressure on the rest of the managed care pack to follow along. The  others still being sued are Anthem, Coventry, Foundation, Humana, PacifiCare, Prudential, United and Wellpoint. 

Enthoven would correctly argue that we haven’t tried managed care or managed competition in the way that he meant it. He also used to argue, although he backed off this position in the mid-1990s, that you couldn’t have managed competition without universal insurance. Bob Evans and Maurice Barer (with a little help from me) have forever argued that you can only cut costs effectively if you have a unified budget (which tends to mean a single national insurance system, although not necessarily as it doesn’t in Germany or Japan)  and that, by necessity, means covering everyone with some type of community rating. But in the US we are not going–there barring Dennis Kucinich winning the Presidency and pigs flying.

So if the suit settlement is the last act of a play that we’ve been watching for a long while, the question becomes, what comes next after 1990’s style managed care? The overriding issue is that while costs go up, things haven’t been as bad for employers or the government while the economy was good, and their revenues have gone up as fast as their health costs.  Now things are not so good.  We have a growing Federal deficit, states cutting their health spending desperately and employers moving costs onto employees.  And still health care cost growth is only matching pace with the overall economy. The challenge of delivering cost-effective health care looks to be well beyond any of the constructs being put forward by the private sector. So do we just end up paying more? And how long before the payers squeal again as they did in the early 1990’s, which created "managed care" as we knew it?