1. UpDate
PUBLICATIONS AND PROGRAMS: Insurance And Managed Care
Employment-Based Health Insurance expansion, market-based reforms, and ad-
justing the status quo.
Critical Distinctions: How Firms that Of’- “Issues in Health Care Cost Manage-
fer Health Benefits Differ from Those that ment,” one of EBRI’s Issue Brief series, dis-
Do Not, a summer 1991 Health Insurance cusses sources of health cost inflation, efforts
Association of America (HIAA) report, is of both private payers and government to
based on HIAA’s 1990 survey of 3,192 em- contain costs, and the effects these efforts
ployers. Survey data indicate that financial have had on the system as a whole. “The
health and size of firm are the most critical fundamental question,” the report states, “is
determinants of employers’ offering health whether the [current] public and private
insurance. “Premium expense” was the most cost management strategies . . . can slow the
frequently cited reason for not offering growth of health care costs in a pluralistic
health insurance; “future health care costs” health care system.”
ranked next, moving ahead of “profits won’t In a section on cost management strate-
cover cost,” which ranked second last year. gies, the report draws on recent EBRI studies
In response to a new question, “independent in Los Angeles, Houston, and Rhode Island.
association” was the most frequently cited In these studies, EBRI researchers examined
alternative source of coverage. Survey find- claims data from employers to measure a
ings were also reported in the Summer 1991 health plan’s cost-sharing effectiveness.
Health Affairs article, “The Health Insur- They found that plan charges were higher in
ance Picture in 1990,” by Cynthia B. Sulli- Rhode Island when deductibles were higher,
van and Thomas Rice. Copies are available and lower in Los Angeles under the same
from HIAA Fulfillment, P.O. Box 41455, circumstances. The report then examines
Washington, DC 20018. the impact of cost containment on the mar-
ket for health services. The report con-
cludes, “It can be argued that cost manage-
The Employee Benefit Research Institute ment reduces unnecessary and inappropriate
(EBRI) released two reports in September care . . ., but it does not affect the underlying
1991 that summarize broad-ranging topics causes of health care cost increases.” Copies
related to the U.S. health care system. The of both reports are available for $25 each from
first of these is an EBRI Special Report en- EBRI, 2121 K Street, NW, Suite 600, Wash-
titled Challenges and Opportunities: Issues ington, DC 20037-2121.
Facing the U.S. Health Care System. It exam-
ines the implications of cost, quality, and
access for employers, weighing the question Employer Health Care Plan Design and
of whether market-oriented strategies can Plan Cost: Analysis of Claims Data from
work in health care. The report concludes Employers in the Los Angeles Area is one
by outlining various proposals currently un- of several case studies that fall under EBRI’s
der discussion for reforming the health care research agenda to study the impact of em-
system, including identification of support- ployer cost management on the cost of
ers and critics of each proposal. These pro- health benefits, the delivery of care, and the
posals include employer-mandated insur- behavior of health care providers. The study
ance, national health insurance, Medicaid examined the market for health care in the

2. U P D ATE 2 9 3
Los Angeles area, using employer claims Health Care in America: Assuring Univer-
data. Researchers found that “[t]hose ele- sal, Portable, and Affordable Coverage, a
ments of plan design that most affect the position statement of the Blue Cross and
out-of-pocket expenses of the insured had Blue Shield Association, was presented be-
the largest effect on plan charges and utili- fore the House Ways and Means Committee
zation in Los Angeles,” although a great deal on 9 October 1991 by Blues President Ber-
of variation existed among employers. They nard Tresnowski. The statement emphasizes
did not find that utilization review had that building on the existing employment
much of an impact on shifting care from base–with federal subsidies, tax incentives,
inpatient to outpatient settings. For copies of and assessments on small employers–is the
the August 1991 EBRI Special Report S-12, best way to attain universal coverage.
contact EBRI at the above address. This proposal would require large em-
ployers to provide coverage and contribute
to its cost. Small employers would be re-
Health System Reform quired to offer basic coverage; those who do
not contribute to coverage would be assessed
Balancing Access, Costs, and Politics:
an amount less than the cost of coverage to
The American Context for Health System
help their workers purchase insurance. Non-
Reform, released in July 1991 by The Urban
workers “should have incentives to purchase
Institute, assesses current proposals for
private insurance,” and government subsi-
health care system reform and offers a
dies should be available to those who cannot
“uniquely American” plan to expand cover;
afford insurance.
age and contain costs. This plan would (1)
Affordability would be achieved through
keep Medicare as is; (2) implement the Pep-
cost management programs that reward pro-
per Commission’s “play or pay” feature, but
vi d er s f o r ef f icien t s er vi ce u s e an d
with coverage of “virtually all small busi-
strengthen incentives for employers to
nesses” and greater subsidies for the near-
choose carriers that manage health care
poor; and (3) replace Medicaid with a state-
costs efficiently. Singkle copies are available
administered plan, funded in part by the
from Mary Weinberg at 312-440-5955; for
federal government, to cover the poor and
multiple copies, contact Sherri Harriman at
those whose employers chose to pay a tax
202-626-4780.
rather than to provide insurance. Copies are
available for $13.25 from University Press of
America, 4720 Boston Way, Lanham, MD Health Insurance in Practice: Interna-
20706. tional Variations in Financing, Benefits,
and Problems, by William A. Glaser, com-
Health Care Financing for All Americans: pares three basic health insurance systems
Private Market Reform and Public Re- worldwide: statutory (Germany, France, the
sponsibility outlines HIAA’s proposals to Netherlands, Belgium, and Switzerland);
expand health care coverage. These include private (United States); and fully govern-
(1) guaranteeing the availability of private mentalized (Great Britain and Canada).
health insurance to all small-employer Glaser concentrates on statutory systems,
groups; (2) ensuring renewability and conti- with their various mixes of private and pub-
nuity of small-employer group coverage; (3) lic insurance, because these offer “plausible
establishing state pools for the medically models” of reform for the United States. He
uninsurable; (4) providing tax assistance for describes how such systems handle financ-
small employers; (5) expanding Medicaid to ing difficulties and control costs without
cover all below the federal poverty level; and diluting coverage and benefits. Finally, Gla-
(6) promoting the development of managed ser offers a possible statutory health insur-
care systems and other cost containment ance model for the United States. Copies of
strategies. Copies of the April 1991 report the 530-page October 1991 book are $70, from
(PPI191) are available from HIAA Fulfillment, Jossey-Bass Publishers, 350 Sansome Street,
P.O. Box 41455, Washington, DC 20018. San Francisco, CA 94104.

3. 294 HEALTH AFFAIRS | Winter 1991
A Healthy America: The Challenge for effect on the federal budget deficit–about
States, released in August 1991 by the Na- $1.8 billion, compared with $16.4 billion for
tional Governors’ Association (NGA), fo- Medicaid expansion– but affected firms
cuses on what the states can do now, in the would be socked with higher labor costs, and
absence of a national consensus, to ensure workers, with layoffs and reduced hours.
that all Americans have access to “afford- Medicaid expansion would concentrate ad-
able and appropriate health care.” This re- ditional health spending where it is most
port is significant in that it outlines areas for needed–on those with family incomes be-
reform agreed to by the state governors. In low 200 percent of poverty– but it would
the health insurance area, reform options greatly increase federal and state spending
include employer mandates, insurance pre- and be administratively complicated. The
mium subsidies, reduced or targeted bene- combination option would provide coverage
fits, public catastrophic insurance, greater for almost all of the uninsured and would
use of community rating, statewide risk increase the federal deficit by less than the
pools, and restrictions on medical under- “stand-alone” Medicaid expansion but by
writing, preexisting condition clauses, and more than the employer mandate. Copies are
redlining. Options for containing costs in- available from CBO, 2nd and D Streets, SW,
clude the “aggressive” use of managed care Room 413, Washington, DC 20515.
strategies in state health plans and the con-
solidation of all state employees for maxi- Trade-offs and Choices: Health Policy Op-
mum volume discounts. The report includes tions for the 1990s summarizes the findings
thirty examples of innovative state reforms. of a MetLife survey of 2,048 individuals,
Copies are available for $18.75 from NGA representing six stakeholder groups in the
Publications, 444 North Capitol Street, Suite U.S. health care system, “to improve the
250, Washington, DC 20001-1572. database underlying today’s health policy
debate.” Released in February 1991, the re-
Physicians for a National Health Program port describes areas of agreement, priorities
(PNHP)–a leading advocate of a Cana- for change, avenues for compromise, and
dian-style, single-payer, national health pro- barriers to change among these groups. Cop-
gram–announces the formation of a Sec- ies of the Executive Summary and full report are
tion for Health Policy Professionals. PNHP available free of charge from Betty Mixon, Edi-
currently has 4,000 members and 28 chap- torial Services, 12 VW, Metropolitan Life In-
ters and serves as an important policy re- surance Company, 1 Madison Avenue, New
source for politicians and grass-roots organi- York, NY 10010-1000.
zations nationwide. For information, contact
PNHP, The Cambridge Hospital / Harvard
Medical School, 1493 Cambridge Street, Cam-
Managed Care Data And Trends
bridge, MA 02139. Can Physicians Manage the Quality and
Costs of Health Care? The Story of The
Selected Options for Expanding Health In- Permanente Medical Group tells how, in
surance Coverage, one of four Congres- 1933, a young physician named Sidney R.
sional Budget Office (CBO) studies on rising Garfield started a prepaid group medical
health care costs and the uninsured, analyzes practice in southern California’s Mojave
the advantages and disadvantages of em- Desert that was to become Kaiser Perma-
ployer mandates, Medicaid expansion, and nente– the model for health maintenance
a combination of the two insurance reforms. organizations (HMOs) and managed care.
While none of the approaches would in- Copies are $29.95, from McGraw-Hill 1221
crease national health spending by more Avenue of the Americas, New York, NY
than 3 percent, all would redistribute health 10020.
spending among business, government, and
individuals. Foster Higgins Health Care Benefits Sur-
Employer mandates would have the least vey, 1990, Report 2: Managed Care Plans

4. U P D ATE 2 9 5
looks at the use of managed care in employer plans made no structural changes in their
benefits programs and its effect on health best-selling benefits package, 35 percent in-
care spending. Survey data show that nearly creased cost sharing. Nevertheless, on aver-
two-thirds of employers offered HMO cov- age, 86 percent of enrollees were in plans
erage in 1990, which cost 17 percent less per whose best-selling package had no cost shar-
employee than traditional indemnity plans. ing for hospital services, and 44 percent, no
Nearly one-third of employers offered pre- cost sharing for primary care visits. HMOs’
ferred provider organization (PPO) cover- financial performance in 1989 improved
age, which cost 8 percent less per employee greatly: 66 percent reported gross profits,
than traditional plans but 10 percent more compared with 46 percent in 1988 and 38
than HMOs. The report also contains guide- percent in 1987. Per capita expenses were
lines for effective managed care design; de- about half of national health care spending
scriptions of managed care models, includ- per capita. Of the fifty-one plans reporting
ing point-of-service plans; and tables of sur- Medicare accounts in 1989, 43 percent suf-
vey responses. Copies and information on the fered losses, 4 percent broke even, and 53
series of four reports are available from Foster percent had operating surpluses. Copies of
Higgins, Survey and Research Services, 212 Volume 1 are available for $40, Volumes 2 and
Carnegie Center, Princeton, NJ 08543-5323. 3, $35 each, plus $2.50 per volume for ship-
ping, from GHAA at the above address.
The Fundamentals of Managed Care, re-
leased in October 1991 by HIAA, offers a The InterStudy Competitive Edge: Bian-
brief overview of managed care: its history nual Report of the Managed Health Care
and development, various models, recent Industry 1, no. 1 (Summer 1991), is a new
trends, and likely future. The publication InterStudy (summer / winter) publication,
highlights quality management and employ which, in addition to providing information
ers’ efforts to contain costs. Copies are avail- on HMO enrollment and plan charac-
able from HIAA Fulfillment, P.O. Box 41455, teristics, reports on pertinent industry
Washington, DC 20018. trends. Newly covered topics in this issue
include HMO profitability for fiscal year
GHAA’s Consumer Satisfaction Survey 1990, quality and cost control measures,
and User’s Manual, 2d ed., May 1991, pre- product diversification, and pure enroll-
sents the Group Health Association of ment by affiliation/ sponsorship.
America’s (GHAA’s) latest survey to solicit While enrollment in traditional HMOs
consumers’ ratings of their own health care, increased by only 3 percent in 1990, man-
attitudes toward care, health insurance plan, aged care principles continued to be assimi-
and use of services in HMOs and indemnity lated into other types of health coverage,
insurance plans. The manual discusses how and open-ended options continued to gain
to use and score the survey and differences in popularity. Individual practice associa-
between this and earlier editions. Copies are tions (IPAs) were the dominant model type
available free of charge from GHAA , Publica- and reported greater use of quality control
tions, Order Department 0612, Washington, measures than other models. The 290 page
DC 20073-0612. report contains a state-by-state HMO direc-
tory, a national managed care firm directory,
HMO Industry Profile, Volume 1: Bene- and five subdirectories. Copies are available
for $80 (plus $5 postage and handling), annual
fits, Premiums, and Market Structure in
1990 and Volume 3: Financial Perform- subscriptions (two issues), $150, from Inter-
Study, P.O. Box 458, 5715 Christmas Luke
ance in 1989, released in June 1991, are
based on GHAA’s fifth Annual Health Road, Excelsior, MN 55331-0458.
Maintenance Organization Industry Survey.
(Volume 2: Physician Staffing [1990] and Utili- Introduction to Managed Care: Health
zation Patterns [1989] is not reviewed here.) Maintenance Organizations, Preferred
While 81 percent of the 372 responding Provider Organizations, and Competitive

5. 296 HEALTH AFFAIRS | Winter 1991
Medical Plans, by Robert G. Shouldice, is Patterns in HMO Enrollment, 1st ed., June
an expanded edition of Shouldice’s Medical 1991, reports that as of 3 1 December 1990,
Group Practice and Health Maintenance Or- there were 569 HMOs with 36.5 million
ganizations, published in 1978 when the members (15 percent of all Americans),
HMO movement was in its infancy. Intro- compared with 591 HMOs with 34.7 million
duction to Managed Care looks at the theory members at the end of 1989. This 5 percent
of managed care as well as the “nuts and increase in HMO enrollment and 4 percent
bolts” of how managed care programs are decrease in total number of plans reflect
created, organized, and operated. Published “continued consolidation of the HMO in-
in October 1991, the 550-page book in- dustry.” The report includes enrollment pat-
cludes chapters on the history, philosophy, terns by state, largest metropolitan areas,
and legislative activities of managed care and plan type, age, and size. Copies are avail-
systems; organizational structure of HMOs; able for $20, plus $2.50 postage and handling,
competitive medical plans (CMPs) and gov- from GHAA at the above address.
ernment contracting; providers, consumers,
and purchasers; control, quality, utilization,
and accountability; and financial manage- Managed Care Legislation And
ment. Copies are available for $65, plus $4 Regulation
postage and handing, from Information Re-
sources Press, Suite 550, 1110 North Glebe Cost Analysis of State Legislative Man-
Road, Arlington, VA 22201. dates on Six Managed Health Care Prac-
tices, a Wyatt Company study for HIAA,
estimates the likely effects of six types of
Marion Merrell Dow Managed care Di- “anti-managed care” legislation– either
gest: HMO Edition, 1991, a fifth annual under discussion by state legislatures or en-
publication, combines for the first time data acted by one or more states–on the costs of
on the HMO industry and HMO pharmacy managed health care. The study, released in
operations. Data were gathered from two August 1991, found that all six legislative
surveys and from insurance regulators in fifty provisions would greatly increase the costs
states between 1 January and 1 April 1991. of managed care (for example, the “any will-
This June 1991 report finds that an average ing provider” mandate would increase fam-
of 5.7 prescriptions per HMO member were ily PPO premiums by $486 annually) and
filled in 1990, up 14 percent from 1989, and severely compromise the cost containment
that average HMO drug spending in 1990 efforts of managed care entities. For a de-
was 27 percent higher than in 1989. Copies tailed discussion of these laws, see “The Im-
of the HMO, PPO, and Update editions are pact of State Laws on Managed Care” in this
available from Marion Marell Dow, Managed volume of Health Affairs. Copies of the full
Health Care Markets Department, 9300 Ward report are avaiable from The Wyatt Company,
Parkway, Kansas City, MO 64114. 601 13th Street, NW, Suite 1000, Washing
ton, DC 20005-3808, and the Executive Sum-
mary, from HIAA, 1025 Connecticut Ave-
1991 So urcebook on HMO Utilization nue, NW, Washington, DC 20036-3998.
Data, released in June 1991 by GHAA, is
based on data from 103 plans with 16.1 GHAA Legislative and Regulatory Issues
million members, or 48 percent of 1989 Digest: 1991–92 summarizes policymakers’
HMO enrollment. The report includes data efforts during the 102d Congress to ensure
on inpatient use of acute care facilities, spe- greater access to affordable, appropriate
cialty facilities, and selected procedures and health care and the likely effect of those
ambulatory use of primary, specialty, and efforts on the managed care industry. The
subspecialty care. Copies are available for report covers “anti-managed care” legisla-
$45, plus $2.50 postage and handling, from tion, federal budget reform, the federal
GHAA, Publications, Order Department HMO Act, living wills, long-term care, so-
0612, Washington, DC 20073-0612. cial HMOs, Medicaid and Medicare, and

6. U P D ATE 2 9 7
quality of care and pharmacy issues. GHAA mental health care services. The study was
foresees the introduction of major legisla- funded by the National Institute of Mental
tion in 1992 to restructure the U.S. health Health (NIMH) and is scheduled for com-
care system but action only on small-group pletion in March 1992. Data for the study
insurance reform; increased congressional were collected from a 1990 survey of HMOs.
oversight of existing as well as newly legis- Investigators Maureen Shadle Peterson (In-
lated health care programs; and legislated terStudy) and Jon Christianson (University
incentives to use managed care. Copies of the of Minnesota) report that almost half of
Spring 1991 report are available for $25 from HMOs contract out for mental health care
GHAA, Publications, Order Department services and that these are most likely to be
0612, Washington, DC 20073-0612. IPAs, middle-sized and for-profit HMOs,
and HMOs affiliated with national managed
The Insider’s (guide to Managed Care: A care firms. For information, contact Inter-
Legal and Operational Roadmap is a 1990 Study, P.O. Box 458, 5715 Christmas Lake
publication of the National Health Lawyers Road, Excelsior, MN 5533 1-0458.
Association (NHLA). It contains the his-
tory, current status, and future directions of Manual of Psychiatric Quality Assurance
managed care; the “alphabet soup” of man- offers guidelines that reflect recent changes
aged care plans and systems; liability issues in the areas of peer review, quality assurance,
in managed psychiatric care; the effects of and utilization review, including increased
antitrust law on managed care; and guide- involvement of federal and state agencies in
lines for evaluating IPAs. Copies are available quality of care review. The 208-page publi-
for $48 (NHLA members) or $58 (nonmem- cation, released in December 1991, contains
bers) from NHLA, 1620 I Street, NW, Suite the history and practical issues of psychiatric
900M, Washington, DC 20006. quality assurance activities and review crite-
ria. Copies are available for $25 from American
Psychiatric Press, 1400 K Street, NW, Wash-
Managed Mental Health Care ington , DC 20005.
The Evolution of Mental Health Benefits,
released in June 1991 by HIAA, focuses on National Association of Private Psychiat-
the managed care strategies used by 70 per- ric Hospitals’ 1991 Survey on Utilization
cent of employers to stem the rising costs of Management Firm Conducting Psychiat-
mental health care. These include increased ric Review summarizes the results of
deductibles and copayments; caps on dol- NAPPH’s fourth annual survey to determine
lars, visits, and courses of treatment; utiliza- how outside review ofhospital-based psychi-
tion management; alternative treatment atric practice affects patient care. NAPPH
settings; managed mental health plans and conducted the survey during spring 1991
“carve-out” programs; gatekeeper employee and released its report in June 1991. Nearly
assistance programs (EAPs); and selective half of NAPPH’s 321 member hospitals re-
contracting through provider networks. sponded. The results indicate that most psy-
HIAA estimates that among employees chiatric hospital care is managed and that
with employer-sponsored health insurance, this trend is growing: 78 percent of patients
96 percent have coverage for inpatient men- (from 134 hospitals) required preadmis-
tal health services, and 93 percent, coverage sion/ precertification review, compared with
for outpatient services. Copies are available 70.4 percent just a year ago, and 74 percent
from HIAA Fulfillment, P.O. Box 41455, of patients required continued-stay review,
Washington, DC 20018. compared with 70.1 percent a year ago.
When asked if outside utilization manage-
Managing Mental Health Care in HMOs ment makes delivering care more difficult,
examines the different ways in which HMOs 93 percent answered “yes.” Chief difficulties
manage the treatment of mental illness and included earlier hospital discharge than is
how these approaches affect enrollees’ use of best for the patient; unknown review crite-

7. 298 HEALTH AFFAIRS | Winter 1991
ria; reviewers’ lack of familiarity with pa- Art–A Guide for States, which identifies
tients’ support systems and benefit plans for thirty states actively involved in Medicaid
follow-up care; and approval and appeal managed care who are convinced that such
processes that delay needed treatment. strategies increase access for Medicaid re-
On the positive side, the survey indicates cipients while containing costs and improv-
an increase in outside reviewers who are also ing quality. Despite considerable innovation
qualified clinicians with specific psychiatric and interest among the states, only about 10
experience, and improvement in review percent of Medicaid recipients are enrolled
firms’ availability to hospital staff. ‘We see in managed care, largely due to complex
the annual utilization management survey federal rules restricting state program devel-
as just one tool we can use to encourage opments and concern by consumer advo-
constructive dialogue with the managed cates that managed care provides inappro-
care industry,” said NAPPH President Fre- priate incentives for underuse of services.
derick D. Raine. Copies are available from The task force provides a unique forum
NAPPH, 1319 F Street, NW, Suite 1000, for all of the stakeholders in Medicaid man-
Washington, DC 20004. aged care to come together, discuss prob-
lems, and propose policy options to solve
Utilization Management: A Handbook for them. Based on the task force’s discussions,
Psychiatrists is a step-by-step guide “to as- the academy will publish a policy paper by
sist psychiatrists in navigating the processes summer 1992 proposing specific strategies
of utilization management in order to obtain for legislative and regulatory reform to en-
optimal coverage of services for their pa- courage the development of effective
tients.” Published by the American Psychi- Medicaid managed care.
atric Association in December 1991, it con- The critical policy issues under debate
tains descriptions of the different review include: (1) developing quality assurance
stages, checklists of required information, standards to replace the current proxy meas-
potential problems and solutions, and guide- ures that require 75 percent Medicaid/ 25
lines for protecting patient confidentiality. percent private enrollment; (2) developing
Copies are available (members, free of charge) improved rate-setting strategies and risk ar-
from American Psychiatric Association, Office rangements to maximize financial viability
of Public Affairs, 1400 K Street, NW, Wash- of plans; (3) expanding the base and diver-
ington, DC 20005. sity of providers, including full risk, partial
capitation, and primary care case manage-
ment; (4) simplifying the federal waiver
Medicaid process; (5) increasing consistency among
conflicting program requirements (Medi-
The National Task Force on Medicaid care, Medicaid, and private insurance); and
Managed Care is a new panel convened by (6) designing methods to address the special
the National Academy for State Health Pol- needs of populations such as the disabled
icy, a nonprofit forum for leading state and high-risk pregnant women.
health policy officials. The twenty-eight The task force will also develop a state-
task force members represent the Health ment of principles, which it believes should
Care Financing Administration (HCFA),
guide any legislative or regulatory reforms,
key congressional staff, state officials, con- and will create work groups to assist in the
sumer advocates, and providers. Its goal is to policy analyses. For further information, con-
eliminate barriers in federal policy that im- tact Trish Riley, Executive Director, National
pede the growth of Medicaid managed care. Academy for State Health Policy, 96 Falmouth
The task force is funded by a grant from
Street, Portland, ME 04203 (207-780-4948).
The Henry J. Kaiser Family Foundation and
is chaired by Trish Riley, executive director
of the academy. Its work is informed by a Med icare
year-long study conducted by the academy,
Medicaid Managed Care: The State of the Medicare Select, a new program of the U.S.

8. U P D ATE 2 9 9
Department of Health and Human Services Quality Management:
(HHS), will enable Medicare beneficiaries
who use PPOs or HMOs to purchase Medi- The InterStudy Quality Edge: Measure-
gap policies for less than the cost of regular ment and Management of Clinical Out-
Medigap coverage. On 20 September 1991, comes 1, no. 1 (Spring 1991), another new
HHS Secretary Louis W. Sullivan an- biannual (spring/ fall) InterStudy publica-
nounced that fifteen states– Alabama, Ari- tion, reports on measuring quality, analyzing
zona, California, Florida, Indiana, Ken- data, and using such findings to manage
tucky, Michigan, Minnesota, Missouri, purchaser and provider organizations. The
North Dakota, Ohio, Oregon, Texas, Wash- core of this first issue is a guide to five general
ington, and Wisconsin– have been desig- health status measures: their history, pur-
nated to begin the program. These states pose, mode of operation, reliability and va-
may offer the Medigap PPO or HMO option, lidity, strengths and weaknesses, user expe-
if, by 30 July 1992, they establish Medigap rience, and conceptual outline. The publi-
regulatory programs that meet the require- cation also contains an overview of four
ments of the Omnibus Budget Reconcili- consortia involved in collecting patient out-
ation Act (OBRA) of 1990. ‘We ultimately come data, an annotated reference list of
want this coordinated care option to be further readings, and a glossary of terms.
available to all Medicare beneficiaries,” said Copies are available for $60 (plus $5 postage
Gail R. Wilensky, administrator of HCFA, and handling) and annual subscriptions (two
which administers the Medicare program. issues), $100, from InterStudy, P.O. Box 458,
For further information, contact Bob Hardy, 5715 Christmas Lake Road, Excelsior, MN
202-245-6145. 55331-0458.
Rural Managed Care
Restructuring Health Insurance for Medi-
care Enrollees, an August 1991 CBO re- Managed Care Plans in Rural America:
port, examines five options to ensure that all How They Work, what They Do examines
Medicare enrollees are offered some protec- three PPOs and a staff-model HMO with
tion against catastrophic out-of-pocket ex- operations in the rural areas of eleven states
penses. Each of the options would cap Medi- to determine whether managed care can
care’s copayment requirements and then reduce employers’ health care costs. The
prohibit Medigap plans from paying any part study was a joint project of the National
of enrollees’ remaining copayment costs; Rural Electric Cooperative Association and
three of the options would include some Metropolitan Life Insurance Company.
degree of prescription drug coverage; and The report, released in summer 1991,
three would change Medicare’s copayment finds that “managed care works in rural ar-
structure. eas,” despite the obstacles of low incomes,
While none of the options would affect few physicians, and sparse population den-
total federal health or Medicare spending, sity. Most employers in the study reported
some would lower Medicaid costs (by about health cost savings of 10–15 percent, al-
15 percent), and others would raise Medi- though few were aware of managed care’s
caid costs (by 2–6 percent). All of the op- “quality effects.” Rural hospitals are more
tions would reduce employers’ costs for re- willing than physicians to join PPO net-
tiree health benefits by 25–35 percent. works, but physicians’ resistance can be
Overall, the options would reduce enrollees’ overcome by point-of-service plans and
average expenses by 14–20 percent; how- HMOs, which give enrollees added benefits
ever, some of the options would increase for using their designated network physi-
enrollees’ costs by 5–21 percent. Single copies cian. The report suggests several public pol-
are available free of charge from CBO Publica- icy changes to encourage the growth of man-
tions Office, Room 413, House Annex 2, 2nd aged care in rural areas. These include (1)
and D Streets, SW, Washington, DC 20515. clarifying multiple-employer insurance plan

9. 300 HEALTH AFFAIRS | Winter 1991
regulations; (2) limiting state-imposed re- Act (ERISA) of 1974, they will likely pre-
strictions on managed care plans; (3) re- serve a differentially regulated insurance in-
forming medical liability and malpractice dustry. Copies are available (first five copies
insurance; and (4) expanding medical out- free, additional copies $2) from U.S. General
comes research. Copies are availablw from Accounting Office, P.O. Box 6015, Gaithers-
NRECA, 1800 Massachusetts Avenue, NW, burg, MD 20877.
Washington, DC 20036.
Small-Group Insurance Reform
Barebones Coverage: Health Insurance
that Doesn’t Insure, a Families USA Foun-
dation report (June 1991), examines the
impact of new limited benefit plans on the
small-group health insurance market in
twelve states. The report argues that while
premiums for these plans are generally 40–
50 percent lower than for standard plans,
much of this reduction is attributable to
increased cost-sharing requirements. More-
over, “bare-bones” policies do nothing to
reduce administrative costs, eliminate ex-
clusions for preexisting conditions, promote
community rating, or control the rate of
health care inflation. In short, they “do not
solve small group insurance problems.” Cop-
ies are available for $5 from Families USA
Foundation, 1334 G Street, NW, Washington,
DC 20005.
Private Health Insurance: Pro blem s
Caused by a Segmented Market, released
in July 1991 by the U.S. General Account-
ing Office (GAO), addresses the increasing
difficulties small firms face in obtaining af-
fordable health insurance for their employ-
ees. Thus far, state reforms include mandates
to ensure the availability of health insurance
to any small business, regardless of employ
ees’ health conditions; exemptions from
state-mandated benefit packages; and tax
incentives and subsidies to small employers
for offering insurance coverage. These re-
forms, however, “neither stop nor reduce the
rising cost of health care,” GAO contends.
They redistribute costs among employers,
causing those currently paying the lowest
premiums to pay higher premiums; they tend
to penalize insurance companies that al-
ready have large numbers of high-risk groups
in their plan; and, without amendments to
the Employee Retirement Income Security