This is a guest article written by:

Ivan J. Miller, Ph. D.

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 a 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 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

1. Disregarding 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 mean 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 mean 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. Insurance records, under current laws, are at times even available to employers.

True privacy and confidentiality mean patients have the 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 insurance benefits.

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 ultra-brief 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 that intentionally restrict choice call themselves names like “Choice Health” or “Options Health.” Companies who are hired to restrict 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.

4. Violating 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 supports the new managed care methods of treatment. Using secret treatment guidelines is just as unethical as giving a patient a secret medication.

5. 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.

Utilization reviewers commonly do not have the credentials or training necessary to confirm that they are competent to overrule and change the decisions of the treating professional. For example, in managed mental health, utilization reviewers often have merely a bachelor’s degree or a master’s degree with limited experience. These reviewers routinely overrule and change the treatment decisions of greatly experienced specialists with a master’s or doctorate.

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 contained in 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.

6. 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 session[1], 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 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.

7. 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 ultra-brief 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 may be 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 for by the managed care company. Patients are not told that their therapist’s professional freedom is constrained by these rating systems.

8. Violating informed consent procedures.

The rights patients have to control the treatment of their minds and bodies are protected through a procedure called informed consent. In this procedure, patients are given important information about treatment and the major treatment options, and 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 another 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 loses the choice to self-pay for the preferred treatment.

Medication is frequently presented as if it is a complete treatment. In truth, psychotherapy for many problems, either in place of medication or along with medication, is a 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 ultra-brief 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.

9. 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 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 kickbacks. Although unethical, these bonuses avoid the laws that were specifically designed to protect patients against kickback or fee-splitting.

10. Squandering money entrusted to their care.

When insurance is sold, the company promises that it can be trusted to handle the funds prudently 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 comparably 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.

11. 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 the potential harm to patients.

Managed care has many policies that can harm patients but do 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, despite 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 based on insurance cost, not the costs to the patients or their families. For example, when ultra-brief 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 the death rate. Human life and quality of life are simply not entered into the managed care formulas for measuring treatment cost-effectiveness. The cost-effectiveness calculations show only insurance expenses. As a result, these formulas 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 truly free market and consequently, cannot give the benefits of a free market. In a truly 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 select 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 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 greatest number.

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 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. 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 treatment.

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 fee-for-service medicine.

Second, it is not true that everyone does unethical things. 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 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 is that these surveys do not ask consumers if they approve of cutting costs by using dishonesty and unethical methods. Saving money is a consumer issue, 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 the 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 were everything, then cheating and stealing would be ethically correct.

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 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 businesses and governments 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 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 grassroots 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 to 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 businesses, and the 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 in 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 sick and vulnerable patients 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 policy.

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.