US health industry seeks cost-effective cure

AS THE US Congress argues about how to reform a health system that consumes 14 per cent of gross domestic product while leaving nearly 40 million Americans uninsured, health- care companies are attempting to hold down costs.

One of the fundamental shifts taking place is towards a cheaper, more integrated system, such as health maintenance organisations, which combine insurance coverage, doctors and hospitals under the same administrative system.

HMO subscribers lose the flexibility of choosing doctors and specialists, but know that a fixed monthly fee will cover most contingencies and as many visits as they require. In California, many employers are already steering employees into HMOs to hold down insurance premiums.

Wayne Moon, who took over in September as president and chief executive of California Blue Shield, a medical insurance company, is a leading figure in the state's health-care industry. He was formerly head of the Kaiser Health Plan and Kaiser Hospital operations, which comprise the country's largest HMO. His appointment at Blue Shield is seen as a sign that integration is the way forward. 'My background is all in the provision of health care, not insurance, but Blue Shield recognise they have to move from the traditional arrangements to more integrated provision of health care.

'With or without health- care reform, there are pressures from employers and also from consumers and public opinion that say you've got to become more cost-effective. Organisations like Kaiser have demonstrated that by integrating the financing and the delivery, you can do more cost-effective things, so irrespective of what the reform looks like, an integrated health-care system will be in a better position.'

Mr Moon believes the health-care industry should focus on increasing efficiency. 'Our first effort is to try to be more efficient about what we do. Studies have shown quite remarkable variations in the kind of resources that are applied for any given illness, with no particularly demonstrable differences in the outcome.'

Another difficulty is that it is almost impossible for individuals to join or change insurance companies if they or their dependants have any existing medical condition. And companies can change insurance rates at any time. Such restrictions reduce job mobility and allow insurance companies to take on only the fit and healthy.

Mr Moon is keen to remove such restrictions. 'I think pre- existing-condition clauses should be removed across the industry,' he said.

As a first step in becoming an integrated company, Blue Shield recently proposed merging with UniHealth America, which already has two HMO networks, although merger talks collapsed after four months of negotiation.

But Mr Moon remains convinced that Blue Shield will be expanding aggressively under his leadership.

'Definitely we're looking for other partners to complete our network across the state,' he said.

'It will be a combination of both acquisition and expansion, with strategic links as well as mergers.

'The key is our link with physicians, and our real focus must be developing relationships with physicians in which it is an appropriate activity for them to be practising cost-effective medicine.

'That's really what we'd like to achieve.'

(Photograph omitted)