The New Ruthless Economy by Simon Head

Author:Simon Head
Language: eng
Format: epub
Publisher: Oxford University Press
Published: 2003-11-24T16:00:00+00:00

7

THE SCIENTIFIC MANAGEMENT OF LIFE—AND DEATH: PART I

THE CALL CENTER WORKFORCE is one of the first proletariats of the digital age, with the empowered computer and its software imposing the discipline and control that, in the mass production plant, has always been the task of the assembly line and the automatic machine. But this transfer of industrial methods from manufacturing to services is not confined to a lower-income, lower-skilled workplace like the call center. With the coming of “managed care,” medicine has become the latest service industry to find itself the target of this industrial reengineering. However, the lead employee in health care, the physician, is a high-wage, highly skilled worker, and the attempts of the managed care industry during the past fifteen years to subject the physician to the disciplines of “process” represent perhaps the most dramatic example of reengineering’s vertical mobility in the new economy.

The decline of the old fee-for-service system of health insurance in the United States sets the scene for the rise of managed care in the late 1980s and early 1990s. The weakness of the old system was its failure to control health care costs, a failure that had a long history. Between 1965 and 1983, per-capita health care expenditures in the United States rose at a rate of 12.5 percent per year, nearly 5 percent greater than the underlying rate of inflation.1 Early in his first term, President Nixon told a news conference that rising health care costs in the United States constituted a “massive crisis” that, unless acted upon, would lead to a “breakdown in our medical system.”2 The crisis became acute in the late 1980s when yearly increases in health insurance premiums of 15 to 20 percent became commonplace.3

A triangular relationship between insurers, employers, and physicians fueled health care cost inflation. The monthly premiums that insurers charged to businesses on behalf of their employees were calculated on a cost-plus basis: The premiums reflected the existing costs of health care plus a markup for profits. As long as the insurer could pass on the higher costs of health care in the form of higher monthly premiums to be paid by the employer, physicians could err on the side of caution in ordering up multiple tests, drugs, or surgical procedures for their patients. The acceleration of health care inflation in the late 1980s led employes to cast around for ways of controlling their health care costs. Managed care seemed to offer a means of breaking these links between higher medical costs and rising insurance premiums.

With the coming of managed care, large employers such as General Motors would contract with selected managed care organizations (MCOs) such as Aetna or Humana for the insurance of all or part of their workforce. The MCO offered the corporation comprehensive coverage of its employees for a fixed payment per insured employee. Employees of companies that enrolled with MCOs then faced restrictions on their choice of physicians. The most restrictive of the MCOs, the health maintenance organization (HMO), limited the employee’s choice of physicians to a panel approved by the HMO.

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