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What Care Should Be Covered?

Bernard J. Mansheim

Abstract. The answer to the question of what health care services should be covered by a managed care plan is straightforward; the plan should cover whatever the consumer is willing to pay for. From the plan's perspective, the consumer is the payer, that is, the employer who negotiates the plan; not the individual patient whose personal preferences and interests may be quite different. Since managed care organizations contract with payers to arrange for health care services within a defined set of benefits, there is a broader question as well: Within the benefits chosen by the payer, what actually is covered? Criteria for determining "medical necessity," which managed care plans frequently use as the basis for coverage, are discussed.

From the standpoint of a managed care organization like an HMO, or even of a traditional health insurance company, the answer to the question "what health services should be covered?" is easy. The answer is: "Whatever the consumer is willing to pay for."

This response may seem flippant unless one thinks seriously about the question. One of the conundrums faced by President Clinton's ill-fated Task Force on Health Reform involved this exact question. Every possible stakeholder weighed in on the question, and the burden of trying to develop a comprehensive health care services package containing everything from emergency care to organ transplantation, from dental care to mental health and long term care, collapsed of its own weight.

Issues of health care rationing or even of what constitutes health care are too broad for this forum. For a health care company that contracts with an employer or other payer, such as the federal or state government, the question of what services should be covered can be deftly avoided. The decision belongs to the payer. The company's job is to implement [End Page 331] care within the benefit structure outlined by the payer. Thus, if a payer wants an infertility benefit for its constituency, or complete access to transplantation services, or pharmacy benefits, the health care company is glad to oblige, as long as the payer is willing to pay.

But I suspect I was not invited to address this question only to dismiss it with a simple, albeit true, answer. For a traditional indemnity insurance company, there is no other issue, since the health insurance company simply passes the cost of services on to the payer and receives a fee for claims processing and other administrative activities.

For a managed care organization (MCO), the prototype of which is the HMO, there is a broader question. The question is broader because the MCO contracts with a payer to arrange for health care services within a defined set of benefits. On the face of it, this arrangement is no different than that which occurs in the traditional indemnity company. There is a vital difference, however, in that the MCO agrees with the payer on a set premium. If the payments for the agreed upon benefits exceed the premium, the MCO assumes financial risk. In other words, the MCO assures the payer that care will be rendered within the benefit structure at whatever cost to the MCO. (There is another financial arrangement that varies from this "fully insured" contract. The employer self-insures and the MCO implements the health care services and has certain performance guarantees sewn into the contract and is, therefore, still at risk for over-expenditure, though less so than in the fully insured contract.)

The question, then, becomes: Within the benefits chosen by the payer, what actually is covered? On the face of it, one might not see the issue. If a benefit is chosen, then it should be covered. A single example will show the potential complexity. Surgical care is covered. Does this include plastic surgery as well as garden variety operations like hernia repair and tonsillectomy? If so, does it include cosmetic surgery like cheek implants or breast augmentation? If not, what about replacement of an amputated ear that occurred due to trauma? Is such replacement truly cosmetic or is it reconstructive? If it is reconstructive, should all reconstructive surgery be covered, such as revision of an ear that was congenitally deformed?

My point ought to be clear. Namely, it is not sufficient to say that what is covered is what is defined in the list of benefits. The essence of how an MCO manages health care services depends on how the MCO interprets the benefits to be provided. My subsequent remarks will focus on this core issue. [End Page 332]

The fundamental understanding between a payer and an MCO is that, unless otherwise agreed, only benefits that are medically necessary will be covered. Thus, the definition of medical necessity becomes paramount. One might assume that medical necessity ought to be decided entirely by the treating physician. Unfortunately there is such a wide variation in medical practice patterns that to default entirely to the physician would lead to the very situation that led to the emergence of managed care in the first place: rampant overutilization. Ethical issues that confront physicians when complete physician autonomy in decision making is allowed, such as ownership in facilities that may lead to a conflict of interest, have been the subject of a detailed discussion by the American Medical Association and are beyond the scope of this paper. Because the MCO has become the risk-taker, it is agreed contractually that its definition of medical necessity will prevail. However, before an MCO can implement health care benefits based on its definition of medical necessity, at least two other authorities may supervene.

First is the law. If legislatures declare that a pregnant woman can stay in the hospital following delivery until she and her physician feel she can be discharged, the issue of whether her prolonged stay is medically necessary is irrelevant. It should be clear that such interference is at best highly inappropriate and at worst undermines the scientific principles upon which medical decision making is based. Again, a subject for another day. A second, higher authority is the payer itself. If the federal government, as the payer for federal employees, decides that bone marrow transplantation for metastatic breast cancer will be a covered benefit, even if the scientific evidence argues against its effectiveness (as it did a few years ago), the MCO is bound by the contract to cover it.

Once the decision to cover a benefit lies with the MCO, which uses medical necessity as the basis for coverage, it is incumbent upon the organization to define medical necessity. The definition must go well beyond the simplistic notion that "whatever the doctor says" defines medical necessity. In fact, to be thorough, the definition must meet a number of criteria.

First, it is important to demonstrate that the service is medically appropriate. That is, the health service must offer benefits that exceed the expected health risks by a sufficiently wide margin. In other words, the service must be demonstrably worth doing and superior to other health services, including at times no service. Some of the expected health benefits can include increased life expectancy, improved functional capacity, [End Page 333] prevention of complications, and relief of pain. This criterion embraces the time-honored maxim primum non nocere, "first do no harm." In addition, this criterion acknowledges the importance of "art" versus "science" in the practice of medicine.

For example, tonsillectomy in a normal child is a recognized procedure. However, there is no evidence that performing this operation in a child without symptoms is better than not doing the procedure at all. Indeed, to do such a procedure may result in more harm than good. Even in a symptomatic child, antibiotic therapy may be more appropriate than surgery because it results in an equally good outcome without the risk of surgical complications. Scientific precision is lacking in a good deal of medicine, in large part because we learn more every day and need to apply what we learn to living human beings without the luxury of performing controlled experiments to see what works. We are left with a concept known as the "standard of medical practice," which is an informal consensus from the medical community about what is the "best" practice. The concept of "standard practice" is an attempt to make science out of art. It is universally acknowledged that relatively little in the practice of medicine is hard science--i.e., amenable to equations like F=ma, which are considered physical laws that have withstood the test of scientific scrutiny over millennia.

Consequently, some agreement must be reached on what constitutes the "standard" or guideline for medical practice. "Consensus" refers to the notion that there is likely to be an answer closer to the truth by sampling large numbers as opposed to asking one opinion. That is, there is apt to be statistical validity in sampling large numbers. Thus, "standard of care" is that which falls somewhere within a standard distribution curve. Whether it's plus or minus one (or two) standard deviation(s) from the mean is open for discussion, although there is considerable precedent for trying to quantify this sort of qualitative concept. Lawyers, for example, ask expert witnesses whether the defendant committed malpractice, which they define in part by asking whether there was more than 50 percent likelihood that the physician did something (s)he should not have done. It is true that I could be more right than my peers even if 95 percent of them disagreed, but far more often they would be right.

Thus, although physicians act independently, they do so with a vast experience that has taught them about the "standard of practice." This concept, albeit somewhat abstract, must be considered part, not all, of [End Page 334] what goes into defining medical necessity. To ignore the importance of this notion is irresponsible.

Second, a covered benefit must meet the basic health needs of an individual. For example, cheek implants may be the most appropriate way to enhance beauty in the face, but they hardly can be construed as a surgical procedure that addresses a basic health concern.

A third criterion in the definition of medical necessity requires that the service be consistent with the diagnosis. For example, if a patient presents to a physician with a sore throat and no other complaints, it would be inappropriate to perform a cardiac treadmill test (which may be recommended because the physician owns the expensive equipment that would otherwise stand idle).

Fourth, a covered benefit must be consistent in type, frequency, and duration of treatment with scientifically based guidelines as demonstrated by research or adopted by professional organizations. Physical therapy provides a useful example. It is often a challenge to define a duration for physical therapy after an injury since the therapist could argue, almost interminably, that more therapy provides more relief, even if the improvement is infinitesimal. Once again, the individual conflict of interest "more fee for more service" rears its ugly head.

A fifth criterion is that the service is required for reasons other than the convenience of the patient or the physician. A Caesarean delivery done on Wednesday morning so that a physician can play golf on Wednesday afternoon is inappropriate, particularly since there is significantly greater morbidity associated with C-sections than with vaginal deliveries.

Sixth, the service must be of demonstrated effectiveness, which is the inverse of experimental or investigational. Here again it is necessary to list a subset of criteria that define experimental. These conditions, which refer to drugs, devices, or procedures, include statements by the FDA or other official bodies that the service or product is inappropriate for use; is subject of an ongoing clinical trial that meets the definition of a phase one, two, or three trial set forth by FDA; or has not been demonstrated through peer-reviewed medical literature to be safe and effective for diagnosing or treating a condition for which it is proposed.

Finally, the benefit must be provided in the most cost-effective setting. This criterion is necessary, though mentioned last because of its controversial nature. If a patient can be cared for in a home setting rather than a hospital at less cost and without jeopardizing quality of care, then the [End Page 335] MCO will agree to cover the benefit in such a setting (unless there are extenuating circumstances).

When all is said and done, this complex effort to define a covered benefit translates into a simple statement. Patients should be cared for in the most appropriate setting and at the most appropriate time for the most appropriate reason and by the most appropriate provider. By reducing the definition of medical necessity to its component parts, it is far easier to rise above the debate that invariably degenerates into an accusation that the MCO is simply trying to withhold care for the sake of higher profits.

Very few scientifically established rules exist in the practice of medicine. In addition, there is virtually nothing in life that people hold more dear than their health. These two facts conspire to make the issue of what services should be covered volatile, to say the least. Rather than despair at what appears to be hopeless, it is far more constructive to face the issue head-on. In an era where health care costs are spiraling and concepts like health care rationing must be faced, we should not despair. The broad question "how much health care should be covered?" will remain dormant until (and if) a single-payer health care system exists. In the meantime, within the confines of a benefit structure chosen by a payer the question of "what is to be covered" must be answered. I have provided a framework for how this decision is made. It may not be perfect, but it strives to put a modicum of quantification into a qualitative subject. Or, to say it more simply, the approach aims to put some science into the art of medicine.

Bernard J. Mansheim, M.D., is Chief Operating Officer of United HealthCare of the Mid-Atlantic, Baltimore, MD.

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