DISCUSSION OF BASIC PHILOSOPHY AND ORGANIZATION 47 (OEO), and the Hawaii Region is embarking on a similar type of program under Title XIX. We have not moved very rapidly in this direction because, with the exception of limited experimental OEO programs, government provisions for health care for the underprivileged have traditionally been geared to the fee-for-service system, and it is very difficult, for legal and administrative reasons, to work out dependable continuing financial provision for providing comprehensive services to an enrolled population. We believe, however, that the desirability of this approach is being increasingly recognized in government circles, and we hope and expect that there will be increased movement toward the development of arrangements for providing health care services to beneficiaries of governmental programs in a manner compatible with the operation of group practice prepayment programs. Q. How do you cope with the medically indigent who come to one of your hospitals? I assume you are also concerned with your tax-exempt status. A. In the Kaiser Foundation Hospitals' annual budget there's a line item called "Charity, Research and Education." We set aside approximately 5 percent of the hospitals' operating costs for charity, research and education. In the earlier years, say in the middle Fifties, a major portion of this budget was devoted to charity. This is how we handled the indigent; no one was turned away. Long-term cases were transferred, when appropriate, to public facilities. One of the basic concepts of the hospital and the tax exemptions under the Internal Revenue Code 501(c)(3) is that it is for the care of anybody who comes in the front door. Over the years the amount of money necessary for the treatment of charity patients has gradually declined as the amount of prepaid insurance has increased and as government programs for the indigent have developed. The amount of money devoted to charity has become smaller and that for education and research has increased. Q. What do you do about a prospective enrollee who has a very positive medical history? A. For the great majority of our members, who come in through group enrollment, there is no medical review. Even if the group member is ill when he joins, he is still eligible. The relatively small percentage of members who come in on an individual basis -13 percent are given a medical questionnaire and, if some serious question arises, also a physical examination. Individual members, who were previously group members, may convert, after leaving the covered group or terminating membership for some other reason, to an individual membership without any examination. Q. How has Kaiser generally fared under dual-choice elections? A. The particular experience, the degree of penetration, varies tremendously. In both Northern and Southern California, however, the net has always been upward. In groups where some other carrier got started first, we know that we are un 48 KAISER-PERMANENTE BASIC PHILOSOPHY AND ORGANIZATION likely to go much beyond the 40 to 50 percent level. On the other hand, where we were the first carrier, we continue to hold a big majority. For example, with the Retail Clerks in Southern California, we still have better than 70 percent of that group. With the Culinary Workers, the figures are a little higher. In the Longshoremen's Southern California program, we have over 90 percent. Q. In evaluating your hospital utilization rates, to what degree can you document the out-of-system use of hospitals and other physicians? That is, to what degree are you really measuring all of the care used by your members? A. We have no regular mechanism for obtaining information on the extent to which people go outside the system unless they apply either for in-area emergency reimbursement or out-of-area reimbursement. However, information on outside utilization can be obtained through special studies. A study of this type was made by Ray Trussell and Josephine Williams of Columbia University a number of years ago,1 They indicated an outside utilization of something under 10 percent in hospital care without any specification as to whether this was covered or uncovered, and something in the order of 15 percent of doctor-office visits. This is a subject of considerable interest to us. The Oregon Region is now involved in a study which may shed some more specific light not only on outside utilization but also the character of that utilization. In Southern California an attitude study was conducted in 1970. It indicated that people do use outside services, but not how much. Northern California may proceed to an attitude survey in which this question will be emphasized. Q. What are the economies or diseconomies of scale with regard to the size of the plans? Possibly one way to get at this would be differences in cost between some of the smaller programs, such as Portland, and those in California. A. This is extremely difficult to measure. Oregon in fact has a lower revenue per member per month and lower costs. Their services or scope of benefits aren't necessarily different, but the economy of that community is different. I don't think it's possible to make a competent judgment among our own regions as to the relative economies in terms of scale or volume. Q. Is this because of the different number of patient visits, different number of hospitalization days, the different prices, etc., or does it really come down to a diseconomy scale? A. Let's take Southern California, 3.7 visits per member per year; Hawaii, somewhere over 4; Oregon, down to 3.1. But ask anybody from our organization why that occurs and you'll get as many different answers and opinions as the number of people you ask. The ratio of physicians in Hawaii is 1 to 1,300 or 1,400 members; in Southern California it's 1 to 1,050; in Northern California it's 1 to less than 1,000. 1. Josephine J. Williams, Project Administrator, School of Public Health and Administrative Medicine, Columbia University, Family Medical Care Under Three Types of Health Insurance (New York: Foundation on Employee Health, Medical Care, and Welfare, Inc., 1962). DISCUSSION OF BASIC PHILOSOPHY AND ORGANIZATION 49 It's very difficult to put your finger on it, even in our own organization, as to why these things happen the way they do. The comparison of absolute costs from one region to another is very difficult. There are many factors that have nothing to do with scale-medical practices, the care of the membership served, the general economic environment of the area. But we might mention a few specific examples of economy of scale. Consider, for example, the distribution of physicians by specialty per 100,000 members (Table IX-6). Any of those specialties which indicated one or two or three per 100,000 members simply translate into economy of scale if you have 100,000 members. If you have less than 100,000, then this is referral service, and this is expensive. An example in Southern California is the concentration in the principal Los Angeles medical center of our radiotherapy activity. We bring members from San Diego, Fontana, and all over into that one location rather than have a betatron in each one of the medical centers. In the area of joint administrative services, generally covered by the Permanente Services Organizations, we have one accounting department that not only takes care of record-keeping for health plan hospitals but the medical group as well. One singie employee relations department. One computer center, etc. All the way through the administrative operations. There are some specifics of that sort. But when we get into differentials of utilization patterns and things that create differences in absolute dollar cost per member, then we get into things other than economy of scale. Q. Do you have any data to compare the total cost of your program-inpatient, outpatient, in-system, out-of-system-to the total cost for comparable health care in comparable population groups? A. Studies made by the School of Public Health at Columbia University,2 by the State Employees Retirement System in California, and by the National Advisory Commission for Health Manpower.1 All concluded that the total cost for members covered under the K-P program was less than that for persons in comparable population groups. A list of studies comparing Kaiser-Permanente with other sectors of the health care industry is included in Appendix B. In addition to information on cost, these studies also include comparisons of utilization, member satisfaction, and other aspects of the program. 2. Williams, Family Medical Care Under Three Types of Health Insurance. 3. Report of the Medical and Hospital Advisory Council to the Board of Administration of the State Employees Retirement System (Sacramento: State of California, June 1964). 4. "The Kaiser Foundation Medical Care Program," in Report of the National Advisory Commission on Health Manpower, Vol. II, Appendix IV (U.S. Government Printing Office, November 1967). V Members, Benefits, and Premiums DANIEL O. WAGSTER* IN THE KAISER-PERMANENTE MEDICAL CARE PROGRAM, the Kaiser Foundation Health Plan serves as the connecting link between the member and the providers of care-the Kaiser Foundation Hospitals and the Permanente Medical Groups. Although there is some regional variation, I will focus on the plan's structure and activities in the Southern California Region, which is representative. the healtH PLAN AND ITS RELATIONS WITH MEDICARE The actions taken with respect to Medicare illustrate the plan's role as the vital connector between members and providers in creating our system of health care delivery. The sudden passage of the Medicare legislation in 1965 created a problem of potentially great magnitude to the K-P program. Some aspects of this problem were: (1) the legislation was written essentially to reimburse providers of care on a fee-forservice basis; (2) it provided benefits (reimbursement) for only a small segment— 4 percent of the plan's population, and (3) Medicare benefits included some services not then a part of plan coverage, while excluding health maintenance items which our program does provide, and which it holds to be basic to a direct-service plan. Thus, the problem involved membership enrollment, benefits, rates, reimbursement to providers of care, member and group relations. That is, coincidentally, a fairly complete list of health plan functions. The plan took the lead in integrating our program with Medicare. It was a plan function to arrange for provision of hospital and medical services to members 65 years of age and older, with no break in continuity of service, and largely without change from the members' point of view. However, the plan acted only with the advice, consent, and knowledge of Kaiser Foundation Hospitals and the medical groups. The actions taken may be summarized as follows: 1. Formulation of basic policy position. Our objectives were: to retain our members, to maintain continuity of membership and age span, to interweave health * Vice-President and Regional Manager, Kaiser Foundation Health Plan and Kaiser Foundation Hospitals, Southern California Region. |