LDI Health Policy Seminar Series
Summary:  The Future of Managed Care
Karen Ignagni
President and Chief Executive Officer, American Association of Health Plans
April 7, 2000

In a frank and engaging talk at the Leonard Davis Institute of Health Economics, Karen Ignagni described the current state of the managed care industry and evaluated its future prospects.  For the past seven years, Ms. Ignagni has been President and Chief Executive Officer of the American Association of Health Plans, which represents more than 1,000 HMOs and PPOs.

She characterized managed care as an “an industry under siege.” With industry-wide margins of 1-2%, capital has taken flight, leaving managed care companies in a vulnerable financial position. 

The industry’s “number one challenge” in the political environment, Ms. Ignagni said, is the so-called patient protection legislation, now in conference committee. She said that the legislation has been misunderstood as giving patients the right to sue their health plans over quality of care. However, health plans can be sued on quality grounds right now, Ms. Ignagni maintained. The new legislation would make plans liable for coverage decisions, even those specified by contract—making all contracts vulnerable to reinterpretation by the courts.

She readily acknowledged that the industry had made certain mistakes that contributed to the present atmosphere. In the 1980s, health plans focused on pleasing employers, whom they considered to be their customers. By focusing on the employer community, she said, “we forgot that the consumers were the end users.”  In addition, the industry did a poor job of explaining the trade-offs involved in providing affordable, quality care. In public arenas, physicians leading managed care organizations didn’t want to defend managed care practices (such as “drive-through deliveries”), even if they were defensible. “They swept trade-offs under the rug,” she said. 

But recently, changes have occurred that may provide an opportunity for a common platform among employers, physicians and health plans. According to some surveys, employers are considering dropping coverage if legislation passes that may involve liability for contract decisions. Physicians are worried that they may face increased liability as well. And finally, the issue of patient safety has brought another dimension to the patient protection debate. In effect, these changes have caused the major stakeholders to share concern about the appropriateness of using liability law to address quality of care issues.

This opportunity for common cause, Ms. Ignagni said, was the impetus for the controversial new AAHP television commercial linking patient safety and patient protection.  Even before the commercial had aired, the American Medical Association had accused the AAHP of crossing “the sacred line of confidence in the health care system” and “destroying trust.” She invited the audience to make up its own mind about this reaction as she showed a tape of the commercial.   The goal, she maintained, was to point out that physicians will be in the same boat with patient safety as health plans are with patient protection. “Whenever there’s a health care issue, Washington thinks in terms of lawsuits,” she explained.  Given the reaction, she said, “we clearly have a lot more talking to do.”

She sketched out two industry goals for the immediate future: reducing the hassle factor for physicians, and providing consumers with real-time help in navigating through the health care system. As part of reducing the hassle factor, she predicted that utilization review procedures will be replaced by strategies that target wide variations in care. Administrative procedures will become more transparent and consistent, improving the relationship between managed care and physicians. 

A new consumer orientation will mean that plans take more of an ombudsman role in patient care, and that they compete on their ability to provide customer support, Ms. Ignagni said.  The survivability of managed care organizations rests on their ability to “prove to people that they’ll be there” when patients need care. 

She believes that the secret to survival of the industry is in the area of disease management, which she defined as the ability to truly manage and coordinate care. “Plans will compete on information and quality,” she added, through the use of increasingly sophisticated information technology. She thought that plans might need to remake themselves in the future, perhaps segmenting the roles of insurer, manager, and information provider. This might lead to new partnerships with information technology firms and pharmaceutical companies.

Ms. Ignagni responded to an audience member’s question about the increasing trend toward employers providing a defined contribution to employees for health coverage. This has happened, she said, because employers have an aversion to risk, and because of unfunded mandates form the government. Health plans are split on this, because most plans are not used to marketing to individuals.

When asked about the managed care industry’s role in reducing the numbers of uninsured, Ms. Ignagni sketched out the AAHP’s recent proposal on the subject. She summarized three major points: first, eliminate mandates on coverage so that plans can customize products and provide policies with reasonable coverage and deductibles; second, reconfigure the employer tax deduction for health insurance so that low-income workers receive more of the benefit; and third, develop the political will to allocate resources to fund the safety net.  More details on the AAHP proposal can be found on its web site (http://www.aahp.org/menus/index1.cfm)

Karen Ignagni
President and Chief Executive Officer
American Association of Health Plans
April 7, 2000

As President and Chief Executive Officer of the American Association of Health plans, Karen Ignagni is the nation’s leading authority on the public policy, legislative, and public affairs issues challenging the managed care industry today.  Through her leadership, the managed care industry has been transformed into an internationally-recognized model of health care covering nearly 175 million Americans.  Her accolades are numerous: Washingtonian magazine has recognized Ms. Ignagni as one of the Top 50 trade association leaders in Washington; under her leadership the 1,000 member trade association has been called “ a force to be reckoned with” on Capital by the National Journal; and most recently Fortune magazine noted that she presided over AAHP’s political program in 1998—a program it deemed “worthy of presidential election bid.”

Ms. Ignagni has a long and distinguished involvement in health care issues.  Prior to coming to AAHP (formerly Group Health Association of America) in 1993.  Ms. Ignagni directed the AFL-CIO Department of Employee Benefits.  For four years, she was a Professional Staff Member of the US Senate Labor and Human Resources Committee.  In the late 1970’s, she was assistant executive director for the Committee for National Health Insurance and, prior to that, a research analyst for the US Department of Health and Human Services.

Ms. Ignagni is regularly featured on nation television and radio programs and in the print news representing the managed care industry on a wide range of issues.

Ms. Ignagni holds a M.B.A. from Loyola University and an undergraduate degree from Providence College.


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