MANAGED CARE AND THE MORALITY OF

THE MARKETPLACE

WHETHER health care should be subjected to the values of the marketplace is a fundamental question facing us today. A powerful trend in this direction is upon us, with enormous, well-financed companies already dominating the delivery of health care in many parts of the country. Although many in medicine believe that the unchecked expansion of managed care (particularly the investor-owned variety) could have dire consequences, few have spoken out. Instead, many leaders have accepted the new trend as a fait accompli and have begun to position their institutions to survive within the constraints of the marketplace. The threats are not difficult to identifY Market-driven care is likely to alienate physicians, undermine patients' trust of physicians'motives, cripple academic medical centers, handicap the research establishment, and expand the population of patients without health care coverage.
Managed care itself is not the enemy. On the contrary, many of its effects are salutary. Patients stay in the hospital far fewer days, many surgical procedures that previously required hospitalization are now safely performed in day surgery, there is far more attention to preventive care, many medical practices have been standardized to produce better outcomes, and satisfying patients has become an explicit goal. There is, however, remarkable diversity among managed-care plans.' Some, mostly older plans that were created when cost containment was an unexpected benefit rather than their central purpose, deliver high-quality care economically. Unfortunately, others cut costs by recruiting the healthiest patients, excluding the sickest, rationing care by making it inconvenient to obtain, and denying care by a variety of mechanisms.
Market-driven health care creates conflicts that threaten our professionalism.2 On the one hand, doctors are expected to provide a wide range of services, recommend the best treatments, and improve patients' quality of life. On the other, to keep expenses to a minimum they must limit the use of services, increase efficiency, shorten the time spent with each patient, and use specialists sparingly. Although many see this as an abstract dilemma, I believe that increasingly the struggle will be more concrete and stark: physicians will be forced to choose between the best interests of their patients and their own economic survival.
Under the fee-for-service system physicians were not at risk. It cost them nothing to request consultations, order tests, or keep patients in the hospital. But in many managed-care organizations, some payments are withheld from physicians until the costs of their patients' care are assessed; in others, doctors' salaries may be cut if the cost of their care is too high.2 3 These physicians are at risk financially, but if they play their cards right, a large fraction of their income can be preservcd. In recent months, however, the stakes have gotten higher. When the care in a community becomes
heavily capitated, many physicians are forced to join managed-care plans or be left without patients. In addition, the physicians are often compelled to sign contracts containing "no-cause" nonrenewal clauses45: their contracts can be ended for any reason at all. Under this arrangement, physicians can rapidly find themselves unemployed. In the past this would have had a negligible effect: an unemployed doctor had only to move and start over. But other managed-care organizations are not likely to be interested in a physician who was dismissed from another plan, and such physicians may well be considered unemployable.
Lamenting the lot of unemployed doctors is not the issue. The image of physicians driving taxis or selling apples is worrisome, but the potential effects short of that --on physicians' behavior and patients' confidence in their doctors--are a real threat. Until now, there has been little empirical evidence to indicate that managed care is inferior to fee-for-service care. In fact, our professional ethos has so far acted as a sturdy constraint. Yet the incentive to remain employed is so strong that many physicians in a capitated system may not provide all the services they should, may not always be the patient's advocate, and may be reluctant to challenge the rules governing which services are appropriate. In some cases, in fact, their contracts forbid them to disclose the existence of services not covered by a plan.26 Doctors forced into such excruciating quandaries will not be able to tolerate them for long. Soon, many will find themselves conforming to the restrictions and deceiving themselves that what they are doing is best for their patients.
These predictions are based on several assumptions: first, that cost, not quality, will dominate in the marketplace. Although many have argued that competition will focus on the quality of care, the methods we have for measuring quality are still quite primitive.7~9 As Arnold Epstein points out in a Sounding Board article in this issue of the Jourrzal,9 the hope of developing national quality-reporting standards died with the demise of health care reform. With the quality measurements now in use, I believe that all plans will look alike to employers. Another assumption is that all plans will offer fewer services. As price competition becomes more intense, some plans are likely to stop providing not only many services of uncertain value but also other medical services valued more by patients than insurers (arthroscopic knee surgery to restore the ability to play tennis, for example). Already, we are seeing how competition is affecting plans in some parts of the countrY Some plans with superb track records are being underbid by wealthy investor-owned plans.~° i' It is only a matter of time before even the best plans will be forced to trim benefits to compete. A last assumption is that physicians will be given the responsibility to implement these restrictions'2~3--a responsibility that will pit their duty to their patients against their duty to their employers.
Rather than oppose a system that might seriously
compromise the integrity of physicians, some people have proposed ways to cope within the system. Several articles in recent issues of medical magazines have offered advice.~4 t5 They suggest hiring a lawyer to assess contracts, introducing a bookkeeping system to track the frequency of services, installing a computer system that bills and tracks patients and their demographic data, and attracting younger patients and turning Medicare patients away, if necessary. In another strategy, proposed by the Council on Ethical and Judicial Affairs of the American Medical Association, physicians are supposed to remain dedicated to the health needs of their patients but at the same time to help make decisions about the allocation of services through representation on the governing boards or the medical boards of their organizations.~3 ~6 The council acknowledged that doctors are obliged to provide or recommend treatment that would materially benefit the patient and to disclose all therapeutic alternatives regardless of their cost or whether they are offered by the doctors' plans. A third strategy is to introduce rules and laws to ensure that managed-care organizations provide appropriate care. Some advocate laws that would bar nonphysician businesses and insurance companies from owning health maintenance organizations,'7 some propose laws governing contracts with patients and specifying measures of quality,iH ~9 and others would mandate oversight committees to approve the clinical guidelines of managed-care organizations.20 One is inclined to be skeptical, however, about the likely effectiveness of rules and regulations to prevent overly restrictive practices by capitated systems, given that rules designed to prevent profiteering in the fee-forservice system worked poorly.
Devotees of "evidence-based medicine" propose another strategy--paying only for treatments that are known to be efficacious or, better still, cost effective (as if a list of such treatments actually existed2~). Still others suggest that we try to place a value on human life and decide how much we are willing to pay for it. For better or worse, we have not yet figured out how to do this. The problem is that the marginal decisions-- those difficult choices about what is beneficial--often have little scientific basis and are extremely difficult to make. In fact, nobody wants to make them. To get around doing so, we often substitute concepts such as "medically appropriate" care and "materially beneficial" care. Unfortunately, these notions have different meanings to different people. This is one reason that we have still not developed a consensus on what should be offered and what should not.
The transformation of our health care system is having several perverse effects. It is producing corporate conglomerates with billions of dollars in assets22 that compensate their executives as grandly as basketball players.23~26 These conglomerates are battling to control physicians in many locations, and because they have cash and monopolistic power, they often succeed. To some, providing medical care is a cost of being in the
health care business, with Wall Street and others using such terms as "the medical loss ratio" to describe the expense involved in actually taking care of the sick.27-29 There is already such sensitivity to price that both individuals and companies change plans readily, thereby interrupting the continuity of patient care.20303~ As another byproduct, a growing number of people in this country have no health care coverage. The conversion to managed care has the potential to squeeze hospitals so badly that they will no longer be able to support research or education adequately,32 fund the debt service on their capital loans, or provide many community services, such as free care for the uninsured. In fact, these prospects expose in stark relief our failure to support research and education independently rather than (in part) by cross-subsidization with dollars designated for patient care.
Needless to say, supporters of market values have a different opinion about a market-driven system. They are right in asserting that market distribution works well for many goods and services. They believe that a market-based system should lead to greater efficiency and make the health care dollar go further, and they assume that the corporatization of health care is appropriate and that health care should be treated as a commodity. Yet, a few have gloated over the disorganization of physicians,33 34 and some contend that the large fraction of health care revenues that is spent on marketing, administration, and profits is what would be expected in any business."
Many disagree vehemently with the proposition that health care is just another commodity. They argue that doctors have traditionally had a professional and moral responsibility to care for patients, that patients are vulnerable and dependent when they are ill and need to know that their physicians are not only at their side but on their side. There is a strong presumption by patients that the physician's concern for the patient will override any financial consideration.
Why have many of our leaders capitulated to such a wrong-headed philosophy of health care? Over the past decade a few people have argued that cost should never be a factor in the one-on-one encounter of a doctor and a patient,35~39 but where are the others? Why haven't we heard from them? I suspect that the embracing of market values in health care reflects a change in society as a whole. Because individualism and competition are increasingly celebrated, the principles of the marketplace now permeate our personal lives and even capture our judgment. When we spend our waking hours scheming about how to win, it becomes difficult to keep in touch with fundamental human needs. We have not given up talking about values, but they are often the values of the marketplace, having to do with how much leverage and money we have. We forget that there is more to being civilized than material goods and individual rights. There is ethical behavior, respect, dignity, and caring.
We must persuade our leaders to speak out. They should concede that too much money is still being spent
on excessive testing and unnecessary treatment, that hospital stays could be further reduced, and that overhead costs could be cut substantially by the elimination of redundant layers of bureaucracy and wasteful paperwork. Leaders should also acknowledge that managing care can limit costs. But they should go on to say that the enormous profits of megahospital systems and huge insurance conglomerates should be used for medical care. Until they are, we have not tried hard enough to discover whether our resources are aufficient to avert restrictions in care. A rich country like ours that spends nearly a trillion dollars a year on health care and enormous sums on tobacco, alcohol, and cosmetics should be able to meet the basic health needs of its citizens. Our leaders should reject market values as a framework for health care and the market-driven mess into which our health system is evolving. We gave up too easily; we must make another serious attempt to formulate a national policy that will provide health care to all.
After all, what oath, promise, or pledge did we ever make, either as individuals or as a profession, that obligates us to restrict care? We pledged, instead, to provide care.
JEROME P. KASSIRER, M.D.
REFERENCES

1. Clancy CM, Brody H. Managed care: Jekyll or Hyde? IAMA 1995:273:3389.
2. Rodwin MA. Conflicts in managed care. N Engl J Med 1995;332:604-7.
3. Hillman AL. Financial incentives for physicians in HMOs--is there a conflict of interest? N Engl J Med 1987;317:1743-8.
4. Terry K. When health plans don't want you amymore. Med Econ 1994; 71(10):138-49.
5. Gesensway D. Can you avoid being 'deselected?' Docs vs. HMOs' Mnktrimming tactics. ACP Observer. October 1994:1, 15.
6. Morain C. Looking for more controls on managed care in California. American Medical News. May 8, 1995:5, 6.
7. Kassirer JR The quality of care amd the quality of measuring it. N Engl J Med 1993;329:1263-5.
8. Vladeck BC. Managed care and quality. JAMA 1995;273:1483.
9. Epstein AM. Performance reports on quality--prototypes, problems, and prospects. N Engl J Med 1995;333:57-61.
10. Anders G, Winslow R. The HMO trend: big, bigger, biggest. Wall Street Joumal. March 31, 1995:BI, B4.
11. Eckholm E. Healing process--a special report: while Congress remains silent, health care transforms itself. New York Times. December 18, 1994:1.
12. Menzel PT. Economic competition in health care: a moral assessment. J Med Philos 1987;12:63-84.
13. Council on Ethical and Judicial Affairs, American Medical Association. Ethical issues in managed care. JAMA 1995;273:330-5.
14. Walker LM. Turn capitation into a moneymaker. Med Econ 1995;72(5):5873.
15. Doyle E. Medicine on 36 cents a day: how to take the fear and risk out of capitated payments. ACP Observer. March 1995:13-4.
16. Eckholm E. A hospital copes with the new order New York Times. January 29, 1995:FI, F7.
17. Yarmolinsky A. Supporting the patient. N Engl J Med 1995;332:602-3.
18. Pear R. Once in forefront, H.M.O.'s lose their luster in health debate. New York Times. August 23, 1994:A12.
19. Anders G, Stout H. Dose of reform: with Congress stalled, health care is shaped by the pnvate sector. Wall Street Joumal. August 26, 1994:AI, A12.
20. Emanuel EJ, Dubler NN. Preserving the physician-patient relationship in the era of managed care. JAMA 1995;273:323-9.
21. Naylor CD. Crey zones of clinical practice: some limits to evidence-based medicine. Lancet 1995;345:840-2.
. Anders G. Money machines: HMOs pile up billions in cash. try to decide what to do with it. Wall Street Journal. December 21, 1994:AI, A5.
23. Freudenheim M. Penny-pinching H.M.O.'s showed their generosity in executive paychecks. New York Times. Apnl 11, 1995:D I, D4.
24. Contavespi V What about Michael Jordan's pay? Forbes. May 23, 1994:142.
25. Zaslow J. Larry Johnson: 'your job isn't everything.' USA Weekend. April 16, 1995:26.
26. Taylor R Bad actors: the growing number of eelfish and spoiled players are hurting their teams and marring the NBA's image. Sports Illustrated. January 30, 1995:18.
27. Iglehart JK. Rapid changes for academic medical centers. N Engl J Med 1994:331:13915.
28. Reinhardt UK. Managed competition in health care reform: just another American dream, or the perfect solution? J Law Med Ethics 1994;22(2):10620.
29. Freudenheim M. Swallow hard and cut your costs, customers say. New York Times. April 28, 1995:DI.
30. Emanuel EJ, Brett AS. Managed competition and the patient-physician relationship. N Engl J Med 1993;329:879-82.
31. Stout H. Selective services: freedom to choose a doctor is dwindling, even before reforms. Wall Street Journal. February 10, 1994:AI, A6.
32. Kassirer JR Academic medical centers under siege. N Engl J Med 1994;331 : 1370-1.
33. Murray D. The four market stages, and where you fit in. Med Econ 1995; 72(5):44-57.
34. Johnsson J. Premium war: who pays? Quality may suffer as firms slice physician fees, protect profits. Amencan Medical News. March 13, 1995:1, 21.
35. Angell M. The doctor as double agent. Kennedy Inst Ethics 1993;3:279-86.
36. Levinsky NG. The doctor's master. N Engl J Med 1984;311:1573-5.
37. Cassel CK. Doctors and allocation decisions: a new role in the new Medicare. J Health Polit Policy Law 1985;10:549-64.
38. Leaf A. The doctor's dilemma--and society's too. N Engl J Med 1984;310: 718-21.
.,. Relman AS. Salaried physicians and economic incentives. N Engl J Med 1988;3 19:784.
THE OREGON HEAETH PEAN --

LESSONS FOR THB NATION

First of livo Parts

THOMAS BODENHEIMER, M.D.

IN 1989, the state of Oregon embarked on a controversial experiment in the financing of health care. The state planned to add many uninsured people to the Medicaid program and to pay for this expansion by reducing the Medicaid benefit package--more people would be covered, but for fewer services. The Oregon plan provides important lessons to a nation striving to expand health care coverage in an era of shrinking budgets.
At first, the Oregon plan made repeated headlines and provoked strong criticism. "The Oregon plan will target a new group for discrimination--the seriously ill," wrote an Oregon physician in a letter to the editor of the Journal.l "It denies care only to the politically powerless poor," commented health analyst Emily Friedman.2 "Oregon's decision to ration health care to its poorest women and children," charged Al Gore, "is a declaration of unconditional surrender just as the first battles are being fought over the future of our health care system."3
Why all the outrage? After all, Oregon was insuring more people, not fewer. Other states had axed thousands of families from Medicaid and reduced benefits, with little or no fuss. The difference was the method that Oregon chose to create its benefit package --the prioritized list. In 1991, Oregon ranked more than 700 diagnoses and treatments in order of importance. The state legislature then drew a line at item 587; treatments below the line would not be covered. Oregon had openly embraced the "R word": rationing--worse, rationing for the poor. Liberal Democrats in Congress, the Children's Defense Fund, the American Academy of Pediatrics, and others condemned the Oregon plan.
On February 1, 1994, the Oregon Health Plan, with its prioritized list, went into operation. How
From the Department of Family and Community Medicine, University of California at San Francisco School of Medicine, San Francisco. Address reprint requests to Dr. Bodenheimer at 1580 Valencia St., Suite 201, San Francisco, CA 94110.
@)1997, Massachusetts Medical Society.
have Medicaid recipients fared during these first three years? Perhaps surprisingly, the plan has added more than 100,000 people to the Medicaid program, and it is politically popular. Serious complaints about the prioritized list are hard to find. Major problems exist, but they mirror the difficulties of the health care system throughout the nation.
HISTORY

The Oregon Health Plan began with the poignant story of a seven-year-old boy. In 1987, Coby Howard contracted acute Iymphocytic leukemia and needed a bone marrow transplant. Earlier that year, the Oregon legislature had discontinued Medicaid coverage for organ transplantation.4 Amid much publicity, Coby died.
John Kitzhaber, an emergency room physician in the town of Roseburg, Oregon, was also president of the Oregon senate. In the emergency department, he saw victims of Medicaid cuts with serious illnesses that could have been treated at earlier stages. In the state senate, he lived through the Coby Howard tragedy. Kitzhaber wanted to address the twin problems: lack of insurance among low-income people and denial of life-saving treatment despite coverage of less effective therapies for less serious conditions.
A legislature can reduce Medicaid expenditures by removing people from the program, lowering the rate of reimbursement to providers, or reducing the benefit package. Kitzhaber believed that removing people from the program was the worst of the options. He also believed that many physicians refused to see Medicaid patients because of low reimbursement rates and that the legislature should not reduce payments to providers. The remaining option in the case of a budget crisis was to reduce the benefit package. But how could the benefit package be reduced without letting more Coby Howards die? Perhaps a prioritized list could guarantee that benefit reductions would eliminate only the least effective treatments.
In 1989, Kitzhaber shepherded through the Oregon legislature a plan with several key features: ( 1 ) all persons with incomes below the federal poverty level would be eligible for Medicaid, (2) the Medicaid benefit package would consist of a prioritized list of diagnoses and treatments, (3) the legislature would draw a line on the list below which treatments would not be covered, (4) the legislature would not be allowed to reduce reimbursement rates to Medicaid providers, (5) Medicaid services would be provided through managed-care plans, and (6) employers would be required to insure their employees, with the prioritized list as the basic benefit package.
In 1989, the Oregon Health Services Commission was established to create the prioritized list.56 The 11 commissioners were remarkably dedicated, attending many long meetings without pay over a
MANAGED CARE UNDER THE OREGON

HEALTH PLAN

Eighty-seven percent of persons enrolled in the Oregon Health Plan are in 1 of the 13 capitated Medicaid managed-care plans with which the state contracts. These are all not-for-profit plans; three forprofit plans dropped out (PactfiCare, Qual-Med, and a local health maintenance organization [HMO]). By far the largest Medicaid managed-care plan is HMO Oregon (owned by Blue Cross and Blue Shield of Oregon), with 34 percent of Medicaid managedcare enrollees.'4
Medicaid managed care has been growing rapidly throughout the United States. In 1996, one third of all Medicaid recipients were enrolled in managedcare plans in 48 states, representing a 33 percent increase in the number for 1995. The federal government is likely to eliminate the waiver process and allow states more flexibility to require that Medicaid baneficiaries enroll in managed-care plans.
Oregon was able to move its Medicaid population into managed care rapidly because managed care has been a major component of Oregon's health system for decades. Kaiser Permanente arrived in the 1940s and started to enroll Medicaid patients in 1976. During the decade before the institution of the Oregon Health Plan, the state enrolled 90,000 Medicaid recipients in HMO-style health plans. Thus, by 1993, when the federal waiver was approved that allowed the state to require that Medicaid recipients enroll in managed-care plans, Medicaid managed care was already well established.
In any Medicaid managed-care plan, one measurement stands out as critically important: the size of the capitation payment from the state to the plan. Kitzhaber recognized the need to make capitation payments reasonably high for two reasons: with adequate payment, physicians, hospitals, and managedcare plans are more likely to support funding for the Medicaid program; and reasonable rates attract physicians to the program, which means greater access to care for baneficiaries. Kitzhaber insisted that capitation payments cover the costs of care, whereas some other states provide payments that are lower than the costs of care.
Although it is difficult to compare capitation payments from state to state (since the mix of services covered by the payments varies), estimates can be made. In 1995, Oregon's capitation rate for nondisabled persons under the age of 65 years was about $130 per member per month. This payment represented a 30 percent increase over the fee-for-service Medicaid payments physicians received before the Oregon plan was introduced. In Tennessee's TennCare program, in contrast, 1995 capitation rates for a similar population were closer to $100 per member per month, representing a 40 percent decrease in pre-TennCare payments.ls~l6 California's compara
ble capitation rate is even lower, about $80 per member per month. New York's rates were considerably higher but have been ratcheted down in the past few years. Studies have shown that the willingness of physicians to provide care for Medicaid patients is related to the level of Medicaid reimbursement.l7
Are Oregon's doctors, hospitals, and health plans satisfied with the capitation rates? Of course not. Are they extremely dissatisfied? Not really. Physicians still earn one third less for services provided to Medicaid patients than for those provided to patients covered by commercial plans or Medicare. Some physicians are limiting the number of Medicaid patients they see, giving rise to complaints--especially in rural areas--that Oregon Health Plan membership cards are simply hunting licenses that enable the poor to join the hunt for a physician who will give them an appointment. The state counters that in 1996, 88 percent of surveyed Medicaid enrollees were satisfied with their access to health care, as compared with 70 percent in 1994.
THE PRIORITIZED LIST

In 1990 and 1991, Oregon's prioritized list was a controversial topic of conversation among health care professionals, policy analysts, bioethicists, and politicians. Today, complaints about the list are unusual.
What does the list look like? Table 1 shows three parts of the 1995 list: the top five lines, the bottom five lines, and those near the current line (578) below which services may be denied.l~ A number of diagnoses listed below line 578--for example, hepatorenal syndrome--can be managed by choosing a treatment listed above the line, such as comfort care (line 260). Pulmonary sarcoidosis, which is near the bottom of the list, can be treated with corticosteroids (line 158, medical treatment for respiratory failure). Expensive therapies that are medically effective, such as renal transplantation for end-stage renal disease and liver transplantation for biliary atresia and other life-threatening hepatic disorders, are ranked high on the list. Contraception is also ranked high, at line 51. Low birth weight (less than 2500 g) is at line 67. Preventive services for children are at line 143, and preventive services with proven effectiveness for adults are at line 181. Medical therapy for human immunodeficiency virus disease and AIDS is at line 168.
Five factors have stilled the argument that the list represents rationing of medical care. First, on balance, the Oregon Health Plan has expanded health care benefits more than it has reduced them. In particular, all enrollees are now covered for dental care and organ transplantation, benefits previously denied to Medicaid recipients.
Second, the line below which services may be de
nied has been set quite low on the list of diagnoses and treatments and has remained low. Most of the treatments listed below the line have little effectiveness. "Line movement" (movement of the line upward so that fewer treatments are covered) has been minimal, in part because the Health Care Financing Administration (HCFA) must approve any line movement passed by the state legislature. In 1996, the legislature moved the line from 606 to 581. In 1997, the legislature attempted to move the line from 581 to 574, but HCFA approved a move only from 581 to 578. If the line were moved much further up, protests could be expected from health plans, physicians, and patients. That situation is unlikely, however, since HCFA has indicated that it will not favor further movement of the line in the near future.
Third, since the items on the list represent diagnosis and treatment pairs, a diagnosis is required before a treatment can be denied. For simple maladies listed below the line, such as acute bronchitis, treatment is given at the diagnostic visit and is covered. Complex diagnostic workups are also covered.
Fourth, physicians occasionally "game" the system, choosing a diagnosis above the line even though the patient has an illness that falls below the line.
Finally, and most important, the state Medicaid program requires adherence to the list only for the 13 percent of patients whose physicians are paid on a fee-for-service basis by the state. In these cases, International Classification of Diseases, 9th Revision (ICD-9) codes and Current Procedural Terminolo
gy, 4th revision (CPT-4) codes for treatments listed below the line are not reimbursed. But for the 87 percent of Medicaid enrollees in capitated health plans, the state has shifted the financial risk to the plans and provides no additional funds if treatments listed below the line are given. The state has calculated that items below the line account for about 10 percent of all medical expenditures and has therefore subtracted 10 percent from capitation payments to the health plans. In this way, the state saves money as a result of the list. Yet the medical directors of health plans may, and often do, authorize care for diagnoses listed below the line. Recently, the utilization review committee of the CareOregon health plan approved high-dose chemotherapy and bone marrow transplantation for a nine-year-old child with medulloblastoma, a $75,000 treatment of unproven efficacy that is listed below the line.
Oregon's prioritized list serves as the Medicaid benefit package, indicating which services are covered and which are not. The list parts company with most health insurance and HMO benefit packages, which cover services that are "medically necessary" but leave the interpretation of medical necessity to medical directors within the insurance company or HMO. In contrast, Oregon's program clearly defines services that are deemed medically necessary, and if fiscal constraints require a reduction in benefits, this reduction is accomplished by taking away less appropriate treatments before denying more appropriate ones.
A similar approach to the design of benefit pack
TABLE 1. THF. OREGON HEALTH PLAN'S PRIORITIZED LIST OF HEALTH SERVICES, 1995.*
The 6ve top items
Line 1. Diagnosis: severe or moderate head injury, hematoma or edema with loss of consciousness. Treatment: medical and surgical treatment.
Line 2. Diagnosis: insulin-dependent diabetes mellitus. Treatment: medical therapy.
Line 3. Diagnosis: peritonitis. Treatment: medical and surgical treatment.
Line 4. Diagnosis: acute glomerulonephritis with lesion of rapidly progressive glomerulonephritis. Treatment: medical therapy, including dialysis.
Line 5. Diagnosis: pneumothorax and hemothorax. Treatment: tube thoracostomy or thoracotomy, medical therapy.
The five bottom items
Line 741. Diagnosis: mental disorders with no effective treatments. Trcatmc~lt: evaluation.
Line 742. Diagnosis: tubal dysfunctic,'1 and other causes of infertility. Treatmcnt: in vitrc> fertilizatic>n, gamete intrafallopian transfer
Line 743. Diagnosis: hepatorenal syndrome. Treatment: medical therapy.
Line 744. Diagnosis: spastic dysphonia. Treatment: medical therapy.
Line 745. Diagnosis: disorders of refraction and accommodation. Treatment: radial keratotomy.
Six items near the 1997 cutoff line
Line 576. Diagnosis: internal derangement of the knee and ligamentous disruptions of the knee, g~-adc IIT c~r 1~. Treatn~ent: repair, n~edical thcrapv.
Line 577 Diagnosis: keratoconjunctivitis sicca, not specified as Sjogren's syndrome. Treatment: punctal occlusion, tarsorrhaphy.
Line 578. Diagnosis: noncervical warts, including condyloma acuminatum and venereal warts. Treatment: medical therapy.
Line 579. Diagnosis: anal fistula. Treatment: fistulectomy.
Line 580. Diagnosis: relaxed anal sphincter. Treatment: medical and surgical treatment.
Line 581. Diagnosis: dental conditions (e.g., broken appliances). Treatment: repairs.
~Data were adapted from Oregon Health Plan Administrative Rules.'8
ages has been proposed by two health policy experts. Robert Brook suggests that substantial resources be devoted--through outcomes research--to the development of detailed guidelines that all health insurance plans can use to determine medical necessity, so that all appropriate care, and no inappropriate care, is covered.l9 David Eddy, arguing that "almost anything would improve on the hopelessly vague terms 'medically necessary' and 'appropriate,"' wants more precise benefit language but rejects the level of detail in Oregon's list.20
Although many particulars of Oregon's list are open to criticism,5 it does incorporate a large dose of common sense. As one Oregon physician explained, "Most things at the top are important, and most things at the bottom are not so important." Oregon's list represents a new approach to the design of a benefit package, introducing a health policy issue that merits further discussion and debate.
REFERENCES

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5. Steinbrook R, Lo B. The Oregon Medicaid demonstration project-- will it provide adequate medical care? N Engl J Med 1992;326:340
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6. Dixon J, Welch HG. Priority setting: lessons from Oregon. Lancet 1991;337:891-4.
7. Tengs TO, Meyer G, Siegel JE, Pliskin JS Graham JD, Weinstein MC. Oregon's Medicaid ranking and cost-effectiveness: is there any relationship? Med Decis Making 1996;16:99-107
8. Iglehart JK. Medicaid and managed care. N Engl J Med 1995;332: 1727-31.
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10. Current Population Survey. Health insurance coverage status by state: 1987 to 1995. Washington, D.C.: Bureau of the Census, 1996.
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1Z. Schroeder SA. The medically uninsured--will they always be with us? N Engl J Med 1996;334:1130-3.
13. Holahan J, Liska D. The slowdown in Medicaid spending growth: wit it continue? Health Aff(Millwood) 1997;16(2):157-63.
14. The Oregon Health Plan. Managed care reaches 286,000. Portland: Oregon Health Forum, May 1997
15. Meyer GS, Blumenthal D. TennCare and academic medical centers: the lessons from Tennessee. JAMA 1996;276:672-6.
16. Wooldridge J, Ku L, Coughlin T, et al. Implementing state health care reform: what have we learned from the first year? Princeton, N.J.: Mathematica Policy Research, December 1996.
17. Held PJ, Holahan J. Containing Medicaid costs in an era of growing physician supply. Health Care Financ Rev 1985;7(1):49-60.
18. Oregon Health Plan Administrative Rules. Salem: Oregon Office of Medical Assistance Programs, 1995.
19. Brook RH. Health, health insurance, and the uninsured. JAMA 1991; 265:2998-3002.
20. Eddy DM. Benefit language: criteria that will improve quality while reducing costs. JAMA 1996;275:650-7