Health Care Is Looking Healthier

For the past few years, the health care industry has been obsessed with squeezing costs without much regard to quality. It has been a race to the bottom, as HMOs and traditional medical insurers, encouraged by cost-conscious employers, have progressively tightened up on access to specialists and new medical treatments, while limiting high-cost items such as maternity hospital stays and long-term psychological care. The result: a substantial decline in health-care inflation, which dropped from an annual rate of 9.6% in 1990 to 3.9% in 1995, but at the cost of a widespread perception among many Americans that the quality of care has declined.

But there may be some relief on the way. Far-sighted companies such as Xerox, PepsiCo, and GTE are keeping closer tabs on the quality of medical care their employees are receiving. Meanwhile, some health-care providers are looking for ways to improve medical care without boosting spending.

Now it's time for the next step--to make quality as important as cost throughout the health-care system. For better or worse, most people still get their medical coverage through their job, so it's the responsibility of Corporate America to become far more vigilant about enforcing standards. Companies that evade this obligation will pay the price, either through a sicker workforce or dissatisfied employees.

At the same time, HMOs and traditional insurance providers must find the fine line between making a profit and caring for real people. In part, they can accomplish both goals at the same time by emphasizing preventive programs for chronic ailments such as asthma and diabetes. Beyond that, they must aim to meet reasonable standards for care, or they will find their legitimacy as gatekeepers ebbing away.

To be sure, there will always be difficult questions of medical ethics. How far should medical insurance go in paying for untested--and expensive--treatments? Clearly, health-care providers should pay for essential life-saving therapies that are proven to work, no matter how costly. The harder issues come elsewhere--for example, with high-priced new drugs that may be marginally better than a lower-priced alternative.

The new push for quality also runs the risk of creating a two-tiered system, in which some companies are willing to pay for top-notch medical programs for their employees, while others pay only for lower-quality care. And there's still the unsolved problem of providing access to appropriate care for the nation's uninsured, now approaching 40 million.

Yet for the first time in many years, it's beginning to look as if many Americans have a chance of getting the best of both worlds--an affordable health-care system that works, too.

Before it's here, it's on the Bloomberg Terminal.