Controlling Costs on Health Care

The Foster Higgins survey has documented the decrease in costs to businesses of their health-care plans resulting from an increase in enrollment of employees into health maintenance organizations (“A Balm for Business,” Jan. 30).

This has led some observers to the conclusion that traditional fee-for-service providers will be phased out within the next five years. This conclusion ignores the facts that preferred provider organizations cost the employer less than HMO plans and that PPOs deliver fee-for-service care using traditional providers.

Managed-care methods being utilized by both HMOs and PPOs have been touted as the reason for reduced costs. In reality, the savings achieved by these mechanisms have not paid for the administrative costs and profits of these health insurance entities. The true reason for reduced costs is that provider rates are controlled by contracting. As the managed-care entities gain more control of the health-care market, they are able to dictate progressively lower reimbursement rates for the providers, in spite of continuing inflation. Since administrative costs for HMOs are greater than for PPOs, HMOs must reduce services in order to remain competitive.

We must abandon our misgivings about controlling medical fees, because managed-care entities have made fee control the standard today. We should accept the fact that fees must be controlled. We should also accept the fact that unnecessary and ineffective care should not be paid out of our insurance pools--whether governmental or private.

Once these principles are accepted, then we can control our health-care costs, without requiring people to leave their traditional providers and without diverting our health-care dollars into an insurance industry with obscene administrative costs and profits.

Dr. DON R. McCANNE

San Clemente

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The premiums a business pays for HMO coverage for employees dropped 3.8% to $3,255. What was not stressed in the article was the fact that PPO coverage costs the employer even less at $3,169 per employee. This is quite a testament to all medical providers who are providing excellent patient care even within the cost limitations of the PPOs.

Employers, especially those that limit their employees only to HMO coverage, should take notice that PPOs might well be a more soothing balm for their bottom line.

MICHAEL ZAPF

Agoura Hills