Prepaid Medical Care: Nation's Biggest Private Plan

Just 17 miles from downtown Los Angeles, the brand-new Kaiser Foundation Hospital at Panorama City looms above the summer-dried landscape like a pair of upended binoculars. But the rush of patients to the twin seven-story towers this week was far more than a response to architectural novelty. It was a testament to the success of the Kaiser Foundation Health Plan Inc.. a repetition of the warm response that greeted the opening of Kaiser's new Medical Office Building at Hayward, near Oakland, fortnight ago. it was one more impressive statistic to add to the success of the eleven other hospitals and 38 clinics that the foundation operates in California. Oregon and Hawaii.

"Medikaiser,'' as insiders now call it. is the nation's largest nongovernmental, womb-to-tomb program for prepaid health and hospital care. Since World War II it has grown to a grand total of 911.001 members, representing about 337,000 subscribers and their families. Contrary to widespread belief, employees of Tycoon Henry J. Kaiser and his gangling industrial empire make up only 5% of Medikaiser's subscribers.

Best in Groups. Anyone in an area served by Medikaiser is eligible to join. And for their money subscribers get more complete protection than is available from most other forms of U.S. medical insurance. In most of the U.S., Blue Cross pays only hospital bills and Blue Shield pays only surgeons' fees and some doctors' bills; H.I.P. (the Health Insurance Plan of Greater New York), runner-up to Kaiser as the nation's biggest prepaid care plan, does not cover hospital bills. Medikaiser covers almost everything.

Among a dozen variants, there is one basic plan. Under this plan, an employed subscriber pays $7.80 a month for himself, or $14.20 for himself and wife, or $18.35 for self, wife and dependents. (If he is part of a group and is over 65, or is an individual member and over 60. he pays an additional $1.20.) For his dues, he and his family are entitled to visit Medikaiser doctors in their offices as often as they like at a charge of $1 a visit. With two minor exceptions, all operations are done without charge. Patients are entitled to: 60 cost-free days of hospitalization for each illness in any year, plus 51 days at half-price; free blood on a replacement basis; a 50% discount on prevailing rates for laboratory work. X rays and physical therapy; free ambulance service; free home calls by nurses; doctors' home calls at $3.50 by day, $5 at night (less than half the prevailing West Coast rates). Pregnancy care, through the birth of the baby, costs $95.

For all this, there are still admitted gaps in what Kaiser can offer. "In care of the aged," laments General Manager Clifford H. Keene, "we are only feeling our way along and haven't found any really good answers yet. We have no real dental care, and only limited psychiatric services." But Kaiser doctors are justly proud of other aspects of their organization. Besides its twelve hospitals, the plan operates a specialized rehabilitation center in Vallejo.

Behind-the-scenes organization is complex--to meet both legal and professional rules. The parent Kaiser Foundation Health Plan (a nonprofit but tax-paying setup) enrolls the members; it then contracts to pay Kaiser Foundation Hospitals (a charitable, non-tax-paying organization) a fixed fee per member per month for hospital care. It also contracts with one of four medical groups (associations of physicians) to provide medical and surgical services for a per capita fee. The hospitals run a research institute and a nursing school. The parent plan builds such facilities as clinics, which it leases to the medical groups. Dapite, Inc. is a planwide subsidiary which prepackages medicines and supplies them at bargain rates to the hospitals and clinics (whose doctors also agree to use mostly generic-named drugs, cheaper than the trademarked equivalents).

"We Run Our Show." Medikaiser is based on two fundamental principles enunciated back in 1932 by Physician Ray Lyman Wilbur, who was Herbert Hoover's Secretary of the Interior. Doctors practice best in groups, Dr. Wilbur argued, because they can instantly call on each other's special skills. Patients, he was convinced, make the best use of doctors' services when they pay for them in advance. But organized medicine bitterly opposed prepaid group practice for years, and much of the antagonism remains..

Perhaps a major factor in Medikaiser's ability to stand up to the opposition of tradition-minded medicine is the organization of the plan's Permanente-- Medical Groups. There is one group each for northern and southern California, Oregon and Hawaii. Most of the Permanente doctors are partners in their own organization, in undisputed charge of the medical care supplied to patients. This silences the bitterest opposition of organized medicine, which has always been reserved for any third party's, especially laymen, having any control over the relations between doctors and patients.

Kaiser doctors are, as a group, sympathetic to organized medicine's fears. Says Dr. Cecil C. Cutting, a surgeon who is head of northern California's Permanente group: "Organized medicine has a legitimate worry that prepaid care could open up medicine to lay control. We are the proof that this need not be so. We physicians in these groups run our own show." Dr. Cutting's show is Permanente's biggest, with 278 partners and 142 employed physicians. After two years, employee doctors become "participants," and after a third year they may be elected to partnership. Kaiser hospitals are community hospitals; any fully qualified physician in the area can put in a bid to reserve one of their 2,333 beds for one of his patients. And the hospitals give a great deal of little-publicized charity care.

"Barrier of Cost." Any organization as revolutionary as Medikaiser was bound to stir up storms of controversy about the quality of its medical care and its general effect on the practice of medicine. But impartial medical authorities in California rate Kaiser hospitals' care as "topnotch." and the groups' medical care as "very good."

There is practically no reservation at all in the approval of Dr. Sidney R. Garfield, who founded Kaiser-style group practice in the California desert in 1933. Dr. Garfield was responsible for the health of construction workers on the Colorado River Aqueduct. His earliest plan covered only on-the-job injuries, but soon it was extended to all illnesses and injuries. At Grand Coulee Dam and in Kaiser's World War II shipyards, Dr. Garfield broadened his plan to cover workers' families as well. Modern Medikaiser is based on his early experience.

A plan of this type, insists quiet, shy Dr. Garfield, has two built-in advantages. Doctors, he says, do their best when everything they do is overseen and may be reviewed by their colleagues; patients, on the other hand, go to their doctor sooner when there is no "barrier of cost." This makes possible the most rewarding practice of all: preventive medicine. To provide the personal touch, Kaiser subscribers are given a reasonably long list from which to select a general practitioner or internist to serve as their family physician. Some keep the same family doctor for years; on his referral, they get treatment from a specialist in the group. To help subscribers make appointments painlessly. Kaiser medical offices use highspeed desks with lazy-Susan centers for doctors' schedule books.

Medikaiser's immediate future is bright. It has just negotiated a $35 million loan from banks and insurance companies to refund some of its debt, build five new clinics, build a new 150-bed hospital and medical center in Santa Clara, and make additions to several present hospitals. "And still," sighs Dr. Garfield, "in some areas we can't accept new members because our facilities are limited." Adds Dr. Cutting: "We don't brag about the quality of care we give, but you can judge it from the fact that now when we go out to recruit doctors in the East, we get the cream of the crop."

*Named for a creek in Santa Clara County where Kaiser built his first cement plant.

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