CASE BACKGROUND

In August 1992, Christy deMeurers, 32 years old teacher given a verdict that she got
a cancer. She is a member of Health Net, a Health Maintenance Organization (HMO) that
provides medical care for its members as part of medical insurance plan. In May 1993, it is
found that the cancer had spread into her bone marrow. Specialist stated that she need a
transplantation for her cancer. However, this transplantations need a lot of cost, about
$100.000,00. This situation arouse a problem because Health Net did not want to cover the
transplantations cost.

As an HMO, Health Net collects monthly premiums from employers in return for
providing their employees with medical care. In 1995 Health Net collected a total of $2
billion from employers. It is a really big amount relative to the Christy’s transplantation cost.
The HMO enters contracts with doctors and hospitals whom it pays to provide the actual
care. In order to keep costs low, the HMO use a system called capitation.

In a capitation system an HMO pays doctors, specialists, groups of doctors, and hospitals a
fixed monthly fee for each patient assigned to them. If the doctor, specialist, doctors’ group,
or hospital spends less than the capitation fee for medical services for the patient, they can
keep the difference; if they spend more than the capitation fee, they must cover the loss
themselves. The capitation system thus provides an economic incentive to provide reduced
levels of medical care. This system made HMO become a very profitable business.

Questions and Answers

Q: Should medical care be subjected to the competitive forces of the free market?

A: It is inevitable, but actually it should not. Medical care related to the very basic right of
human being, right to live. Therefore, it is really important that the government ensure this
right provided equally for the citizens. In the other hand, medical care business right now is
monopolized by big firms, they which have almost unlimited resources can have the best
research and development in order to find the best service for the customer. This will left
another firm with limited resources struggle to survive. It is a big consequences for this
condition, which will lead those big firms set the price highly. If this condition resist, it will
be really dificult for the low-middle class of sociaty to get appropriate medical care for their
illnesses.

Q: Should the provision of medical care be turned into a business?

A: Yes, it is. A business have a goal to deliver the best product or services to the customer.
Therefore, from the statement above, medical care business will give a lot benefits to the
society. An insurance will help people to cover their medical cost which sometimes really
high depend on the case. Without insurance, people will hardly cover the cost. However, the
government need to control the business. Since it related with a lot of money, a lot of ways
can be used by the insurance company or the customer to get the benefit they should not
get.

Q: In your judgment, is it morally appropriate for an HMO to use a capitation system that
provides economic incentives to increase efficiency in the delivery of medical care?

A: Yes, it is. Given a pressure to be efficient will really push the medical care institutions to
allocate the resources effectively. Capitation will give the medical care institutions less space
to exploit for their own interest. If generic prescription can be used, they will use it.
If laboratory test does not needed, there will be no laboratory test. In addition, since
medical care is a lot about service, the medical care institutions will not belittle the effect of
quality of their service. Once a customer dissappointed, the effect can be really destructive
for the brand image. If this happened, the institutions can sufferfor losing their customer.
Thus, although the the medical care institutions have to be efficient, they will not sacrifice
the quality.
Q: Evaluate the ethics of the activities of the various individuals involved in this case!
A:
1. Dr. Gupta and Dr.Macmillan fot not giving the appropriate treatment.
It is really clear that both of them could not deliver the best treatment since they
are forced by the HMO. In this point of view, they can’t be blamed. However, if they
do the right things, we will regard them as a great people.
2. Dr Schinke recommend Christy to be evaluated at UCLS Medical Center.
It is quite right that dr. Schinke do this. It is what really needed by Christy. He still
firmly hold his decision although forced by the HMO.
3. Dr. Ossorio refused to allow the transplantations.
All fact have dtated that the transplantation is needed. HOwever, Dr. Ossorio still
insisted that the HMO wil not pay the transplantations cost. This is really weird,
from the illustration Health Net collected a total of $2 billion from employers in
1995, $100.000,00 should not worry them much. Thus, it is really dissapointing that
Health Net can easily neglect their customer right for medical care.