Blue Cross Bearing Down

Watchdogging medical costs

Medical costs in the U.S. are so high partly because nonprofit insurance companies and government programs have been paying most doctor and hospital bills, with few questions asked. One person who wants to do something about it is President Carter, who has proposed setting cost ceilings on medical services. Now the Blue Cross Association, representing the largest conglomerate of hospitalization insurers, has joined the Carter cost-cutting crusade.

Last week Walter J. McNerney, president of Blue Cross, announced that its 69 member-plans had agreed on a new program of cost containment for the benefit of their 84 million subscribers. What it amounts to is a kind of watchdogging on doctors and hospitals, with the threat of withheld insurance payments, and a carrot-and-stick incentive plan.

Starting next January all Blue Cross groups will be required to cast a prosecuting attorney's eye on hospital records to detect abuses and outright fraud. Records will also be screened to determine such things as whether the medical treatment given was necessary and whether the patient was kept in bed longer than required--a common device for upping hospital bills. The carrot-and-stick part of the program involves trying to persuade hospitals to draw up accurate budgets a year in advance and then to abide by them. Blue Cross will pay the agreed sum. If a hospital's expenditures exceed budget, its management will be stuck with the job of finding money elsewhere. If it keeps expenses below budget, the hospital treasury can pocket the difference.

Since Blue Cross annually pays hospitals $13 billion for services rendered to its members, the threat to withhold payments unless the agreed-upon cost standards and procedures are met could be powerful. But whether the ambitious plan will work depends a good deal on whether or not the particular insurance company, using its own teams as well as already existing medical monitoring systems, can actually wrestle the medica. bureaucracy into line, set cost standards and avoid budget padding.

Blue Cross officials point out that much of the cost-savings plan has been in operation for some time in Michigan, which has the nation's second largest Blue Cross plan. As a result, they say, Blue Cross-Blue Shield froze Michigan doctors' fees, and increases in hospital costs were held to about 12% a year, a bit below the national average of 15%.

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