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Managed-care advocates praise its cost controls on treatments for beginning to tame the health care beast, which devoured nearly 14 percent of the nation's gross domestic product in 1994, according to the U.S. Department of Health and. Human Services. Such belt-tightening is necessary to allocate health care dollars rationally, advocates contend, pointing to direct patient costs as proof that a healthy balance has been achieved. But critics contend that managed care is more about making money than saving it. Even though costs have gone down, they argue, premiums have remained high and corporate profits have soared. More significantly, they charge that managed care delivers second-class treatment because of the way doctors in the plans are compensated. Because of a financing arrangement called "capitation," which sets a fixed fee per patient, and broad incentives to reduce costs, critics claim doctors have powerful inducements to scale back on treatments and hospital stays, and to limit referrals to specialists. Managed-care providers deny it.



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