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Managed care


Managed care

Health care in the United States
Government Health Programs

Private health coverage

Health care reform law

State level reform
Municipal health coverage

The term managed care or managed health care is used in the

...intended to reduce unnecessary health care costs through a variety of mechanisms, including: economic incentives for physicians and patients to select less costly forms of care; programs for reviewing the medical necessity of specific services; increased beneficiary cost sharing; controls on inpatient admissions and lengths of stay; the establishment of cost-sharing incentives for outpatient surgery; selective contracting with health care providers; and the intensive management of high-cost health care cases. The programs may be provided in a variety of settings, such as [1]

The growth of managed care in the

  • The Health Care Crisis, Part I – a Pinky Show online video about MCOs and their relationship to the health care crisis.

External links

  1. ^ Managed Care Programs. National Library of Medicine.
  2. ^ [± WHAT IS MANAGED HEALTH CARE? by Christine Tobin, MBA, RN, CDE]
  3. ^ a b The backlash against managed care, Nation's Business, July 1998, accessed 2007-10-05
  4. ^ Kaiser Public Opinion Spotlight: The Public, Managed Care, and Consumer Protections, June 2004, accessed 2007-10-05.
  5. ^ Health Care Costs: A Primer, Kaiser Family Foundation Health Care Marketplace Project, August 2007, accessed 2007-10-05
  6. ^ a b The Factors Fueling Rising Healthcare Costs 2006, report prepared by Price Waterhouse Coopers for America's Health Insurance Plans, January 2006, accessed 2007-10-05
  7. ^ Trends in Health Care Costs and Spending, Kaiser Family Foundation Health Care Marketplace Project, September 2007, accessed 2007-10-05
  8. ^
  9. ^
  10. ^ Peter R. Kongstvedt, "The Managed Health Care Handbook," Fourth Edition, Aspen Publishers, Inc., 2001, page 3, ISBN 0-8342-1726-0
  11. ^ a b Managed Care: Integrating the Delivery and Financing of Health Care – Part A, Health Insurance Association of America, 1995, page 9 ISBN 1-879143-26-7
  12. ^ Margaret E. Lynch, Editor, "Health Insurance Terminology," Health Insurance Association of America, 1992, ISBN 1-879143-13-5
  14. ^ Gina Kolata, "Survey Finds High Fees Common in Medical Care ," The New York Times, August 11, 2009
  15. ^ Peter R. Kongstvedt, "The Managed Health Care Handbook," Fourth Edition, Aspen Publishers, Inc., 2001, page 1322 ISBN 0-8342-1726-0
  16. ^ (Himmelstein, Woolhandler, Hellander, Wolfe, 1999; HMO honor roll, 1997; Kuttner, 1999)
  17. ^ Cox, T. (2006). Professional caregiver insurance risk: A brief primer for nurse executives and decisionmakers. Nurse Leader, 4(2): 48–51.
  18. ^ Cox, T. (2010). Legal and ethical implications of health care provider insurance risk assumption. JONAS Healthcare Law, Ethics and Regulation. 12(4): 106–16.

Notes and references

See also

shows that smaller insurers have lower probabilities of modest profits than large insurers, higher probabilities of high losses than large insurers, provide lower benefits to policyholders, and have far higher surplus requirements. All these effects work against the viability of health care provider insurance risk assumption. [18] The most common managed care financial arrangement,

Critics of managed care argue that "for-profit" managed care has been an unsuccessful health policy, as it has contributed to higher health care costs (25–33% higher overhead at some of the largest HMOs), increased the number of uninsured citizens, driven away health care providers, and applied downward pressure on quality (worse scores on 14 of 14 quality indicators reported to the National Committee for Quality Assurance).[16]

The overall impact of managed care remains widely debated. Proponents argue that it has increased efficiency, improved overall standards, and led to a better understanding of the relationship and quality. They argue that there is no consistent, direct correlation between the cost of care and its quality, pointing to a 2002 Juran Institute study which estimated that the "cost of poor quality" caused by overuse, misuse, and waste amounts to 30 percent of all direct health care spending.[6] The emerging practice of evidence-based medicine is being used to determine when lower-cost medicine may in fact be more effective.


Many "traditional" or "indemnity" health insurance plans now incorporate some managed care features such as precertification for non-emergency hospital admissions and utilization reviews. These are sometimes described as "managed indemnity" plans.

Managed care in indemnity insurance plans

Fee-for-Service coverage falls into Basic and Major Medical Protection categories. Basic protection deals with costs of a hospital room, hospital services, care and supplies, cost of surgery in or out of hospital, and doctor visits. Major Medical Protection covers costs of serious illnesses and injuries, which usually require long-term treatment and rehabilitation period. Basic and Major Medical Insurance coverage combined are called a Comprehensive Health Care Plan. It is vitally important to know your insurance policy, since some services can be limited and some not covered at all.

There are basically two types of Health Insurance: Fee-for-Service (Indemnity) and Managed Care. Health Insurance policies may vary from low cost to all-inclusive, meeting different demands of customers. Which Health Insurance type and plan you choose largely depends on your needs, preferences and budget. Fee-for-Service is a traditional kind of health care policy wherein insurance companies pay medical staff fees for each service provided to an insured patient. Fee-for-service plans offer a wide choice of doctors and hospitals.

Private Fee-For-Service (PFFS)

POS plans are becoming more popular because they offer more flexibility and freedom of choice than standard HMOs.

In terms of using such a plan, a POS plan has levels of progressively higher patient financial participation as the patient moves away from the more managed features of the plan. For example, if the patient stays in a network of providers and seeks a referral to use a specialist, they may have a copayment only. However, if they use an out of network provider, but do not seek a referral, they will pay more, and so on.

A POS plan utilizes some of the features of each of the above plans. Members of a POS plan do not make a choice about which system to use until the point at which the service is being used.

Point Of Service (POS)

Because the patient is picking up a substantial portion of the "first dollars" of coverage, PPO are the least expensive types of coverage [1].

In terms of using such a plan, unlike an HMO plan, which has a copayment cost share feature (a nominal payment generally paid at the time of service), a PPO generally does not have a copay and instead offers a deductible and a coinsurance feature. The deductible must be paid in full before any benefits are provided. After the deductible is met, the coinsurance benefits apply. If the PPO plan is an 80% coinsurance plan with a $1,000 deductible, then the patient will pay 100% of the allowed provider fee up to $1,000. After this amount has been paid by the patient, the insurer will pay 80% of subsequent fees and the patient will pay the remaining 20%. Charges above the allowed amount are not payable by the patient or insurer but instead are written off as a discount by the physician.

Rather than contract with the various insurers and third party administrators, providers may contract with preferred provider organizations. A membership allows a substantial discount below their regularly charged rates from the designated professionals partnered with the organization. Preferred provider organizations themselves earn money by charging an access fee to the insurance company for the use of their network (unlike the usual insurance with premiums and corresponding payments paid either in full or partially by the insurance provider to the medical doctor).

Preferred Provider Organization (PPO)

IPAs usually have a governing board to determine the best forms of practices.

An Independent Practice Association is a legal entity that contracts with a group of physicians to provide service to the HMO's members. Most often, the physicians are paid on a basis of capitation, which in this context means a set amount for each enrolled person assigned to that physician or group of physicians, whether or not that person seeks care. The contract is not usually exclusive, allowing individual doctors or the group to sign contracts with multiple HMOs. Physicians who participate in IPAs usually also serve fee-for-service patients not associated with managed care.

Independent Practice Association (IPA)

Since the 1980s, under the ERISA Act passed in Congress in 1974 and its preemptive effect on state common law tort lawsuits that "relate to" Employee Benefit Plans, HMOs administering benefits through private employer health plans have been protected by Federal law from malpractice litigation on the grounds that the decisions regarding patient care are administrative rather than medical in nature. See Cigna v. Calad, 2004.

HMOs are licensed at the state level, under a license that is known as a certificate of authority (COA) rather than under an insurance license.[15] In 1972, the National Association of Insurance Commissioners adopted the HMO Model Act, which was intended to provide a model regulatory structure for states to use in authorizing the establishment of HMOs and in monitoring their operations. In practice, an HMO is a coordinated delivery system that combines both the financing and delivery of health care for enrollees. In the design of the plan, each member is assigned a "gatekeeper", a primary care physician (PCP) who is responsible for the overall care of members assigned to him/her. Specialty services require a specific referral from the PCP to the specialist. Non-emergency hospital admissions also required specific pre-authorization by the PCP. Typically, services are not covered if performed by a provider not an employee of or specifically approved by the HMO, unless it is an emergency situation as defined by the HMO. Financial sanctions for use of emergency facilities in non-emergency situations were once an issue; however, prudent layperson language now applies to all emergency-service utilization and penalties are rare.

Proposed in the 1960s by Dr. Paul Elwood in the "Health Maintenance Strategy", the physicians or a network of doctors and facilities including hospitals. In return the HMO received mandated market access and could receive federal development funds.

Health Maintenance Organization: (HMO)

Proposed by Richard Evan Steele, the concept is described in the book Managed Care in a Public Setting. The proposed system encompasses both health care and social services in a comprehensive system that provides answers for those seeking to balance the myriad challenges of balancing care, cost and social conscience. Not yet put in practice, the concept provides a road-map for all of those looking for melding the best of the US managed care movement and the socially funded European systems in a community based system fueled by positive incentive structures for the lowest effective level of care and the highest possible quality of care. This can be achieved by changing the focus of care and social services away from the ultra-specialized, evidence based concept to a highly tuned, flexible and technically advanced primary care system.

Managed Care in a Public Setting: (MCPS)

There are several types of network-based managed care programs. These range from more restrictive to less restrictive, and include:

Types of network-based managed care programs

There is a continuum of organizations that provide managed care, each operating with slightly different business models. Some organizations are made of physicians, while others are combinations of physicians, hospitals, and other providers. Here is a list of common MCOs:

Managed care organizations (MCOs)

Provider networks can be used to reduce costs by negotiating favorable fees from providers, selecting cost effective providers, and creating financial incentives for providers to practice more efficiently.[11] A survey issued in 2009 by America's Health Insurance Plans found that patients going to out-of-network providers are sometimes charged extremely high fees.[13][14] Other managed care techniques include disease management, case management, wellness incentives, patient education, utilization management and utilization review. These techniques can be applied to both network-based benefit programs and benefit programs that are not based on a provider network. The use of managed care techniques without a provider network is sometimes described as "managed indemnity."

  • A set of designated doctors and health care facilities, known as a provider network, which furnish an array of health care services to enrollees
  • Explicit standards for selecting providers
  • Formal utilization review and quality improvement programs
  • An emphasis on preventive care
  • Financial incentives to encourage enrollees to use care efficiently[10][11][12]

One of the most characteristic forms of managed care is the use of a panel or network of health care providers to provide care to enrollees. Such integrated delivery systems typically include one or more of the following:

Managed care techniques

Nevertheless, according to the trade association long-term care for the elderly and individuals with disabilities. The states pay a monthly capitated rate per member to the MCOs that provide comprehensive care and accept the risk of managing total costs.[9]

By the late 1990s, U.S. per capita health care spending began to increase again, peaking around 2002.[6] Despite managed care's mandate to control costs, U.S. healthcare expenditures has continued to outstrip the overall national income, rising about 2.4 percentage points faster than the annual GDP since 1970.[7]

The backlash included vocal critics, including disgruntled patients and consumer-advocacy groups, who argued that managed care plans were controlling costs by denying medically necessary services to patients, even in life-threatening situations, or by providing low-quality care. The volume of criticism led many states to pass laws mandating managed-care standards.[3] Meanwhile, insurers responded to public demands and political pressure by beginning to offer other plan options with more comprehensive care networks—according to one analysis, between the years 1970 and 2005 the share of personal health expenditures paid directly out-of-pocket by U.S. consumers fell from about 40 percent to 15 percent. So although consumers faced rising health insurance premiums over the period, lower out-of-pocket costs likely encouraged consumers to use more health care. Data indicating whether this increase in use was due to voluntary or optional service purchases or the sudden access lower-income citizens had to basic healthcare is not available here at this time.[5]

Managed care plans are widely credited with subduing medical cost inflation in the late 1980s by reducing unnecessary hospitalizations, forcing providers to discount their rates, and causing the health-care industry to become more efficient and competitive. Managed care plans and strategies proliferated and quickly became nearly ubiquitous in the U.S. However, this rapid growth led to a consumer backlash. Because many managed care health plans are provided by for-profit companies, their cost-control efforts created widespread perception that they were more interested in saving money than providing health care.[3] In a 2004 poll by the Kaiser Family Foundation, a majority of those polled said they believed that managed care decreased the time doctors spend with patients, made it harder for people who are sick to see specialists, and had failed to produce significant health care savings. These public perceptions have been fairly consistent in polling since 1997.[4]

Dr. Health Maintenance Organization Act, which encouraged rapid growth of Health Maintenance Organizations (HMOs), the first form of managed care.



  • History 1
  • Managed care techniques 2
    • Managed care organizations (MCOs) 2.1
  • Types of network-based managed care programs 3
    • Managed Care in a Public Setting: (MCPS) 3.1
    • Health Maintenance Organization: (HMO) 3.2
    • Independent Practice Association (IPA) 3.3
    • Preferred Provider Organization (PPO) 3.4
    • Point Of Service (POS) 3.5
    • Private Fee-For-Service (PFFS) 3.6
    • Managed care in indemnity insurance plans 3.7
  • Impacts 4
  • See also 5
  • Notes and references 6
  • External links 7

Proponents and critics are also sharply divided on managed care's overall impact on the quality of U.S. health care delivery. [2]

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