Rising health care costs over the last 30 years resulted in a call for health care reform. While legislative reform has been slow, “market-driven” reform is occurring. As a response to growing concerns expressed by businesses and by the Federal and state governments, the health care industry is reorganizing itself to control costs. Managed care is the result.
What is Managed Care?
Managed care is a system of health care that controls cost of services, manages the use of services, and measures the performance of health care providers. There are different types of managed care plans. Two of the most common types are Health Maintenance Organizations (HMOs) and Preferred Provider Organizations (PPOs). Most others are hybrids of the two. Since plans are different, knowing the details of your specific plan is important.
Managed care is both a health care financing and a health care delivery system. A plan typically guarantees 24-hour, seven-day-a-week access to health care for its members. The plan member selects a primary care physician from a list provided by the plan. Members who use providers not on this list will usually pay more for health care. Usually, a primary care physician coordinates all care for a patient. It is estimated that 90% of a patient’s medical care can be handled at the primary care physician’s office. The primary provider helps the patient identify and schedule appointments with any needed specialists.
How Does Managed Care Reduce Costs?
Managed care plans contract with health care professionals and agencies, and insurance companies. Those under contract become linked into a network that provides services to plan members. Each member receives care for a fixed amount (say, $12 a month). This is called “capitation.” The plan is paid per person rather than for each visit or each type of service. Whether the member never sees the doctor or makes 20 visits, an employer contracts with a plan to pay this fixed per member charge for its employees. Medicaid and Medicare programs also sign contracts with these plans. Some plans charge members a small $5 to $10 co-payment for each visit.
Managed care plans also control costs by setting criteria for selecting providers and by establishing formal programs to monitor the amount and quality of care being given. Utilization review is one common monitoring strategy. Except for emergencies, doctors are often required to get approval from the plan before hospitalizing a patient or before providing expensive tests and procedures.
What Are Some Concerns About Managed Care?
Much less is known about other managed care models, but research shows that HMOs are achieving cost savings. They do this by controlling and managing both the use and the provision of services. While this is one advantage to managed health care, critics point to disadvantages.
Critics argue that managed care may result in too few services being provided. Others counter that as networks mature and gain experience, they realize that providing too few services may, in fact, result in increasing costs eventually. Patients who are not treated early and effectively, frequently require more costly and extensive follow-up care.
Another concern is that managed care restricts patients’ “free choice” of providers. Choice is sometimes restricted because employers offer only one plan to employees. If a patient’s current doctor is not enrolled in an employer’s plan, then the patient must select a new primary care provider who is linked to the plan’s network. Under some plans, choice is further restricted because the primary care physician must approve visits to specialists.
Critics also point out that a reliance on managed care does not address the issue of access to health care services for all citizens. Nationwide, 16% of the non-elderly have no health insurance, public or private. Most uninsured Americans live in families with at least one working adult. Not surprisingly, the uninsured have a higher incidence of late stage diagnosis of life-threatening disease. They have higher death rates as well.
In many rural areas, population is not dense enough to support a full range of health care services. Rural communities are already having difficulty recruiting and keeping doctors. Managed care just increases the competition. A few HMOs serve rural areas, but in recent years there has been little development of new managed care plans in rural America.
Adapted from Managed Care, Understanding Our Changing Health Care System, by Gail R. Carlson, MPH, Ph.D., Health Education Specialist, University Extension, University of Missouri-Columbia.