Home Healthcare Articles Managed care
Managed care is a concept in U.S. health care
which rose to dominance during the presidency of Ronald Reagan
as a means to control Medicare payouts. As a major Medicare
claims administrator, the Blue Cross-Blue Shield insurance firm
was a major architect of managed care. It spread fairly quickly
to the health insurance industry in the private sector.
Managed care is based on a effort to control
escalating health care costs by the health insurance industry,
which supposedly defines a reasonable maximum fee which health
care providers may charge for any given service. Providers are
ostensibly bound to accept these maximum fees if they wish to
be listed in directories of specific insurance companies, which
are provided to their policy holders as referral directories
of "approved" physicians. An unsupported assumption
inherent in these "directories", is that the policy
holder is receiving a list of fully reliable, experienced and
competent physicians whose agreement to accept limits on their
fees indicates highly altruistic natures.
The rise of managed care was credited by the
health insurance industry for the lessened rate of medical inflation
seen in much of the 1990s in the U.S., which in some years of
that decade the rate of increase in price of medical goods and
services was little more than the overall rate of general inflation.
However, this effect now seems to largely have ended, and U.S.
medical inflation is once again two or three times the rate
of overall inflation, as it was during much of the 1980s.
Forms of Managed Care
There are several forms of managed care. Ranging
from more restrictive to less restrictive, they include:
Health Maintenance Organization (HMO)
Proposed in the 1960s by Dr. Paul Elwood in
the "Health Maintenance Strategy", the HMO concept
was promoted by the Nixon Administration as a fix to rising
health care costs and set in law as PL 93-222. As defined in
the act, a federally qualified HMO would in exchange for a subscriber
fee (premium) allow members acess to panel of employed physicians
or a network of doctors and facilities including hospitals.
In return the HMO received mandated market access and could
receive federal development funds.
In practice, an HMO is an insurance plan under
which an insurance company controls all aspects of the health
care of the insured. In the design of the plan, each member
is assigned as "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-emergent situations were once
an issue; however, prudent layperson language now applies to
all emergency-service utilization and penalties are rare. A
leading example is the Kaiser Permanente Plan.
Physicians, nurses and other healthcare providers
on the staff of HMOs work as salaried employees. They are generally
housed at a central office location, rather than seeded throughout
the community. They render care according to guidelines established
by the corporate managers of the HMO, and may receive additional
instructions in specific cases. The nature of these guidelines
and instructions are invariably to provide the least costly
and uncomplicated form of care for patient diagnosis, which
is usually made on the basis of the least costly diagnostic
procedures, moving to more costly procedures only as a last
resort. Since the 1980s, HMOs have been protected by Federal
law from malpractice litigation on the grounds that the decisions
regarding patient care are administrative rather than medical
Preferred Provider Organization (PPO)
PPOs are insurance plans in which the policy-holder
is free to chose his/her own physician, although they will generally
receive greater benefits returns (possibly including lower deductibles,
lower copayments, and higher reimbursement percentages) if a
pre-approved "network" of caregivers and facilites
is utilized in non-emergency situations, and a PCP is identified
and consulted. These "network" caregivers and facilities
are independent of insurance company ownership, and may hold
contracts for reimbursement with multiple insurors. "Pre-certification"
(prior approval) may be required before nonemergency hospital
admissions, testing, consultations or outpatient surgery under
many plans. Providers remain liable for malpractice.
While not employees of the insuror, PPO healthcare
providers do hold contracts with each insurance company for
which they are designated as "preferred", under which
they agree to capitate their fees at a level approved by the
insuror. In the beginning, the insurance companies used actuarial
tables to determine a "reasonable and customary fee"
for each service and the provider, if he/she generally charged
more, was obligated to write off the difference. The insuror
would then pay a percentage of the balance to the provider,
and the rest would become the responsibility of the insured.
But during the 1990s, many providers engaged the services of
medical office management services to handle these contracting
arrangements on *their* behalf, with the result that full fees,
writeoffs, and percentages due from insuror and insured are
jointly agreed-to amounts between the insuror and the provider
on a plan-by-plan, provider-by-provider basis, which amounts
are protected as corporate secrets and are not available to
consumers who wish to compare benefits offered against premiums
charged on a dollar basis. Furthermore, in the event the insuror
defaults on payment by claiming a service provided was "not
necessary" under the plan, the provider is free charge
any amount he/she deems desirable to the patient, instead of
any generalized, capitated "reasonable and customary fee"
determined by the insuror.
Point of Service (POS)
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.
Managed care in indemnity insurance plans
Many "traditional" or "indemnity"
health insurance plans now incorporate some managed care features
such as precertification for non-emergency hospital admissions
and utilization reviews.