Managed care is the enrollment of patients into a plan that makes capitated payments to health care providers on behalf of its members, thus shifting the financial risk for health care from patients and payers to providers. The intent of this shift is to provide incentives to health care professionals to reduce their utilization of resources, ideally through measures such as health promotion and disease prevention among the group's members.
The phrase "managed care" is often loosely used to describe almost any attempt to limit health care expenditures in an increasingly competitive marketplace. Traditionally, however, managed-care plan members are cared for only by doctors who are part of the group. Each member is assigned a primary care physician who acts as that member's main caregiver and care coordinator, thus limiting the member's access to specialists and other more expensive types of care.
In the period following World War II, the predominant American health insurance paradigm was one in which insurance companies sold coverage to employers, who provided coverage to employees as a benefit of employment. Health coverage became an element in contract negotiations between employers and employee unions and during the 1950s and 1960s, when the American workforce was relatively young and healthy, and many industries agreed to provide generous health benefits at little or no direct cost to workers. At the same time, the public sector dramatically expanded its payment for health care with Medicare and Medicaid. In this "unmanaged care" system, patients were free to self-refer to the rapidly growing numbers of specialist physicians, with little or no coordination of their care. With relatively few restrictions, payments were made by insurance companies and government programs to physicians, hospitals, and other health care providers on a fee-for-service or cost basis—the higher the cost or charge, the larger the payment.
Little thought appears to have been given to the predictable effects of the nation's demography (young people of the 1950s and 1960s grew older) or of financial incentives on the cost of care. Patients insulated from the costs of their care by insurance tended to increase their access to, and expectations for, health care; while physicians trained to go to extremes on patients' behalf developed increasingly effective, and expensive, means of doing so. In the 1970s, these two dynamics led to a crisis of rapid and uncontrolled escalation in the costs of care.
Although early managed care plans were first organized in the 1920s, managed care is generally considered as having its origins in the 1940s in notfor-profit organizations such as the Group Health Cooperative of Puget Sound, the Kaiser Foundation Medical Care Program, and the Health Insurance Plan of Greater New York. Managed care spread relatively slowly until the 1970s and 1980s, when the crisis in health care costs began to encourage managed care as a lower-cost alternative to the accepted approach. Increased competition in the health care market led to the adaptation of managed-care techniques by new for-profit health care firms, and at the same time a number of states changed their Medicaid plans to a managed-care approach. This led to rapid increases in managed-care enrollment—as of 1999, more than half of all practicing physicians in the United States, and over 75 percent of the insured population, participated in some form of managed care plan.
Managed care arrangements take many shapes including group- or staff-model health maintenance organizations (HMOs), in which salaried physicians and other providers cared for plan members predominated only among the early managed care plans. These have increasingly been replaced by individual practice associations (IPAs), in which physicians agree to accept managed care patients as part of their existing practices. Point-of-service (POS) plans allow plan members more flexibility than HMOs, but require a higher rate of payment. Preferred provider organizations (PPOs), though often included in the managed care category, are discounted fee-for-service arrangements in which providers accept lower fees in return for a guaranteed patient volume, and are not true managed care efforts.
As noted above, the membership of early HMOs consisted largely of employed workers. Recent attempts to contain costs by enrolling Medicare and Medicaid patients into managed care plans have been only partially successful at best, due to the fact that members of both groups are more likely to have higher-cost health needs than the employed workforce. Some insurers have participated in these plans, only to withdraw when they were unable to meet their financial goals. Other problems have occurred when managed care plans have attempted to improve their competitive position in the marketplace at the cost of their health care mission: misrepresentation of benefits; adverse selection of members; and delaying, limiting, or withholding treatment are some of the problems that have arisen. Problems of this sort have resulted in increased public dissatisfaction and calls for government regulation as the definition of managed care—at one time considered a utopian health-improvement experiment, but now often considered a generic term for cost cutting at human expense—continues to evolve.
JAMES R. BOEX
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