The History of Managed Care
Managed care was developed in the United States as a response to rising healthcare costs and the need for a more efficient healthcare delivery system. The concept of managed care emerged in the early 20th century but gained significant traction in the 1970s and 1980s (Scutchfield, Lee, & Patton, 1997).
Development of Managed Care
Early Influences (early 20th century): The concept of managed care can be traced back to the early 1900s when certain organizations, such as the Baylor Hospital Plan, started offering prepaid medical services. These early initiatives aimed to provide affordable and accessible healthcare to specific groups of people (Scutchfield et al., 1997).
Post-World War II Era: The development of employer-sponsored health insurance after World War II led to the evolution of managed care. As employers sought ways to control healthcare costs, health maintenance organizations (HMOs) and preferred provider organizations (PPOs) emerged as popular models (Scutchfield et al., 1997).
1970s-1980s: The passage of the Health Maintenance Organization Act of 1973 and the introduction of Medicare and Medicaid in the 1960s encouraged the growth of managed care. HMOs became more prevalent during this period, driven by the aim to control costs and improve healthcare quality (Scutchfield et al., 1997).
Types of Managed Care Organizations
Health Maintenance Organization (HMO): HMOs are organizations that provide comprehensive healthcare services to their members in exchange for a fixed monthly premium. Members must choose a primary care physician (PCP) who coordinates their care and provides referrals to specialists within the network (Scutchfield et al., 1997).
Preferred Provider Organization (PPO): PPOs offer more flexibility compared to HMOs. Members can visit any healthcare provider within or outside the network without a referral from a PCP. However, utilizing in-network providers often results in higher cost savings for members (Scutchfield et al., 1997).
Point of Service (POS): POS plans combine features of both HMOs and PPOs. Members have the option to choose a PCP who manages their healthcare, but they also have the flexibility to seek care from out-of-network providers at a higher cost (Scutchfield et al., 1997).
Perspectives on Managed Care
Provider’s Point of View:
Positive Aspects:
Increased access to patients through a larger pool of insured individuals.
Streamlined administrative processes due to standardized payment systems.
Potential for financial stability through negotiated contracts with managed care organizations (MCOs).
Negative Aspects:
Limited autonomy and control over medical decision-making due to preauthorization requirements.
Financial pressures and reduced reimbursement rates leading to lower income for providers.
Strained doctor-patient relationships due to time constraints and limited choice of providers (Claxton et al., 2012; Sekhri, 2000).
Patient’s Point of View:
Positive Aspects:
Lower out-of-pocket costs compared to traditional fee-for-service plans.
Access to a network of healthcare providers with negotiated rates.
Coordinated care through a primary care physician or care manager (Claxton et al., 2012).
Negative Aspects:
Limited choice of providers, especially with HMOs.
Potential delays in accessing specialty care due to referral requirements.
Difficulty in understanding and navigating complex managed care plans (Claxton et al., 2012).
Provider Incentives and Financial Risk
Providers are incentivized for efficiency in the delivery of healthcare services through various mechanisms:
Capitation: Providers receive a fixed amount per patient per month from the MCO, regardless of the actual cost of care provided. This incentivizes providers to deliver cost-effective care and manage resources efficiently.
Pay-for-performance: Providers may receive financial incentives or bonuses based on meeting specific quality and outcome measures. This encourages providers to focus on delivering high-quality care.
Shared Savings: Providers can share in the cost savings achieved by meeting certain cost targets or reducing unnecessary healthcare utilization. This aligns their financial interests with the goals of managed care organizations.
The financial risk is typically shared between the provider and the managed care organization. Providers bear the risk of potential losses if their costs exceed the capitated payments or if they do not meet the performance targets. However, managed care organizations also bear some financial risk as they are responsible for covering any costs that exceed the capitated payments (Claxton et al., 2012).
Recommendations for Patients Considering Managed Care Health Plans
Acceptance: Patients should consider accepting managed care health plans if they prioritize cost savings, access to a network of providers, and coordinated care. Managed care can provide affordable healthcare options, especially for individuals who do not require frequent specialist care.
Decline: Patients who value greater choice and autonomy in selecting healthcare providers or who have complex medical conditions may consider declining managed care health plans. Traditional fee-for-service or other health insurance options may better suit their needs.
It is important for patients to carefully review and compare different managed care plans, considering factors such as premium costs, provider networks, coverage limitations, and potential out-of-pocket expenses before making an informed decision (Claxton et al., 2012).
