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Rising health care costs over the last 30 years resulted in a call for health care reform. While legislative reforms failed, “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 in an effort 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, it is important for individuals to know the details of their specific plan.

Managed care is both a health care financing and a health care delivery system. Plans typically guarantee 24-hour, seven-day-a-week access to health care for its members. Under most plans, a primary care physician coordinates all care for a patient. When specialists are needed, the primary care provider makes a referral. The plan member selects a primary care physician from a list provided by the plan.

How Does Managed Care Differ from Conventional Insurance?

Historically, this country’s health care industry was made up of a large number of independent health care providers who owned their own practices. These were either solo practices or practices jointly owned by physicians who practiced together in a clinic setting. Furthermore, almost all communities of any size had their own hospital, most of which were independent from one another. Frequently these facilities were run as nonprofit institutions.

Under managed care, physicians, hospitals, and other health care providers are linked contractually into networks. These providers agreed to provide care to members (patients) at fees established by the network. Network providers also agree to abide by other cost control and practice guidelines set by the network. In general, managed care differs from conventional health insurance in some of the following ways.

Choosing a Doctor

Conventional insurance – Individuals can choose any physician they want at any time they want. This includes choosing a specialist of their choice.

Managed care – Individuals choose a physician from a list provided by the plan. When using specialists, different plans have different requirements. In some plans, members can select any specialist from the list provided by the plan. In others, the individual’s primary care physician must make a referral.

Deciding about the quality of care

Conventional insurance – The individual is responsible for determining if her physician is qualified to provide the kind of care that was needed. The individual is also the one to determine if she is receiving quality health care. The health insurance plan usually does not get involved in this decision.

Managed care – The plan typically determines if a doctor is qualified before the doctor joins the managed care network. Annual surveys of patients and chart reviews are also done to maintain the quality of care. Some plans also have a grievance procedure which members are encouraged to use if they are not satisfied with the quality of the care.

Paying for Care

Conventional insurance – The usual method of payment is called fee-for-service. The physician is paid for each appointment. The bill increases as more services are provided, or as more expensive services are substituted for less expensive ones. Typically, the individual pays the bill and is partially reimbursed by their insurance company.

Managed care – The usual method of payment is known as “capitation”. Providers are paid a fixed amount for each person (member) enrolled in the plan. Whether the member never sees the doctor or sees her 20 times, the provider does not get any more money than the agreed upon amount. The capitated (fixed) amount is usually paid by the employer or Medicare. Some plans also have members pay a small co-payment for each visit.

It is also worth noting that under managed care, individuals are being encouraged to assume more responsibility for their own health. At a minimum, this means taking a more active role in the health care decision making. However, some plans also emphasize greater responsibility for lifestyle decisions.

How Does Managed Care Control Costs?

The most obvious strategy for controlling costs is by contracting with providers to provide care for members at reduced rates. Another approach has been to spread the financial risk of providing care to providers.

Under a capitated system, the provider assumes some of the financial risk for providing care. As a result, they have a vested interest in keeping members healthy and controlling access to more expensive tests and procedures. The associated risk to the consumer is that too few services will be provided. To ensure the quality of care, members should become familar with their plan’s grievance procedures and use them when necessary.

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.

Are There Concerns About Managed Care?

Much less is known about other managed care models, but research shows that HMOs are achieving cost savings. While this is one advantage to managed health care, critics point to disadvantages. Managed care might result in too few services being provided. Most plans restrict a patient’s “free choice” of providers. Managed care does not address the issue of access to health care services for those without insurance, or for those living in rural communities where managed care may not be economically feasible.

In the future, all of us will be expected to assume more responsibility for our own health. In part that involves learning about the plans that are offered and using the selected plan appropriately.

References:

• Cordes, Sam, Ph.D. 1995. Hogs and Health Care: There are Similarities. Corn Husker Economics (May 31). Lincoln, NE: University of Nebraska, Cooperative Extension.
• Lipman, Marvin M., M.D., How to Manage with Managed Care, Consumer Reports on Health. September, 1994. Yonkers, NY.
• MacLeod, Gordon K. 1993. An Overview of Managed Health Care. In The Managed Health Care Handbook edited by Peter R. Kongstvedt, MD. Gaithersburg, Maryland: Aspen Publications, Inc.
• Mueller, Kurt, Ph.D.; Andrew Coburn, Ph.D.; Robert Crittenden, M.D.; Sam Cordes, Ph.D.; J. Patrick Hart, Ph.D.; and Wayne Myers, M.D. 1996. Changes in the Health Care Marketplace: What is the Future for Rural Health Care Delivery? A National Key Informant Survey. Prepared by The Rural Policy Research Institute Expert Panel on Rural Health Delivery. Columbia, Missouri: University of Missouri.

What is a Gate Keeper?

Many types of managed care plans use primary care physicians as gate keepers to control costs and coordinate health care services for their members. When individuals join a plan, they are provided a list of physicians who are part of the managed care network. Members are expected to select one of the primary care doctors on the list.

Before making a final selection, find out if the doctor is accepting new patients from your managed care plan. Some limit the number of managed care patients they will accept. Besides it is a good idea to interview the doctor in order to find out if this is someone you can work with. A primary care provider is usually a family practitioner or a general internist. For a woman, it might be a gynecologist. For younger patients, a pediatrician or family practitioner usually handles routine care.

Under some managed care plans, the member is expected to contact their primary care provider before receiving any health care. This is where the term gate keeper comes from. Many plans require that the individual’s primary care doctor make a formal referral to a specialist. If the individual makes an appointment for a specialist without the referral, he may be responsible for all or most of the specialist’s bill.

There are some advantages to having a primary care provider. It is estimated that 90% of an individual’s medical needs can be met by a primary care physician in the office. Since primary care doctors typically charge less, the cost of health care is reduced. Under ideal conditions, the primary care provider functions much like the traditional family doctor. He focuses on the health of the whole person rather than on a single organ system in the body. He emphasizes the importance of prevention and establishes a schedule for age-appropriate health screening.

When a suspected problem does exist, he can make the initial diagnosis, advise the patient on further treatment and make necessary referrals. The fact that all medical records are kept in one location also contributes to care that is better coordinated.

One concern about this approach is that too few services will be provided. In order to control costs the “gate keeper” may limit access to specialists or more costly tests and procedures. However, most plans (at least HMOs) are required to have a formal grievance procedure. To insure the quality of their care, members should become familiar with their plan’s grievance procedure, and be assertive about using such procedures when they believe the quality of their care is inadequate. There is another safeguard. Doctors know that poorer health outcomes and higher costs can result when care is not adequate or delayed. Therefore, whether practicing in managed care networks or under conventional insurance plans, good doctors are likely to continue to provide quality care in a timely manner.

Insurance Quotes: Most Americans are confused about the difference between Medicare, Medicaid and Medigap. Medicare and Medicaid programs are government programs created as part of the Social Security Act of 1965. Medigap is an insurance policy offered by private insurance companies to fill the “gaps” in coverage for Original Medicare. Here is a brief summary of the three programs.

Medicaid

Medicaid is a health insurance program financed and run jointly by the federal and state governments for low-income people of all ages who do not have the money or insurance to pay for health care. The goal of the program is to provide medical and other health care services to eligible individuals so that they are able to remain as self-sufficient as possible. Medicaid is a state administered program. Each state sets its own guidelines, subject to federal rules and guidelines. Certain services must be covered by the states in order to receive federal funds. Other services are optional and are elected by states.

Services that are often provided are:

• health screening and services for children,
• hospital and physician services,
• laboratory services and X-rays,
• care in nursing homes or
• home health care services.

Medicaid eligibility in nearly every state is limited to:

• low-income children,
• pregnant women,
• families with dependent children,
• persons who are blind or disabled, and
• persons 65 or older.

Other eligibility requirements must also be met.

Medicare

Medicare is a federally funded and administered program that provides health insurance for older Americans and those who are disabled. Individuals contribute to Medicare during their working years, just as they do to Social Security. Since Medicare is a federal program, eligibility guidelines and services are much the same all over the country.

People eligible for the program include:

• most persons over the age of 65,
• persons with disability status, or
• persons with irreversible kidney failure.

There are a number of Medicare plan choices. Two of the most widely available plans are Original Medicare and Medicare Advantage.

Original Medicare Plan

The Original Medicare Plan is available nationwide and is a pay-per-visit health plan. You can go to any health care provider who accepts Medicare and is accepting new Medicare patients. There are usually coverage “gaps” or costs that you must pay, such as deductibles, copayments and coinsurance. Some people buy a Medigap policy to cover these gaps in coverage (see Medigap below).

The Original Medicare Plan has two parts. Part A provides hospital insurance and Part B, which is optional, provides medical insurance. If someone chooses Part B, a monthly premium is deducted from his or her Social Security benefits. Insurance coverage for prescription drugs is a new benefit added on January 1, 2006. Insurance companies and other private companies work with Medicare to offer the drug benefit. Costs vary depending on which plan is selected by the individual.

Medicare Advantage Plan

Medicare Advantage Plans are available in some parts of the country. These are managed care Medicare plans. Medicare pays a set amount of money for your care every month to these private health plans whether or not you use services. In most of these plans, generally there are extra benefits and lower co-payments than in the Original Medicare Plan.

However, you may have to see doctors that belong to the plan or go to certain hospitals to get services. If you enroll in a Medicare Advantage Plan, you probably won’t need a Medigap policy because Medicare Advantage Plans usually provide a wider range of services.

Medicare does not cover all health care services, nor does it pay the entire cost of all the services that it does cover.

Medigap

Medigap insurance is also known as Medicare supplement insurance. A Medigap policy provides reimbursement for the out-of-pocket costs that are not covered by Original Medicare. Gaps in the Original Medicare Plan consist of deductibles, coinsurance and co-payments that the individual is responsible for paying. Medigap policies are sold by private health insurance companies. There are 12 standardized policies, called Plans “A” through “L.” Each plan has a different set of benefits. Not all companies sell all 12 policies.

hen purchasing Medigap insurance, shop around. Policies offering the same benefits can vary greatly in price. Since the plans are standardized they are easy to compare across companies. In addition, you want a policy that truly supplements Medicare — one that will cover that portion of the bill not covered by Medicare, as well as covering some additional health services not provided by Medicare. Also consider your own situation; not everyone needs a Medigap policy. For example, you might not need a Medigap policy if you have a Medicare Advantage Plan or a supplemental health insurance plan through your former employer.

While much has remained constant in Medicare and Medicaid since these programs were created 40 years ago, both programs have also changed a great deal. Faced with an aging population, rising health care costs and decreasing availability of employer-sponsored health insurance, governments are debating how to maintain these programs and control costs. In spite of these concerns, Medicaid and Medicare play a major role in providing health care coverage for people of all ages. Medigap policies can further reduce health care costs for individuals who have Original Medicare. For more information about Medicare, Medicaid and Medigap contact the Centers for Medicare and Medicaid Services at 877-267-2323 or visit the Centers’ Web site http://www.cms.hhs.gov/ Another good reference is the official Medicare Web site: http://www.medicare.gov/default.asp.

Source: Centers for Medicare and Medicaid Services http://www.cms.hhs.gov/

While legislative health reform seems to be progressing slowly, the health care industry is rapidly reorganizing itself in an effort to control costs. Managed care is the result. Managed Care is a system of health care that controls the cost of services, manages the use of services and measures performance of health care providers. There are different types of managed care plans. Therefore, it is important for individuals to know the details of their specific plan. In general, managed care differs from conventional health insurance in some of the following ways.

Insurance: Choosing a Doctor

Conventional insurance – individuals can choose any physician they want at any time they want. This includes choosing a specialist of their choice.

Managed care – individuals choose a physician from a list provided by the plan. When using specialists some plans allow members to select any specialist from the provided list. In others, the individual’s primary care physician must make a referral.

Insurance: Deciding about the quality of care

Conventional insurance – the individual is responsible for determining if her physician is qualified to provide the kind of care that is needed. The individual is also the one to determine if she is receiving quality health care. The health insurance plan usually does not get involved in this decision.

Managed care – the plan typically determines if a doctor is qualified before the doctor joins the managed care network. Annual surveys of patients and chart reviews are done to maintain the quality of care. Some plans also have a grievance procedure which members are encouraged to use if they are not satisfied with the quality of the care.

Insurance: Paying for Care

Conventional insurance – the usual method of payment is called fee-for-service. The physician is paid for each appointment. The bill increases as more services are provided, or as more expensive services are substituted for less expensive ones. Typically, the individual pays the bill and is partially reimbursed by their insurance company.

Managed care – the usual method of payment is known as “capitation”. Providers are paid a fixed amount for each person (member) enrolled in the plan. For example, the plan might agree to provide care for $100 per member per month. Whether a member never sees the doctor or sees her 20 times, the provider does not get any more (or any less) than the agreed upon amount. The capitated (fixed) amount is usually paid by the employer or Medicare. Some plans also have members pay a small co-payment for each visit.

Managed Care Comparison Worksheet