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Health care in the United States

Government Centers for Medicare and Medicaid Services Medicare Medicaid Department of Veterans Affairs (VA) State Children's Health Insurance Program (SCHIP) EMTALA Private Health insurance Health Maintenance Organization (HMO) Managed Care Medical underwriting Preferred provider organization (PPO) Private consumer driven Flexible spending account (FSA) Health Reimbursement Account Health Savings Account Medical savings account High Deductible Health Plan (HDHP) Others Canadian and American health care systems compared Single payer health care Universal Health Care Health care reform

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The term "managed care" is used in several related ways. The first is to describe a variety of techniques intended to reduce the cost of providing health benefits and improve the quality of care ("managed care techniques"). The second is to describe the organizations that use those managed care techniques, or provide them as services to other organizations ("managed care organizations"). The third is to describe a system of financing and delivering health care to enrollees that is organized around managed care techniques and concepts ("managed care delivery systems"). Such integrated delivery systems are typically based on a panel or network of contracted health care providers, and include one or more of the following:

• A set of selected providers that furnish a comprehensive array of health care services to enrollees;
• Explicit standards for selecting providers;
• Formal utilization review and quality improvement programs;
• An emphasis on preventive care; and
• Financial incentives to encourage enrollees to use care efficiently.^[1][2][3]

Many managed care techniques were pioneered by health maintenance organizations, but are now used by a variety of private health benefit programs. The growth of managed care in the U.S. was spurred by the enactment of the Health Maintenance Organization Act of 1973. It began to influence health policy during the presidency of Ronald Reagan, ostensibly as a way to control Medicare payouts. According to the National Library of Medicine, the term "managed care" encompasses a variety of health insurance programs:

...intended to reduce unnecessary health care costs through a variety of mechanisms, including: economic incentives for physicians and patients to select less costly forms of care; programs for reviewing the medical necessity of specific services; increased beneficiary cost sharing; controls on inpatient admissions and lengths of stay; the establishment of cost-sharing incentives for outpatient surgery; selective contracting with health care providers; and the intensive management of high-cost health care cases. The programs may be provided in a variety of settings, such as Health Maintenance Organizations and Preferred Provider Organizations.^[4]

According to the trade association America’s Health Insurance Plans, managed care is nearly ubiquitous in the U.S.; 90 percent of insured Americans are now enrolled in plans with some form of managed care.^[5] The National Directory of Managed Care Organizations, Sixth Edition profiles more than 5,000 plans, including new consumer-driven health plans and health savings accounts.

Managed care has attracted controversy because it has largely failed in the overall goal of controlling medical costs. Meanwhile, proponents and critics are sharply divided on managed care's overall impact on the quality of U.S. health care delivery.

Contents 1 History 2 Forms of managed care 2.1 Health Maintenance Organization (HMO) 2.2 Preferred Provider Organization (PPO) 2.3 Point Of Service (POS) 2.4 Managed care in indemnity insurance plans 3 Impacts 4 Notes and references 5 Further reading 6 See also 7 External links

Paul Starr suggests in his analysis of the American health care system (i.e., The Social Transformation of American Medicine) that Ronald Reagan was the first mainstream political leader to take deliberate steps to reform American health care from its longstanding not-for-profit business principles into a for-profit model that would be driven by the insurance industry. In 1973, Congress passed the Health Maintenance Organization Act, which encouraged rapid growth of HMOs, the first form of managed care.

Managed care plans are widely credited with subduing medical cost inflation in the late 1980s by reducing unnecessary hospitalizations, forcing providers to discount their rates, and causing the health-care industry to become more efficient and competitive.^[6] Managed care plans and strategies proliferated and quickly became nearly ubiquitous in the U.S. However, this rapid growth led to a consumer backlash. Because many managed care health plans are provided by for-profit companies, their cost-control efforts created widespread perception that they were more interested in saving money than providing health care.^[6] In a 2004 poll by the Kaiser Family Foundation, majorities of those polled said they believed that managed care decreased the time doctors spend with patients, made it harder for people who are sick to see specialists, and had failed to produce significant health care savings. These public perceptions have been fairly consistent in polling since 1997.^[7]

The backlash included vocal critics, including disgruntled patients and consumer-advocacy groups, who argued that managed care plans were controlling costs by denying medically necessary services to patients, even in life-threatening situations, or by providing low-quality care. The volume of criticism led many states to pass laws mandating managed-care standards.^[6] Complying with these mandates increased costs. Meanwhile, insurers responded to public demand by beginning to offer other comprehensive plan options with more comprehensive care networks. In fact, between 1970 and 2005, the share of personal health expenditures paid directly out-of-pocket by U.S. consumers actually fell from about 40 percent to 15 percent. So although consumers faced rising health insurance premiums over the period, lower out-of-pocket costs likely encouraged consumers to use more health care, leading to expenditure growth.^[8]

By the late 1990s, U.S. per capita health care spending began to increase again, peaking around 2002.^[9] Despite managed care's efforts to control costs, U.S. health care spending continues to outstrip the overall economy, rising about 2.4 percentage points faster than annual GDP since 1970.^[10]

There are several forms of managed care. Plans range from more restrictive to less restrictive, and include:

Main article: Health Maintenance Organization

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 the Health Maintenance Organization Act of 1973. As defined in the act, a federally qualified HMO would in exchange for a subscriber fee (premium) allow members access to a 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.

HMOs are licensed by the state level, under a license that is known as a certificate of authority (COA) rather than under an insurance license. ^[11] In 1972 the National Association of Insurance Commissioners adopted the HMO Model Act, which was intended to provide a model regulatory structure for states to use in authorizing the establishment of HMOs and in monitoring their operations. In practice, an HMO is a coordinated delivery system that combines both the financing and delivery of health care for enrollees. In the design of the plan, each member is assigned a "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.

Since the 1980s, under the ERISA Act passed in Congress in 1974 and its preemptive effect on state common law tort lawsuits that "relate to" Employee Benefit Plans, HMOs administering benefits through private employer health plans have been protected by Federal law from malpractice litigation on the grounds that the decisions regarding patient care are administrative rather than medical in nature. See "Cigna v. Calad ", 2004.

Main article: Preferred provider organization

Rather than contract with the various insurers and third party administrators, providers may contract with preferred provider organizations. They generally agree to a discount from a relative value-based fee schedule or simply a discount from whatever they bill (which is perhaps subject to reasonable, usual, and customary limitation (generally a percentile of national or regional charge data)). The PPO, in turn, promises convenience, less administrative expenses, and/or prompt payment.

In terms of using such a plan, unlike an HMO plan, which has a copayment cost share feature (a nominal payment generally paid at the time of service), a PPO generally does not have a copay and instead offers a deductible and a coinsurance feature. The deductible represents the first dollar of coverage and is paid by the patient. After the deductible is met, the coinsurance portion applies. If the PPO plan is an 80% coinsurance plan with a $1,000 coinsurance out of pocket, then the patient will pay 20% of the allowed provider fee up to $1,000. After this amount has been paid by the patient, the insurer will pay 100% of subsequent costs.

Because the patient is picking up a substantial portion of the "first dollars" of coverage, PPO are the least expensive types of coverage[1].

Main article: Point of service plan

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.

In terms of using such a plan, a POS plan has levels of progressively higher patient financial participation as the patient moves away from the more managed features of the plan. For example, if the patient stays in a network of providers and seeks a referral to use a specialist, they may have a copayment only. However, if they use a network provider, but do not seek a referral, they will pay more, and so on.

Many "traditional" or "indemnity" health insurance plans now incorporate some managed care features such as precertification for non-emergency hospital admissions and utilization reviews.

The overall impact of managed care remains widely debated. Proponents argue that it has increased efficiency, improved overall standards, and led to a better understanding of the relationship between costs and quality. They argue that there is no consistent, direct correlation between the cost of care and its quality, pointing to a 2002 Juran Institute study which estimated that the "cost of poor quality" caused by overuse, misuse, and waste amounts to 30 percent of all direct health care spending.^[9] The emerging practice of evidence-based medicine is being used to determine when lower-cost medicine may in fact be more effective.

Critics of managed care argue that "for-profit" managed care has been an unsuccessful health policy, as it has contributed to higher health care costs (25-33% higher overhead at some of the largest HMOs), increased the number of uninsured citizens, driven away health care providers, and applied downward pressure on quality (worse scores on 14 of 14 quality indicators reported to the National Committee for Quality Assurance).^[12]

• Managed Healthcare Executive - a magazine for senior-level decision makers.
• Medical Economics

• Disease management (health)
• Case management
• Patient education
• Utilization review
• Health care in the United States
• Nursing and Health Care Management
• Sicko
• America’s Health Insurance Plans (AHIP)

• The Health Care Crisis, Part I - a Pinky Show online video about MCOs and their relationship to the health care crisis.