Introduction
Managed care refers to a health provision platform that emphasizes wellbeing management, proper health care utilization, and affordable and quality treatment cost among other l benefits. This form of care is enhanced through contracted agreements between managed care organizations, which are also referred to as MCOs, and the government health care agencies. The MCOs accept a certain monthly or annual payment known as capitation to cater for all services. MCOs have been subdivided into three major classes, namely, Health Maintenance Organizations (HMO), Preferred Provider Organization (PPO), and Point of Service plans (POS). This paper discusses the evolution of managed care, its influence, and cost-efficacy before offering the major similarities and differences between MCO models. It also provided the trend that managed care has demonstrated with time.
Evolution of Managed Care
Managed care has been in existence for over 100 years in the United States, although it was made official in the mid-1970s. In the 1990s, malpractices, class action, and lawsuits on employee benefits marred the industry. These lawsuits eroded the prevailing legal protection that HMOs enjoyed under the Employee Retirement Income Security Act (ERISA) of 1974. Therefore, HMOs changed their plans and practices to camouflage themselves against consumers’ anxiety on their coverage and legal risks, which became a reality after the erosion of legal protection. Moreover, suppressive clauses that were applied in contracts between MCOs and their providers limited the providers from being honest and open to their clients about certain details concerning diagnosis and reimbursement. This situation has driven the MCOs’ focus towards meeting their bottom line for survival, especially after the collapse of the US healthcare reform in 1994. This state of affairs can also be witnessed from Aetna, which was an HMO that previously focused on indemnity products. However, in 1996, it merged with US Healthcare and shifted its business model to managed care due to the existing climate, which valued economies of scale and growth. By 1999, it had begun focusing on profitability rather than market share. Currently, since the PPOs offer more choices, they are more popular than HMOs.
Influence of Managed Care
The main agenda of managed care is to offer healthcare at a partially lower cost in comparison with regular medical checkups and physician visits. Therefore, the population, which is on the lower cadre of the financial pyramid, forms the main target for HMOs. Managed care ensures that this class of people accesses proper and regular healthcare services. The payment plan involves a monthly contribution as compared to a normal visit to a medical outlet where the cost is substantially high. Thus, this platform provides healthcare services to US citizens who previously could not manage to afford it. The plan has been a breakthrough to many American citizens who initially could succumb to ailments that were too expensive for them to treat.
Cost-Efficacy of Managed Care
The presence of managed care institutions in a health care market generates competition between the institutions, which, in turn, influences patients’ treatment patterns in the whole market. Due to competition among themselves or between them and other insurance-based health services for enrollees, MCOs can competitively lower their premiums or cost by adopting efficient practices such as offering financial incentives, proper selection of enrollees, or reducing provider fees. The financial incentives may include changing provider behavior and bonuses (Mcguire, Newhouse, & Sinaiko, 2011). Furthermore, physicians can adopt a single style of practice that is influenced by incentives, which are assimilated via the MCOs for all their patients. As a result, the patients in the MCO will influence the patterns of practice for non-MCOs because of the reduced provider cost following pressure from lower prices. This effect may influence the treatment patterns for every patient, whether MCOs or non-MCOs.
Differences and Similarities between MCO Models
As previously mentioned, there exist three major models of MCOs, namely, HMOs, POSs, and PPOs. For an HMO, one has to choose an HMO physician as his or her primary health provider. The physician coordinates any referrals to specialists and other medical care requirements. Sometimes, patients may choose a treatment procedure from a physician who is out of network. Thus, they will be necessitated to cater for the majority of the cost. Moreover, according to US laws, an HMO cannot obtain an emergency care referral (Mcguire et al., 2011). Hence, the HMO is supposed to pay for emergency room diagnosis devoid of any referral. Although HMO is the least expensive health program for employers to their employees, it caters to diagnosis, preventive care, and doctor’s visits, which are covered by the insurance premium that people pay every month. Therefore, there exist no deductibles, either personal or family-based, to meet medical costs. In addition, for each visit, payments that are made partially based on the plan and the enrollees (co-payment) are insignificant just as it is witnessed in PPO, although co-insurance does not occur. Unlike the MCO, the PPO allows enrollees to visit an off-network provider where they can still receive the services required (Mcguire et al, 2011). Another difference with MCO is that one has to pay for co-insurance, which usually is the difference between the off-network and network prices. In off-network, the enrollee caters for his medical expenses and demands reimbursement from their network provider. The third difference between MCO and PPO is that one does not need a referral to visit a specialist. Lastly, the model, POS, is a hybrid of HMO and PPO. It is similar to the PPO since the enrollee may go out of the network. Contrary to the PPO, the HMO does not allow one to go off-network unless his or her primary doctor refers him or her where the health plan will pay almost all of the enrollee’s bills.
Managed Care Trend
The American healthcare scheme is going through a speedy and remarkable revolution. Health insurers are encountering transformations following healthcare restructuring, unrelenting development in healthcare expenditure, aging people, and the rising number of citizens who suffer from persistent diseases. According to Myers (2015), 66% of individuals who have attained 65 years and above suffer from chronic ailments. Hence, managing this situation is expected to alter the trend in spending on chronic diseases. Similarly, the rising complications that are associated with the elderly will also change the amount of money that the US government has been allocating for this group. According to Mcguire et al. (2011), Medicaid has been established to provide a basis for the delivery of health benefits and other paybacks through contractual arrangements between MCOs and the government’s agencies. It is beneficial to the health of millions of Americans, for instance, pregnant women, the elderly, the disabled, and low-income households because it is either free or extensively cheap. Hence, it is expected to increase access to medical care (Beik, 2011).
Conclusion
Based on the expositions made in the paper, it is evident that managed care has many positive implications on the US healthcare system. Moreover, the majority of the trends on managed care are inclined towards better service provision to the population. Health care has been made cheaper and more accessible perpetual to marginalized groups in society such as the elderly, the poor and needy, or even the disabled people.
Reference List
Beik, J. (2011). Health insurance today. St. Louis, MO: Elsevier/Saunders.
Mcguire, T., Newhouse, J., & Sinaiko, A. (2011). An Economic History of Medicare Part C. Milbank Quarterly , 89(2), 289-332.
Myers, M. (2015). Three trends affecting managed care. Web.