Memorandum on Managed Care
MEMORANDUM ON MANAGED CARE
TO: Dr. Forney Fleming and the Class of Fall’14 for American Healthcare System
DATE: September 10, 2014
RE: Managed Care, Markets and Rationing Briefing Paper
MANAGED CARE: An organized way to deliver healthcare services by efficiently utilizing healthcare resources to provide quality patient care. Managed care principles have been used for over 100 years in the U.S. The major goals of managed care include improving quality and accessibility of health care, improving outcomes and overall quality of life for patients and containing costs. The growth of managed care in the U.S. was spurred by the enactment of the Health Maintenance Organization Act of 1973. The organizations that use the above techniques or provide them are called “MCO” or “Managed Care Organizations”. Managed Care organizations are broadly classified into two categories viz. HMO, PPO & POS. During the last quarter of the 20th century, HMOs emerged as an important alternative to traditional medical indemnity insurance plans, and largely supplanted them. This was largely known as the “managed care revolution”. HMOs have had a profound effect on every aspect of the practice of medicine-professional, scientific, social, economic, and legal.
HMO (Healthcare Maintenance Organizations): HMOs are comprehensive health care delivery systems that offers a wide range of healthcare services through a network of providers who agree to supply services to members. With an HMO you'll likely have coverage for a broader range of preventive healthcare services than you would through another type of plan. As a member of an HMO, you'll be required to choose a primary care physician (PCP). Your PCP will take care of most of your healthcare needs. Before you can see a specialist, you'll need to obtain a referral from your PCP. HMO plans typically enable members to have lower out-of-pocket healthcare expenses. You may not be required to pay a deductible before coverage starts and your co-payments will likely be minimal. You also typically won't have to submit any of your own claims to the insurance company. However, you'll likely have no coverage for services rendered by out-of-network providers or for services rendered without a proper referral from your PCP.
PROS: Lower costs, No deductible & Less Co-payments
CONS: Limited choices, Restrictions on when you receive care & Cost limit issues
HMO Backlash: There was a growing consensus among the American public that HMOs were not functioning towards their primary purpose i.e. to reduce the cost of healthcare delivery.
There were highly publicized opinions on bad patient outcomes and other bad experiences that did little to help to allay the growing fears among the public. Adding contradicting surveys to the equation did little to help the public notion towards HMOs. The fact was that the public backlash was also being driven by rare events that seem threatening and dramatic but have been experienced by few consumers. This HMO backlash was majorly caused due to dissatisfaction of both the patient and the provider. People’s perception of the changing HMO working methodology was another major cause of the backlash because most of the people feared that if they were sick, the alignment of HMOs towards cost management and not care management will lead to their health plan being more concerned about saving money than about what is the best medical treatment.
PPO (Preferred Provider Organization): Preferred provider organizations have also contracted with hospitals and physicians to provide health-care services. Unlike the case with an HMO, you do not have to go to these physicians. However, you will pay more if you go outside the list of preferred providers. PPO plans usually have a deductible, which is the
