In the United States, managed care or managed healthcare is a group of activities intended to reduce the cost of providing health care and providing health insurance while improving the quality of that care. It has become the predominant system of delivering and receiving health care in the United States since its implementation in the early 1980s, and has been largely unaffected by the Affordable Care Act of 2010.
...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.Managed Care Programs. National Library of Medicine.
The growth of managed care in the U.S. was spurred by the enactment of the Health Maintenance Organization Act of 1973. While managed care techniques were pioneered by health maintenance organizations, they are now used by a variety of private health benefit programs. Managed care is now nearly ubiquitous in the U.S., but has attracted controversy because it has had mixed results in its overall goal of controlling medical costs.WHAT IS MANAGED HEALTH CARE? by Christine Tobin Proponents and critics are also sharply divided on managed care's overall impact on U.S. health care delivery, with some arguing it contributes to US underperformance on metrics such as life expectancy and high total spending.
History Dr. Paul Starr suggests in his analysis of the American healthcare system (i.e., The Social Transformation of American Medicine) that Richard Nixon, advised by the "father of Health Maintenance Organizations", Dr. Paul M. Ellwood Jr., was the first mainstream political leader to take deliberate steps to change 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 Health Maintenance Organizations (HMOs), the first form of managed care.
Early origins The earliest form of managed care can be traced back to the 1800s, when immigrants came to the United States to work in plantations, lumber camps, mines, and railroads. Under an employer or contract, prepaid health plans and services were developed to accommodate their workers. Physicians were either under a salary or contracts. Many hospitals occupied under contracts to obtain beds. Communal social organization, from immigrants within the United States such as northern Europe, Scandinavia, and Asia, contributed to the creation of early care models.
Before healthcare plans emerged, patients would simply pay for services out of pocket. In the period between 1910 and 1940, early healthcare plans formed into two models: a capitated plan (essentially an HMO), and a plan which paid service providers, such as the Blue Cross and Blue Shield Plans. One of the earliest examples is a 1910 "prepaid group plan" in Tacoma, Washington for lumber mills. Blue Cross (hospital care) and Blue Shield (professional service) plans began in 1929 with a prepaid plan with Baylor Hospital. Under these early years, many experimental plans were organized, eventually creating an innovative healthcare plan and delivery system for the growing work forces. For example, Henry J. Kaiser, his son Edgar, and physician Sidney Garfield later built health care services and company-owned clinics and hospitals after developing a prepaid plan for workers in 1938, expanding during World War II. Spreading to other hospitals over the next several decades; these plans were largely independent of each other and controlled by statewide hospitals and physicians until the 1970s, when they became nonprofits before being converted into for-profit corporations such as Anthem.
1980s expansion and subdued inflation 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. 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 are driven by the need to generate profits and not providing health care.< In a 2004 poll by the Kaiser Family Foundation, a majority 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.Kaiser Public Opinion Spotlight: The Public, Managed Care, and Consumer Protections , June 2004, accessed 2007-10-05. In response, close to 900 state laws were passed regulating managed care in the 1990s.
The backlash featured 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.
1990s growth and ubiquity By the late 1990s, U.S. per capita healthcare spending began to increase again, peaking around 2002.The Factors Fueling Rising Healthcare Costs 2006 , report prepared by Price Waterhouse Coopers for America's Health Insurance Plans, January 2006, accessed 2007-10-05 Despite managed care's mandate to control costs, U.S. healthcare expenditures have continued to outstrip the overall national income, rising about 2.4 percentage points faster than the annual GDP since 1970.Trends in Health Care Costs and Spending, Kaiser Family Foundation Health Care Marketplace Project, September 2007, accessed 2007-10-05
Nevertheless, according to the trade association America's Health Insurance Plans, 90 percent of insured Americans are now enrolled in plans with some form of managed care. 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. In addition, 26 states have contracts with managed care organizations (MCOs) to deliver long-term care for the elderly and individuals with disabilities. The states pay a monthly capitated rate per member to the MCOs that provide comprehensive care and accept the risk of managing total costs.
Techniques
One of the most characteristic forms of managed care is the use of a panel or network of healthcare providers to provide care to enrollees. Such integrated delivery systems typically include one or more of the following: Designated doctors and healthcare facilities, known as a provider network, which enrollees are required or incentivized to useManaged Care: Integrating the Delivery and Financing of Health Care – Part A, Health Insurance Association of America, 1995, page 9 America's Health Insurance Plans, August 2009Gina Kolata, "Survey Finds High Fees Common in Medical Care ," The New York Times, August 11, 2009Peter R. Kongstvedt, "The Managed Health Care Handbook," Fourth Edition, Aspen Publishers, Inc., 2001, page 3, Margaret E. Lynch, Editor, "Health Insurance Terminology," Health Insurance Association of America, 1992, Formal utilization review and quality improvement programs including disease management and case management An emphasis on preventive care including wellness incentives and patient education
The techniques can be applied to both network-based benefit programs and benefit programs that are not based on a provider network. The use of managed care techniques without a provider network is sometimes described as "managed indemnity".
Cost sharing High-deductible health plans are used by insurers to keep costs down by incentivizing consumers to select cheaper providers and possibly utilize less healthcare.
Reference price schemes are another method to share costs, where a health insurer will only pay a certain amount and anything above that must be paid out of pocket.
Provider networks Insurance plan companies, such as UnitedHealth Group, negotiates with providers in periodic contract negotiations; contracts may be discontinued from time to time. High-profile contract disputes can span provider networks across the nation, as in the case of a 2018 dispute between UnitedHealth Group and a major emergency room doctor group Envision Healthcare.
Maintaining up-to-date provider directories is necessary as CMS can fine insurers with outdated directories. As a condition of participation, UnitedHealthcare requires that providers notify them of changes, but also has a Professional Verification Outreach program to proactively request information from providers. However, providers are burdened by having to maintain their information with multiple networks (e.g., competitors to UnitedHealthcare). The total cost of maintaining these directories is estimated at $2.1b annually, and a blockchain initiative began in 2018 to share the directory.
When patients receive care from doctors who are out of network, they can be subject to balance billing; this is particularly common in emergency or hospital care, where the patient may not be notified that a provider is out of network.
Utilization review Utilization management (UM) or utilization review is the use of managed care techniques such as prior authorization that allow payers to manage the cost of health care benefits by assessing its appropriateness before it is provided using evidence-based criteria or guidelines. UM criteria are medical guidelines which may be developed in house, acquired from a vendor, or acquired and adapted to suit local conditions. Two commonly used UM criteria frameworks are the McKesson InterQual criteriaMitus, A. J. (2008). The birth of InterQual: evidence-based decision support criteria that helped change healthcare. Prof Case Manag, 13(4), 228-233 and MCG (previously known as the Milliman Care Guidelines).
Lawsuits In the 21st century, commercial payers were increasingly using litigation against providers to combat alleged fraud or abuse. Examples included litigation between Aetna and a group of surgical centers over an out-of-network overbilling scheme and kickbacks for referrals, where Aetna was ultimately awarded $37 million. While Aetna has led the initiative, other health insurance companies have engaged in similar efforts.
Organizations There is a continuum of organizations that provide managed care, each operating with slightly different business models. Some organizations are made of physicians, and others are combinations of physicians, hospitals, and other providers. Here is a list of common organizations: Group practice without walls Independent practice association Management services organization Physician practice management company (PPM)
Industry in the United States
As of 2017, the largest commercial plans were Aetna, Anthem, Cigna, Health Care Service Corp, UnitedHealthcare, and Centene Corporation. As of 2017, there were 907 health insurance companies in the United States, although the top 10 account for about 53% of revenue and the top 100 account for 95% of revenue.
Smaller regional or startup plans are offered by Oscar Health, Moda Health, and Premera.