What is Managed Care?
Managed care plans differ from traditional indemnity plans in many ways. Traditional plans allow participants to see any physician they choose, and utilization of services generally is not restricted. There are no limitations on fees, although “Usual, Customary and Reasonable” (UCR) charges limit what a plan will pay. The more care physicians and other health care providers give, the more revenue they receive. There is little concern that a patient will not receive necessary treatment. In fact, many critics of traditional plans claim they encourage unnecessary treatment.
In contrast, managed care plans limit choice of physicians and health care facilities and tightly control both the utilization of services and the amount charged for these services. In many plans, a set fee per person/per month, known as a “capitated rate,” is negotiated between health care purchasers and providers. This rate is the same no matter how much or how little care a person receives. This can encourage incomplete advice and inadequate treatment.
The most common form of managed care, the Health Maintenance Organization (HMO), has been around for years and has a history of solid union support. Currently, though, most managed care plans, particularly HMOs, are run by for-profit companies. These newer for-profits are underpricing older non-profit HMOs. Competi-tion is fierce. All plans are constantly looking for ways to cut costs and increase their market share.
A growing number of workers, including many AFSCME members, now have only managed care plans from which to choose, if they have any choice at all. Whether this is good or bad depends on the quality of the plans, how the plans are selected and what requirements are set out in the contract between the health plan and the payer, typically the employer but sometimes a benefits trust. What is certain is that the emergence of managed care has changed the nature of health benefit negotiations. With indemnity plans, unions did not need to be overly concerned with which carrier provided the insurance. What was important was what services were covered and how much employees paid out of pocket. Managed care has changed that. Managed care plans must be evaluated carefully. The process of selecting doctors and facilities, how care is monitored, and hours of operation and location, are all important determinants of quality and access for our members. The inclusion of unionized facilities in managed care networks can help ensure quality, as well as preserve union jobs.
As the name implies, managed care plans manage health care services. This means that the plan itself sets guidelines for determining when given surgeries are needed, what tests are appropriate, how long a patient should remain in the hospital, and so on. These measures may prevent unnecessary surgeries and needless tests, which are all too common in American medicine. If care management programs are based on sound medicine, as compared to economic expediency, and operated by qualified medical personnel, the result can be better care at a lower cost. But if a push to cut costs takes precedence over clinical considerations, care management programs become a dangerous problem. With a bad managed care program, a test or procedure described as covered in the plan description can be, in fact, unavailable in certain situations. Many have argued that the focus of managed care has been to manage costs.
The three main types of managed care plans are Health Maintenance Organizations (HMOs), Preferred Provider Organizations (PPOs) and Point of Service (POS) plans.
- A HMO is a plan that provides comprehensive health care services, with an emphasis on preventive care, for a fixed (capitated) payment. HMOs are the most stringent form of managed care. Participants must select a primary care physician, who acts as a “gatekeeper” for most services covered by the plan. If the patient does not channel care through the gatekeeper and obtain care at one of the HMO’s participating facilities, it is generally not covered under the plan.
There are two basic types of HMOs — the group or staff model and the independent practice association (IPA). These two models are sometimes referred to as non-network (group/staff) and network (IPA) HMOs. Under the group/staff model, the plan’s doctors share facilities and equipment. Some are employed by the HMO while others are compensated in other ways, such as a capitated rate per person. In an IPA model, physicians are organized like an HMO, but practice in their own offices. IPA doctors often have a mix of patients, some belonging to the HMO and some not. IPAs tend to have more doctors than the group/staff model and tend to be more geographically dispersed.
- A PPO falls between an HMO and a traditional indemnity plan. Patients choose from a network of physicians and facilities who have agreed to discount the cost of services, but are paid for each service rendered. Different providers may be selected at any time and the patient is not required to select a primary care provider. Payment is based on a set fee schedule. Physicians are not permitted to charge patients more than the agreed-upon fees. Financial incentives (lower deductibles and copayments) encourage participants to use in-network providers.
- A POS plan is one that includes some type of managed care option, but allows participants to go outside of the managed care network by paying more. The first POS plans typically included a HMO, a PPO and an indemnity plan option. Now most POS plans are simply HMO plans with an opt-out feature. POS plans are often referred to as open-ended HMOs. As in an HMO, participants select a gatekeeper from the panel of participating doctors, and that gatekeeper directs all care received. Care received in-network typically requires only a small dollar copayment per visit. Unlike true HMOs, POS plans cover care received outside of the network, but the patient will pay more. Typically, the higher cost sharing is in the form of deductibles and percentage copayments.