Managed care

Managed care is a concept in U.S. health care which rose to dominance during the presidency of Ronald Reagan, ostensibly as a means to control Medicare payouts. Ronald Reagan had supported legislation in California during his term as Governor there as a way to stem rapidly rising costs to California's Medicaid (named Medi-Cal) Program adopted earlier in his administration. The program was allowed as a Medicaid "waiver." At the time it was called the "Pre-paid Health Plan Program". A series of contracting scandals with a number of prepaid health plans caused reforms in CA and prompted passage of the HMO Act by Congress. Reagan later promoted HMO's nationwide after he became President, and they spread relatively quickly through the health insurance industry. Managed care usually refers to a PPO, HMO, MCO, or POS plan.

The rise of managed care was touted by the U.S. health insurance industry as a way to lower the rate of medical inflation in the 1990s. But managed care has not been successful in lowering the rate of medical inflation. In fact, U.S. medical inflation is now two or three times the rate of overall inflation, as it was during much of the 1980s.

Managed care has been a successful for-profit business model. Corporations and many individual investors have reaped billions in profits. However, critics have argued managed care has been an unsuccessful health policy as it has increased health care costs, increased the number of uninsured citizens, driven away health care providers (e.g., nurses) and applied downward pressure on quality.

Forms of managed care
There are several forms of managed care. Ranging from more restrictive to less restrictive, they include:

Health Maintenance Organization (HMO)
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 PL 93-222. 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.

In practice, an HMO is an insurance plan under which an insurance company controls all aspects of the health care of the insured. 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.

Preferred Provider Organization (PPO)
While not employees of the insurer, PPO healthcare providers do hold contracts with each insurance company, or a Third Party Adjusting company, for which they are used actuarial tables to determine a "reasonable and customary fee" for each service and the provider, if he/she generally charged more, was obligated to write off the difference. The insurer would then pay a percentage of the balance to the provider, and the rest would become the responsibility of the insured. But during the 1990s, many providers engaged the services of medical office management services to handle these contracting arrangements on their behalf, with the result that full fees, writeoffs, and percentages due from insurer and insured are jointly agreed-to amounts between the insurer and the provider on a plan-by-plan, provider-by-provider basis, which amounts are protected as corporate secrets and are not available to consumers who wish to compare benefits offered against premiums charged on a dollar basis. Furthermore, in the event the insurer defaults on payment by claiming a service provided was "not necessary" under the plan, the provider is free to charge any amount he/she deems desirable to the patient, instead of any generalized, capitated "reasonable and customary fee" determined by the insurer.

Point Of Service (POS)
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.

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