Managed Care/HMOs
| Author | Jeffrey Wilson |
| Pages | 873-881 |
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"Managed care" refers to that type of health care system under which medical care and treatment is managed by the entity paying the bills, and not the medical care or treatment provider (physician, hospital, etc.). It is a system dominated by acronyms that identify different services or components (e.g., HMOs, PPOs, EPOs). It is also a system that has become so complex that many believe it has lost sight of its original objectives.
Prior to the proliferation of managed care plans, medical services and treatments were traditionally provided under what is now referred to as "fee-for-service" plans. Under fee-for-service medicine, the health care provider (physician, hospital, etc.) decided what treatment or procedure was necessary for the patient. However, insurance companies often engaged in semantic battles with health care providers over what treatments were considered "necessary" and how much they would cost. Often stuck in the middle were the patients, who had to choose between waiting for a decision or paying for the treatment themselves.
Managed care organizations (MCOs) began to proliferate during the 1980s, when the industry began to court employers (who pay the bulk of the nation's health insurance premiums). There had been reports of hospitals and doctors under traditional medical insurance plans performing unnecessary diagnostic tests or prolonging treatments (especially rehabilitative therapies) to maximize their incomes/profits. Employers saw the MCO industry as a way to cut costs for employee health insurance.
The MCO purports to control the cost, quality, and availability of medical care by limiting access to care providers and shifting focus to wellness rather than illness. MCO plans typically employ doctors and statisticians to assess computer-generated data, such as how long a heart attack patient should be hospitalized or what treatments are most effective for a particular illness or injury. These data are then developed into industry standards that are referred to as "best practice" guidelines or benchmarks. The MCO, and not the treating doctor, then decides what treatments will be authorized and how much will be paid for the treatments/hospital stays, etc. In return, the MCO purports to offer lower insurance premiums for subscribing members.
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There are four basic types of managed care plans that fall under the umbrella of "MCOs."
By far the most common type, HMOs ostensibly focus on wellness (e.g., by providing for annual physical examinations). Members (who are insured) pay a fixed annual premium in return for health care access that is limited to the HMO's network of physicians and hospitals. Medical care is also limited to a prearranged, comprehensive list of medical services that will be provided to the enrolled group as a whole. Most HMOs require patients to choose (from the HMO network) a physician as a primary care provider (PCP) who must first be consulted for any medical concern. The PCP, and not the patient, then decides if the patient should consult a specialist or get a second opinion. This practice (common to most forms of MCOs in general) is known as "gatekeeping."
In a PPO, the managing entity is not always the insurer; it also may be an employer or a plan administrator. Discounted rates are negotiated with specific health care providers in return for increased patient volume. However, members may choose providers outside of the PPO network, but they will have to pay more to do so.
Under an EPO, the managing entity contracts with a group of health care providers who agree to internally follow utilization procedures, to refer patients only to other specialists within the EPO, and to use only those hospitals contracted with the EPO. Members must use EPO providers.
The designation of POS refers to the fact that the amount of co-payment an insured pays is dependent upon the "point of service." If an insured member goes outside of the plan network to receive care, the co-payment is higher, as network providers have agreed to accept a discounted rate for services in return for patient volume and patient referral.
Less than 15 percent of Medicare beneficiaries are enrolled in Medicare managed care programs, previously known as the Medicare+Choice plan, but now referred to as Medicare Advantage. As part of the Medicare Reform Package [that resulted in the enactment of the Medicare Prescription Drug Improvement and Modernization Act of 2003 (P.L. 108-173)], Congress increased payments to Medicare HMOs for 2004. In 2006, seniors became eligible for a new Medicare option: PPOs. This was expected to meet the demand of "baby-boomers," the first of whom were entering their 60s at that time. Because approximately 80 percent of individuals with private insurance had PPO plans, the transition to Medicare PPO would be a smoother transition.
Traditional Medicare enrollees often need to understand and deal with three different plans: basic Medicare, "medigap" supplemental insurance, and the new Part D prescription drug plan. However, Medicare Advantage enrollees may reduce this burden by combining regular health care and prescription drugs, as well as limiting ou-of-pocket expenses for copays and deductibles.
The early HMOs were idealistic non-profit organizations endeavoring to enhance the delivery of health care to patients while controlling costs. The HMO Act of 1973 changed that premise. It authorized for-profit IPA-HMOs in which HMOs may contract with independent practice associations (IPAs) that, in turn, contract with individual physicians for services and compensation. By the late 1990s, 80 percent of MCOs were for-profit organizations, and only 68 percent or less of insurance premiums went toward medical care. The remainder was paid for MCO executives' and salespersons' salaries.
As a counterbalance against growing concerns that MCOs had transformed from patient-friendly plans to profit-making machines, state legislators around the country began to enact laws limiting certain restrictions imposed by MCOs on their members. Most of these laws are referred to as "HMO laws" but generally govern all MCOs within the state (HMOs being the most common).
State laws vary on such issues as whether HMOs may deny patient access to medical specialists without first going through the designated primary care provider (PCP); "best practice" minimum hospital stays; and whether HMOs may provide financial incentives to health care providers who curb medical costs by limiting medical care. Almost all states now prohibit "gag rules," which are contractual agree-
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ments with physicians not to inform their patients of treatment options not covered by the HMO/MCO plan (a common practice in earlier days).
Nineteen states have POS laws. Point-of-service (POS) plans permit enrollees to choose a nonparticipating provider instead of a participating provider at the time services are needed. A higher copayment or a deductible may apply if a non-participating provider renders services. A POS law mandates that managed care plans provide a point-of-service choice to enrollees. This is often accomplished by providing a HMO plan alongside an indemnity plan. If the enrollee uses a provider who participates in the HMO network, then HMO benefits apply, but the indemnify benefits apply if a non-participating provider is used. State laws vary. Some require a POS offering only for employers with more than 25 or 50 employees or health plans with more than 5,000 or 10,000 enrollees Others might have special provisions that apply to dental plans.
Seventeen states have network adequacy requirements. Such laws mandate that plans establish standards for the creation and maintenance of provider networks that are sufficient to assure that managed care plan enrollees can access necessary services without unreasonable delay. Sufficiency may be determined in terms of provider-to-enrollee ratios, geographic accessibility, waiting time for appointments, and office hours.
Twenty-three states have a freedom of choice laws that preserve a managed care enrollee's right to select any available provider in the network. Many states limit these laws to providers of pharmaceutical services.
Twenty-two states have AWP (any willing provider) laws that require managed care plans to grant network participation to any provider willing to join and meet network requirements. Most states with this requirement limit the application to pharmacies or pharmacists.
Thirty-seven states prohibit discrimination between various classes of providers based on their academic degrees. To do this, the laws...
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