Bilimoria (2015) defines managed care or managed care organization (MCO) as a health care delivery network structured to control cost, usage, and quality of health care. Managed care organization connects health insurance with care delivery for a particular population. To employers, an MCO is an insurer while to providers it is a payer. On the other hand, to patients or members, it is a service provider. Notably, one of the key aims of the MCO is to avail the highest quality of care depending on the availability of resources. The main kinds of managed care plans are health care organization (HCO) and preferred provider organization (PPO). However, managed care faces several drawbacks. According to McDonnell and Graham (2015), the three significant criticisms of managed care restricted care, strict approvals, and referral hurdles.
Restricted care means that patients can only visit physicians that are in their managed care providers network, which limits the doctors that members can see. Consequently, many doctors are out of reach with these plans. The second drawback is that managed care offers strict approvals. In particular, the primary goal of insurance companies as businesses is to make a profit (Bilimoria, 2015). Therefore, they tend to be strict on the services they are willing to cover wholly or cover at all. Consequently, many Americans suffering from pre-existing health problems and conditions lack the cover. Similarly, the insurance companies seek pre-approval before commencing treatment and patients have to wait to get an appointment and authorization for treatment. McDonnell and Graham (2015) add that managed care leads to referral issues. Mainly, it is common for a physician to refer a patient to a specialist when a health condition is beyond his or her scope of practice. However, under this system, most doctors do not concern themselves with establishing if that specialist is within a patients care network. If the specialist is not within the network, then the patient cannot seek the service, and if they do, they bear the cost out of pocket, which can be costly.
Nevertheless, as the health care costs continue to increase, employers seek to control their health benefit expenses, which have led to the invention of consumer-driven health plans (CDHPs). According to Wojcik (2014), this policy has overtaken health maintenance organizations (HMOs) and are now the second most common plan design availed by U.S. employers. The CDHP is a kind of health coverage that persuades covered members to be knowledgeable and thoughtful consumers of health care services. Wojcik (2014) adds that the CDHP design inspires participants to be proactive while choosing their health care providers, controlling their health expenses, and enhancing their general health through proper nutrition and physical exercise. Notably, this plan is becoming progressively popular among employers since it avails them with a vehicle for improving consumerism and a structure for educating and motivating employees to engage actively in understanding and managing their health.
Song (2010) refers to CDHP as a three-tier payment system because of its three key features, namely, a savings account, out-of-pocket payments, and an insurance plan. The saving account, which is the first tier, is a pretax account that enables employees to pay for health care services using pretax dollars. Mainly, either the employer or the employee may fund the account depending on its kind. The funds from the account can be utilized to satisfy the insurance plan deductible. Then, the difference between the sum in the members pretax account and the deductible is the second tier, which Song (2010) calls the coverage gap. Notably, the amount not covered by the savings account must be covered by the insured. If health care costs surpass the deductible amount, then the third feature, the high-deductible insurance plan, sets in. Under this feature, the insured pays a coinsurance amount for benefits until an out-of-pocket maximum is attained (Song, 2010). Once this maximum is achieved, the high-deductible health plan caters for all costs for the remainder of the year.
Notably, CDHP differs from managed care plan in philosophy and design, particularly, regarding providers, covered benefits, and level of cost sharing. According to studies by Bilimoria (2015) and Song (2010), significant similarities and differences are eminent between Health Maintenance Organization (HMO) Plans and Consumer-Driven Health Plans (CDHP). Both plans avail comprehensive coverage at a low out-of-pocket premium although CDHPs involve a higher deductible plan once a person surpasses the allowable amount. However, the plans differ in the level of cost sharing whereby in HMO, a member pays co-pay for office visits, which covers other services such as x-rays or lab tests whereas in CHDPs, the member is responsible for most of the actual health care costs.
The plans also differ regarding covered benefits whereby under the HMO plan, a patient chooses a primary care physician (PCP) from whom he or she seeks medical attention while sick. To visit a specialist, the member must have a referral from the primary care physician, which limits a members choices since many doctors do not accept the HMO plans. In particular, HMOs usually pay only for visits to physicians within their network and a patient has to cater for costs incurred for a visit to an out-of-network doctor. On the other hand, under the CHDP plan, a member does not have to choose a primary care physician or get referrals. Finally, the funds paid under HMO plans only cover health care, which differs from funds contributed under CHDP plans. In particular, as Song (2010) notes, a member saves a lot in taxes and the funds in the savings account can be put towards retirement. Notably, the CHDP plan has more benefits than the HMO plan.
However, these plans have their disadvantages about cost and quality of care, which led to the establishment of Accountable Care Organizations (ACOs). These provider alliances support the consolidation of groups of physicians, health care facilities, and other providers. They base the associations on various ways around the chance to acquire additional payments by attaining continually advancing patient-focused quality goals and denoting real decreases in overall spending growth for their set patient population. Shortell, Casalino, and Fisher (2010) assert that the ACO design is highly flexible, which allows it to be organized in various ways ranging from fully integrated delivery structures to networked systems within which physicians in small office practices can operate efficiently together to enhance quality, coordinate care, and reduce costs.
ACOs reduce health care costs by changing the way in which care is delivered. Mainly, ACOs avail a structure to transition from paying for volume and intensity to paying for value. These alliances are compatible with various payment reforms to enhance the quality of care. Such key aspects mainly include minimizing unnecessary hospital admissions and preventable admissions, improving transition in care, removing unneeded emergency department visits, upgrading at-home care through new home diagnostic and treatment technologies, and decreasing the demand for office visit-based care (Shortell, Casalino & Fisher, 2010). Additionally, the transition to different payment incentives such as capitated payments and one-sided shared savings coupled with quality bonuses aid in reducing costs. In particular, the ACOs move providers away from the traditional-fee-for-service payment toward capitation and risk-adjusted global budgets. Nevertheless, these payments work alongside the organization of health care delivery. Shortell, Casalino, and Fisher (2010) assert that the success of ACO depends on balancing the goal of reducing cost with meeting the quality targets.
To conclude, any comprehension of health insurance and managed needs a fundamental understanding of accessing coverage and the essential elements of coverage, namely, providers, covered benefits, and level of cost sharing. Notably, despite which kind of plan or provider is involved, these components are always standard regardless of other differing features. The common types of managed care plans in U.S. include health care organization (HCO) and preferred provider organization (PPO). However, these programs offer restricted care, have strict approvals, and present referral hurdles. These drawbacks increase health care costs, which burden members or patients. Nevertheless, as the health care costs continue to rise, employers seek to control their health benefit expenses, which have led to the invention of consumer-driven health plans (CDHPs). The program is becoming progressively popular among employers since it avails them with a vehicle for enhancing consumerism and a structure for educating and motivating employees to engage actively in understanding and managing their health. Additionally, to control cost and quality of care further, Accountable Care Organizations (ACOs) continue to spread in the U.S.
Bilimoria, N. M. (2015). Responding to Audits: Managed Care, Medicare, and Medicaid... Oh My!. The Journal of medical practice management: MPM, 31(3), 170.
McDonnell, D. D., & Graham, C. L. (2015). Medicaid beneficiaries in California reported less positive experiences when assigned to a managed care plan. Health Affairs, 34(3), 447-454.
Shortell, S. M., Casalino, L. P., & Fisher, E. S. (2010). How the Center for Medicare and Medicaid Innovation should test accountable care organizations. Health Affairs, 29(7), 1293-1298.
Song, G. Y. (2010). Consumer-Driven Health Care: What Is It, and What Does It Mean for Employees and Employers?
Wojcik, J. (2014). Cost increases slide after introduction of consumer-driven plans. Business Insurance. 48(13) 21.
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