Managed Care Term Paper

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managed care in modern health care. Specifically it will include a brief history of managed care, along with some pros and cons about the process.

Managed care is an arrangement where an insuring organization accepts the risk for providing a defined set of health services, using a defined set of providers, for a defined population, in return for a fixed or regular per capita payment" (Lammers and Geist, 1997, p. 46). Briefly, for managed care to survive and prosper, member physicians must do the minimum health care necessary to keep the patient healthy and still turn a profit.

Managed care is not a new phenomenon in health care. In fact, it has existed in the United States since the 1920s. "Historians cite the 1930s as the beginning of managed care as we know it today. The launch of the Kaiser Health Plan during World War II resulted in the first clinic-based system of managed care" (Editors). Edgar Kaiser, the founder of the Kaiser Health Plan (still one of the largest and most successful managed care plans), created an American phenomenon. Managed care is strictly an American invention, and still proves most popular in the United States.

After World War II, work was plentiful, life was good, and employers offered their employees great health care benefits, often 100% paid by the employer. By the 1960s, the introduction of government plans such as Medicare and Medicaid caused health care costs to skyrocket. By the 1970s, costs rose even more, approaching 14% of Gross National Product (GNP). The decade from 1985 to 1995 saw the proliferation of HMOs and PPOs in an effort to curb escalating costs. Today, MCOs [Managed Care Organizations] cover three out of four American workers, and annual inflation in health care costs has been reduced significantly" (Editors).

Between 1940 and the 1970s, more employees were covered by health care insurance than ever before in the history of the country, contributing to better health care, but also contributing to the steadily rising health care costs.

When employers did not provide group coverage, many middle-class Americans could not afford an individual insurance policy for their families; some did not have access to group coverage because they were self-employed, small entrepreneurs with limited incomes; and there were people with long-term serious preexisting conditions who were denied coverage through employment, or who simply could not afford the extremely expensive risk-adjusted policies available in the marketplace (Birenbaum, 1997, p. ix).

By the 1980s, managed care and HMOs were beginning to explode. "The Tax Equity and Fiscal Responsibility Act of 1982 expanded the market by making it easier for Medicare and Medicaid beneficiaries to enroll in HMOs" (Birenbaum, 1997, p. 17). Managed care was often the most popular choice for employer provided insurance because of its affordability and convenience. In the 1990s, managed care has come under scrutiny, but continues in popularity and convenience.

Managed care replaces the traditional doctor patient relationship with a 3-part relationship, adding the MCO to the mixture. Instead of one doctor, the plan participant may have several specialists who must all be referred by the participant's primary care physician. "Under these drastically new circumstances, providers, including individual physicians and nurses, as well as organizations like hospitals and clinics, have profoundly altered their behaviors" (Lammers and Geist, 1997, p. 46).

Doctors are no longer responsible for one patient at a time. Their practices have become glutted with thousands of patients who must all be dealt with as quickly and efficiently as possible. Patients are no longer simply patients; they have become consumers because they can pick and choose their health plans almost as easily as they can choose oranges at the supermarket.

Several important issues face managed health care, both positive and negative. Initially, managed care served a major purpose in American health care. At its inception, many experts believed it would revolutionize health care. Because of relatively low premiums and low-cost "co-payments" for patients, health care would become more affordable for everyone. Attending physicians would quickly and easily refer patients who needed to see specialists. Physicians could see more patients, and patients would save money on their health care.

What produces value in managed care is a good health outcome rather than medical intervention. Not every visit to a doctor is necessary; nor is every test conducted, every medication prescribed, or every placement in an intensive care unit going to produce an effective outcome (Birenbaum, 1997, p. 14).

Many of these expectations actually occurred. Managed care is one of the most widely used forms of health care today. Because numerous companies are now in the managed care business, there is more competition among venders, helping to keep prices down and quality up.

However, there is also a downside to the managed care industry. Most doctors are no longer responsible for their own practice; they are employees of the managed care group. They are paid a salary and offered incentives and penalties according to their "numbers." Some physicians belong to several groups at the same time, and see patients from any or all of these groups. Either way, the physician is responsible for seeing as many patients as possible to generate the maximum fees. They may be penalized if they do not see enough patients, or they refer too many patients to specialists.

Health insurance plans divide up their revenues -- the premiums -- into funds for different kinds of services. In addition to a fund for primary care doctors' pay, there might be funds for specialists' fees, prescription drugs, emergency room visits, and ancillary services such as physical therapy, laboratory tests, and X-ray and other imaging studies (Stone, 1998, p. 173).

Clearly, the patient is last in line in this scenario. Managed care has turned health care into what many people call "factories." If a physician is behind schedule, he may not allot enough time to each patient. A patient may not obtain a referral if the physician feels there have already been too many referrals during the period. The patient is probably not aware of any of these restrictions, but they certainly have the feeling they are not receiving definitive health care.

Where individual physicians were once encouraged to do more for the patient, they are now "incentivized" to do less. Where providers once were responsible for curing disease, they are now increasingly concerned with health promotion and disease prevention, and with efforts toward excluding diseases from their lists of "covered services" (Lammers and Geist, 1997. p. 46).

Ultimately, managed care has turned the doctor into a businessman first, and a physician second. This is one of the major negative effects of managed care; it alters medical care at its very roots. "In the late twentieth century, the doctor has been reconceived as an entrepreneur who is now in the business of insuring patients as well as caring for them" (Stone, 1998, p. 161). This major alteration in the traditional doctor-patient relationship is probably one of the most startling and disturbing issues managed care must address. When a doctor stops being a trusted healer and becomes an accountant, the trust in the relationship is sorely tested. Because of this shift in trust, many patients no longer trust their doctor, or his expertise. "Second opinions" in medical diagnosis have become commonplace. Switching doctors is also very common - something that did not happen when the "family" physician knew and treated the entire family.

The ultimate question is whether health care is a social good or a market commodity. If you believe health care is a commodity like food or automobiles or clothes, then that leads you down one road. If it's a social good like public health or clean air, you go down another. -- John C. AARP Rother, (Wines and Pear, 1996) (Birenbaum, 1997, p. 159).

In another disturbing trend, managed care providers often try to "second guess" the physician, denying coverage or payment for certain "unnecessary" items. The patient is the pawn in these decisions, rarely understanding the denial or how to question the decision. For example, "Just before the sixth session, Dr. Jackson is contacted by a reviewer for the managed care health insurance program covering Lee's therapy. The reviewer informs Dr. Jackson that the company will not authorize payment for further psychotherapeutic care" (Cummingse, 1992, p. 215). Unfortunately, these situations are far too common, and the final victim is the patient who does not receive necessary care.

Many Americans are becoming increasingly dissatisfied with their managed care options. Some are returning to traditional insurance plans, hoping for a more personal relationship with a physician who is not tied to an HMO or other managed care organization. Some are opting for HMO plans that give them more choice over physicians and specialists.

In almost all surveys that compare HMO members with individuals who have old-fashioned health insurance coverage, the HMO members are less satisfied. In addition, consumers in "gatekeeper" free preferred provider organizations (PPOs) also are more satisfied than HMO members, mainly because their network…[continue]

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