What is Managed Care?
Managed care describes a form of health insurance that relies on a network
of physicians and hospitals brought together to provide medical services
at a predetermined, reduced cost. Under managed care, medical care is
"managed" to meet both quality and cost standards.
How Managed Care Benefits You
Managed care differs from the traditional healthcare indemnity insurance
that has covered consumers for over 50 years. Indemnity plans provide
coverage for members only when they require physician or hospital services.
With managed care, the emphasis shifts from the treatment of illness to
wellness, detection, and prevention.
Under most managed care plans, medical services such as well-baby care,
immunizations, mammography, other cancer screenings, and physicals are
routinely covered. These preventive healthcare services are typically
not covered by traditional insurance plans. Managed care is proactive--instead
Education is a priority. Managed care patients may be offered classes
prior to surgical procedures to ease and speed their recovery. Educational
opportunities may also include classes on CPR training, prepared childbirth,
stress and weight management, smoking cessation, men's and women's health
issues, allergies, and diabetes.
How Managed Care Works to Contain Medical Costs
With health services provided in the most appropriate settings, managed
care results in decreased hospital admissions, shorter lengths of stay,
fewer inpatient procedures, and a reduction in reimbursement per episode of care.
This means that hospitals have to economize and become more efficient.
Nationwide, this has led to the integration of hospitals into larger healthcare
delivery systems to share resources and reduce unnecessary duplications
Types of Managed Care Plans
Health Maintenance Organization (HMO)
Preferred Provider Organization (PPO)
- This type of managed care plan charges a fixed fee to members in exchange
for comprehensive healthcare services. Preventive care (such as physicals,
immunizations, and cancer screenings), hospitalization, and emergency
care services are usually all included. Members may only use the physicians
and hospitals that have been approved by the HMO. Hospitalizations must
be approved in advance. Generally, because of the reduced physician choice,
HMOs represent the lowest cost healthcare plan.
Point of Service Plan (POS)
- This managed care plan offers the use of a "preferred" network of physicians
and hospitals. Patients are allowed to go outside the network for care,
but they must pay the difference between the preferred physician's discount
fee and the higher fee of a non-preferred physician. These plans do not
emphasize "health management" by a primary care physician. They often
cost more in insurance premiums than HMO or POS plans.
- This managed care plan combines features of an HMO and PPO. It provides
a comprehensive set of health benefits and allows health plan members
to use out-of-network providers, but with a reduced level of benefits.
Generally speaking, because it offers a wide choice of physicians, this
type of managed care plan also has greater out-of-pocket costs than an
HMO plan, but less than a PPO plan.
Before You Choose a Plan
Before choosing a plan, ask yourself some key questions to identify the
plan that will work best for you and your family:
- Which plans cover the services you need most, such as routine exams, specialty
care, alternative healthcare, vision and dental care, etc.?
- What services are excluded by the plans? Will your special needs be covered?
- If your current doctor is not part of the managed care plan, will you have
to change doctors to join? Are the providers conveniently located?
- How does the plan provide for services outside your local area?
What is a Primary Care Physician (PCP)?
Another change under managed care is the rising influence of primary care
physicians. Today, your primary care physician--family practitioner, internist,
or pediatrician--is assuming the role of "health manager." He/she knows
your complete medical history and treats the majority of your medical
needs. Your primary care physician also guides you when diagnostic procedures
and referrals to specialists are needed.
Choice of physicians is an issue in managed care plans. Most managed care
plans will furnish you with a list of approved or preferred primary care
physicians from which to choose. If your current physician is not on the
list, you will need to select a new physician. Some plans allow patients
to use physicians who are not preferred providers; however, the patient
then pays the difference in cost. Thus, it becomes important to research
the network of primary care physicians, specialists, and hospitals that
are included in a plan before enrolling.
With managed care, many medical offices are now using physician extenders
such as certified nurse-midwives, physician assistants, and nurse practitioners.
These healthcare professionals provide more patient teaching and preventive
services, enabling physicians to concentrate on more complex problems
while others manage routine care.
Managed Care Terms and Definitions
Capitation - A method of reimbursement where providers receive a fixed per-member/per-month
premium for each member covered by that provider, regardless of how many
or few services the members use. In return for this payment, the provider
agrees to deliver a set program of healthcare services to plan members.
Co-insurance - A share cost incurred after the deductible is met according to the insured's
insurance plan provision.
Co-payment - A flat payment made by a plan member to a physician or other provider
Deductible - An amount that is required to be paid by a subscriber before health plan
benefits will begin to reimburse for services. It is usually an annual
amount of all health care cost that is not covered by your insurance plan.
Fee-for-Service - The patient is charged according to a fee schedule set by the provider
for each service and/or procedure provided.
Gatekeeper - Usually refers to the primary care physician in a managed care plan
who coordinates the care of the patient and makes referrals to medical
Indemnity Insurance - The typical insurance plan of the past 20 years that provides physician
and hospital benefits. Most indemnity insurance pays 80 percent of the
usual and customary rates.
Managed Care Plan - A health plan with a defined network of providers cooperating to manage
the care of each enrollee. Such plans "manage" care by controlling the
selection and use of services and providers. Examples include PPOs, HMOs,
and POS plans.
Personal Physician - Another term for primary care physician.
Physician Hospital Organization (PHO) - A legal entity formed by a hospital and a group of physicians to negotiate
and obtain payer contracts.
Primary Care Physician (PCP) - Includes family practitioners, general practitioners, internists, and
pediatricians who provide basic, routine, and preventive healthcare.
Providers - Individuals and institutions who are licensed to provide