Chapter 9 Managed Care and Managed Care Organizations (MCOs) NOTE: In Quiz 2 and the final exam this chapter will be a little more heavily weighed than other chapters What is Managed Care? Core feature: It integrates the functions of financing, insurance, delivery, and payment Integration of the Quad Functions - 1 Financing – contract negotiations between employers and MCOs Insurance – The MCO assumes risk The need for an insurance company is eliminated Risk is often shared with the providers Integration of the Quad Functions - 2 Delivery – The MCO must arrange to provide a comprehensive array of services Payment – Capitation Discounted fees Salary Other Characteristics of Managed Care Defined group of enrollees Limits on choice of providers Utilization management Financial incentives to providers for efficiency Accountability for plan performance (quality) Enrollments in Managed Care: 2002 Private: Medicare: Medicaid: 95% 13% 55% Forces Behind Managed Care Health Maintenance Organization Act 1973 provided federal funds to start new HMOs Escalating health insurance costs – Figure 9-5, p. 333 The System Before Managed Care Fee-for service The insured had direct access to any provider, PCP or specialist Itemized billing of charges by the provider to the insurer Few, if any, controls over the amount of payment Sickness coverage; no coverage for wellness and prevention Insurers functioned simply as passive payers of claims Flaws in Fee-for-service Various p. 332 kinds of inefficiencies – see Moral hazard Overutilization of specialty care Charges set at artificially high levels Provider-induced demand Physicians benefited financially by putting patients in the hospital Inefficiencies were absorbed by raising premiums Cost Control in Managed Care Elimination of intermediaries – tight integration of quad functions Control over reimbursement – capitation risk sharing or discounts Utilization management Utilization Management Choice restriction – In-network access – no open access – Out-of-network access, but pay extra Gatekeeping by a PCP Case management for complex cases Utilization Review Practice profiling Utilization Review (UR) Case review Determine the most appropriate type and level of service Plan subsequent care Three Types of UR Prospective UR Concurrent UR and discharge planning Retrospective UR Types of MCOs HMOs PPOs POS Plans Why Different Types? HMOs did not become widely popular (except in California and Minnesota) – Figure 9-8, p. 341. The main drawbacks of HMOs were: – Choice restriction (for enrollees) – Capitation (for providers) – Utilization management (for both) HMOs Emphasize preventive care Capitation is the method used to pay providers Carve outs for certain specialty services In-network access Gatekeeping Standards of quality HMO Models Staff Group Network Independent practice associations (IPAs) Study from the textbook what these models are and their main advantages and disadvantages HMO Enrollments Figure 9-9, p. 344 PPOs Sickness care Discounted fees is the method used to pay providers (no risk sharing) Both in-network and out-of-network access Generally, no gatekeeping Generally, loose utilization management PPO Enrollments Figure 9-10, p. 346 POS Plans Cross between HMO and PPO HMO features are retained PPO features are available at the point of service POS Enrollment Figure 9-11, p. 346 Trends in Managed Care Figure 9-12, p. 347 Health insurance premiums Figure 9-13, p. 348 Medicaid Enrollment Balanced Budget Act 1997 allowed states to enroll Medicaid beneficiaries in managed care Unavailability of managed care plans in some geographic locations MCO pullouts Primary care case management (PCCM) programs: direct contracting with providers by states Medicare Enrollment Medicare beneficiaries have the option to remain in the fee-forservice program Capitated risk contracts MCO pullouts due to reduced capitation under the BBA 1997 Problem: Medicare capitation is not based on risk adjustment Impact on cost, access, and quality