The Health Maintenance Organization (HMO) ACT of 1973 required employers with more than 25 employees to offer federally certified HMO options along with indemnity insurance upon request. With the HMO ACT of 1973, employers needed them more than ever. HMOs had to instantly find a way to provide quality care at the lowest possible cost to the employer, so they engineered techniques that became known as managed care.
Managed care is loosely defined as a mixture of techniques intended to reduce the cost of providing health benefits in order to improve the quality of care for a predetermined population. The intent is to decrease unnecessary cost through a multitude of mechanisms which include offering economic incentives for physicians and patients to select less costly forms of care, reviewing the medical necessity of specific services, increasing cost sharing, controlling inpatients admissions, length of stay and contracting with health care providers. Early on, managed care seemed to be the answer to the escalating cost of U.S. healthcare, but patients were very limited in their freedom to choose their own providers for a number of reasons.
Healthcare, as it was three decades ago; mandated patients to pay monthly premiums, doctor visit co-pays and sacrifice freedom of choice for a so called sense of security and continuity of care. The doctors sacrifice independence; fee-for-service practices for a stable salary and the promise of a certain amount of patient visits. Again, the intent of managed care organizations during their inception was to control the rising cost of healthcare and still provide quality health care at affordable cost for patients and employers. Over the years the perception seemed to be that managed care organizations were more concerned with making money than providing quality healthcare. Katherine Swartz explains in “The Death of Managed Care” that there are three reasons why managed care is on its way out. First, in the pre-managed care period there was no financial incentive for a provider to ration care. In an effort to keep cost down for the employer, managed care entices physicians to measure the care they provide by offering them money. Second, insurance companies would diffuse doctor’s charges amongst all other policy holders. The result was that patients never worried about a provider over prescribing diagnostic test to increase their own bottom line. Finally, unhappy patients could go elsewhere if they desired. Those three reasons have influenced the belief that managed care is nearing its closing stages.
Today, managed care organizations are certainly experiencing some degree of difficulty, but like most high-quality organizations, adaptation of different business strategies will insure there existence. According to an article published in 2005, Health Research Policy and Systems, there have been some changes in the way managed care organizations operate. First, the use of gatekeepers system was relaxed. Consumers were allowed direct access to specialist. Next, the referral requirements were loosened, making it easier for patients to get into specialty clinics. Finally, strict authorizations for emergency department visits were also relaxed. Together the changes seemed to ease the negative public perception about managed care.
Frank Diamond (MANAGED CARE April 2007). What If? MediMedia USA
Lagoe, R., Aspling, D., Westert, G. (17 MAR 2005) Current and future developments in managed care in the United States and implications for Europe. Health and Research Policy and Systems, Vol 3
Swartz, K., (5 OCT 1999) The death of managed