History of Managed Care in the US - Assignment Example

Managed Care in U.S Grade Managed Care in US Managed care is a form of healthcare whereby patients only visit specific doctors and hospitals. A managing company regulates the treatment costs. U.S National Library of Medicine defines managed healthcare as an insurance plan because there are contracts between the clinicians and certain hospitals to offer care to their registered members at a reduced cost. The costs per network depend on the rules of the network. Flexible networks cost more than restricted networks. History of Managed Healthcare Michael Shadid, who was a physician in Elk City, Oklahoma, introduced managed healthcare in United States in 1929. Michael started by establishing a health cooperative for farmers without involving any specialist or general hospitals. He raised money to start the cooperative through selling shares and fixed annual fees to pay by the patients to cater for their healthcare costs (National Council of Disability, 2013). By the year 1934, a staff, Dr.Shadid, and other new recruits were supported by 600 family memberships. At the same year, two physicians- Donald Ross and Clifford Loos - entered into a contract of providing comprehensive healthcare services to 2,000 employees from a water company, which was in the neighborhood. Development of Prepaid Healthcare Plans Group health Association in Washington, DC, Kaiser-permanente Medical Program., Health cooperative of Puget Sound in Seattle, Health insurance plan of New York City, and Group Health Plan of Minneapolis were begun between 1930 and 1960. Most such healthcare plans have been introduced in the past 40 years. Public Managed Care Plans Introduction of Heath maintenance Act of 1973(P.L.93-222) resulted in expansion of managed healthcare centers. Healthcare centers act was proposed by Nixon’s Administration to reduce costs incurred when accessing healthcare and establish universal plans in healthcare. This registration also restricted the establishment of prepaid healthcare plans (National council of disability, 2013). It also required companies that had 25 or more employees to register for an HMO through giving health insurance cover to all their employees. Legislation to HMO would promote competition in the healthcare market, which would offer an alternative to outpatient to attend expensive hospitals for treatment. This legislation was also a profitable turning point to Healthcare sectors in U.S since it introduced profitable healthcare corporations. The increase in HMOs in U.S. caused an increase in Gross National Product (GNP). Congress later authorized free ambulance care and provided the beneficiaries with kidney dialysis and end-stage renal disease (National Council of Disability, 2013). The Federal Government authorized payments to more than 2400 medical care given to outpatients. As a result, more clinicians formed groups to diagnose the fitness and wellness of the patients. It also offered rehabilitation, surgery, and delivery services to the patients. This practice caused an increase in outpatient clinics from 200 to 1500 from 1983 to 1991. This reduced the number of surgeries performed in hospitals by half. Influence in Medicare Prospective Payments As more and more healthcare services were developed, growth of commercial managed care plans bypassed all of them. Managed healthcare plans were given credit because of effectively reducing healthcare costs (National Council of Disability, 2013). They did this through avoiding unnecessary hospitalizations and forcing clinicians to offer services at a discounted rate. This augmented the number of people who requested for membership in managed healthcare plans. These managed healthcare enactment laws covered women visits to gynecologists and obstetricians without necessarily being permitted by their primary care physician (National Council of Disability, 2013). The rights to emergency care and newborn mother’s health protection acts were also included. This law prohibited drive-through deliveries. Recent Developments In the last 2 decades, there has been an increase in out-of –network options availed to patients registered in HMOs, PPOs, and POS. More people have registered in HMOs, PPOs, and POS since they have reduced costs and they offer primary, preventive, and acute health services using managed care plans. Managed Care Plans Managed healthcare plans include Health Maintenance Organization (HMO). This pays for care available within the network by a primary care doctor who is responsible for the largest part of care. HMOs make use of prepaid premiums. In cases where utilization of resources is over the prepaid amount, then the provider covers, the excess risk (Medline plus, 2015). HMO models include group model where an exclusive contract for the whole group is employed. A good example is Kaiser Permanente. This health plan contracts with only health provider and Permanente medical group. It only attends patients registered with Kaiser Foundation health plan. Staff model HMO includes a situation where all physicians are employees of this plan; an example pungent sound cooperative based in the U.S. They are non-profit organization governed by consumer boards. Staff model clinicians are paid a salary and a bonus frequently. Independent practice Association (IPA) provides members with an opportunity to contract in a non-exclusive relationship with HMOs. The practitioners have a right to contract with as many plans as possible and the plan is free to contract with as many physicians as it wishes. The clinicians see free-for-service patients and pre-paid patients. Network models combine group features with IPA models. These contracts allow groups to contract with several plans. PPO Preferred Provider Organization (PPO) pays a higher amount after accessing care inside the network. It also allows its patients to look for medical care outside the network at an extra cost. PPO managed care is a health sector where the insurance company contracts with providers to offer them services on a discounted fee (Medline plus, 2015). The registered participants are listed by the company whereby the insurance company is assured of an increase in the number of members and prompt payments. The insurance company ensures treatment without out-of-pocket expenses. POS Point of service (POS) allows patients to choose between PPO and HMO when care is required. POS is referred as the open-ended option. There is a higher premium in this plan since the provider is allowed to visit other healthcare providers (Medline plus, 2015). People who have little experience in healthcare and are looking forward to selecting certain healthcare recommend this plan. Advantages and Disadvantages of HMO Health Insurance HMO health plan is advantageous to the patients since it does not require claim forms when in hospitals. It only requires a proof card that indicates that the patient is insured. The physicians benefit from a fixed fee charged monthly at every visit in healthcares. This acts as a payment to each doctor. The patients benefit from relatively low out-of-pocket expenses (Health Insure, 2013). Disadvantages of HMO Premiums paid are exactly enough to cover doctors costs in the network. This is a disadvantage to the doctors since they are not able to get any benefits. The patients are disadvantaged in that there is no ease of flexibility to move from one primary care physician to another (Managed Care, 2004). The patients do not get specialized attention since there are plenty of referrals. The doctors rarely attend patients who are not referrals or emergencies. It is the most restrictive and expensive healthcare. Advantages of PPO Insurance Members who stay within this network incur low costs. They are not required to have a special primary care giver. It is possible to access physicians without referrals including those that are out of duty. Disadvantages There are more costs if care is sourced out of the network. It is more expensive since more amenities are provided. Co-payments are also increased (Health Insure, 2013). Out-of-pocket costs are large. The members are limited in that they have to stay in one network of doctors and specialists. Advantages of POS Insurance This plan allows members to move from one network to another at a higher deductable fee. Through using preventive care, it is cost effective in the end (Health Insure, 2013). Members pay small amounts of co-insurance. Disadvantages There are little pays when visiting offices. Switching from one network to another requires payments. This plan has more expensive premiums than HMO and more freedom. Types of Incentives Incentives paid to physicians may be two-tier plan (direct) or indirect (three-tier plan). Two-tier plans involve HMOs that contract directly with individual physicians while three-tier plan involve HMOs that contract indirectly using intermediate provider groups or IPAs (medical independent practice associations. Nelson (2012) has identified three types of incentive mechanisms for people who access managed healthcare. These are shared risk pool, capitation, and for-profit insurance companies. Shared Risk Pool A risk pool is a total of physicians who are collectively paid thus sharing financial risks for patient care costs. This is a situation where the health insurance companies decide on the amount they want to spend on medical care for their registered members in one year. The doctors are then penalized if they spend more than the agreed target or are rewarded with a bonus if they spend below the limit amount. The healthcare financial management deducts the amount spent on healthcare from the pool. The surplus and the deficit from the risk pool are deducted at the end of the year. The main purpose of HMOs is to save on medical costs. For example, when doctors save on the target costs by 60%, they receive 60% bonus from the insurance companies. In case of deficit, the providers shares 60% deficit. Capitation Nelson (2012) explains that capitation is a type of arrangement used to manage healthcare. This is a condition where the doctors are paid a huge amount of money whether they attend to patients or not. For-Profit Insurance Companies This explains that HMOs are forms of business organizations formed by the owners with an aim of making profits. Nelson (2012) argues that Weiss ratings in Florida report that HMOs had a double increase of their profits from $5.5 billion in 2002 to $ 10.2 billion in 2003. California HMO Kaiser Permanente consolidated all its profits, which added up to $1.1 billion increase in profits. Blue shield plans had an increase of 63% in its profits from 2002($3.3 billion) to 2003($5.4 billion). Other types of incentives include FFFS payment, episode-based payment, and bundled payment. FFS Payment (Free For service) FFS payment made on providers is the common way of structuring payments. It generates revenue for all early services provided depending on delivering costs. High fixed costs on patients provide additional finance to provide additional services to the patients. This means that marginal revenue exceeds marginal costs covered in a single service. Thus, an increase in revenues and costs leads to an increase in healthcare services such as high skilled services, operating rooms, bed days, drugs among others. Episode-Based Payment Episode-based payment gives incentives to physicians to effectively manage resources during illness or care.CDT is responsible for creating an economic unit with those incentives into action. The patient requiring compensation for professionals to coordinate their services effectively makes episode-based payments. The surgeons are paid per procedure while anesthesiologists are paid per the time taken in the operation room. The hospitals are paid per the shift of the operation. Bundled Payment Bundled payment includes professional fees that create incentives to redesign workflow in inpatient stay. According to Luft (2009), bundled payment involves standard preoperative protocols, drug regimens, implants, and formulas. Rationale for Choosing Managed Care Health Plans Department of health (2012) indicates that patients considering managed care health plans should first investigate the kinds of health plans that are obtainable in their country, doctors that are available, and the plans they participate in. Depending on the plan chosen, the patients should enquire from the doctors whether they accept patients from such plans. The effectiveness and benefits of each plan should also be enquired and the frequency of offering such plan. The patients should also consider the kind of doctors they need, whether pediatrician or family doctors. According to the advantages of each healthcare outlined above, PPO healthcare is the best for patients. This is because patients can look for medical care outside their networks at an extra fee. Services are offered at a discount fee. There are no out-of-pocket expenses (Medline plus, 2015). References Department of Health. (2012). Choosing a health plan. Retrieved from https://www.health.ny.gov/health_care/managed_care/choosing.htm Health Insure. (2013). PPO VS HMO. Retrieved from http://www.healthinsure.org/ppo-vs-hmo/ Luft, H. (2009). Economic incentives to promote innovation in healthcare delivery. U.S. National Library of Medicine National Institute of Health, 467(10), 2497-2505. Managed care. (2004). Managed care introduction. Retrieved from http://www.csus.edu/indiv/h/heflintl/group/section-1/group-k 5/Website/Whole%20Document.htm Medline plus (2015). Managed care. Retrieved from http://www.nlm.nih.gov/medlineplus/managedcare.html National Council of Disability. (2013). Appendix B: A brief history of managed care. Retrieved from http://www.ncd.gov/publications/2013/20130315/20130513_AppendixB Nelson, D. (2012). Managed care financial incentives. 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