Health Care and Managed Care: How Compelling a Fit?

By Heinen, LuAnn; Chase, Deborah | Public Management, June 1994 | Go to article overview

Health Care and Managed Care: How Compelling a Fit?


Heinen, LuAnn, Chase, Deborah, Public Management


Implications For Local Government Managers

Health care reform and managed care are linked inextricably in current policy discussions and legislative proposals. If health reform is the goal, then managed care is a major part of the solution. Although these concepts legitimately are viewed in tandem, it is critical to understand that they are not synonymous. Failure to recognize parts of the policy problem not addressed by managed care, as well as the learning curve faced by managed care in meeting the health reform challenge, will set unrealistic expectations for managed health plans.

Managed care delivery systems can substantially ameliorate (but will not by themselves solve) today's health care dilemma. This article presents an overview of the health care reform agenda, a description of managed care techniques and how they relate to reform, an analysis of the opportunities and challenges that health care reform offers for managed care, and the impact that reform will have on the public manager.

The Health Care Reform Agenda

Amidst the hundreds of health care reform initiatives proposed at both the federal and state levels, a common agenda has emerged focusing primarily on increasing access and decreasing costs. Most of the legislative proposals would fulfill this agenda by emphasizing several basic themes, as outlined in this section.

Standard Benefit Packages to Create Uniformity in Coverage. Many federal and state proposals stipulate a standard benefit package of health care services that would be offered to all or select populations. Proposed benefit packages can include all or some of the following: inpatient services, outpatient services, preventive care, mental health and chemical dependency services, prescription drugs, and community-based chronic care. Some proposals actually specify benefits to be offered, while others only identify the decision-making body (for example, a state-appointed commission) that would be responsible for defining the benefit packages.

Insurance Reforms for Expanded Access. Provisions often are included to reform the insurance market. Common components include restriction or elimination of preexisting-condition exclusions; mandates that coverage be portable between jobs and among geographic relocations; guarantees that small employer groups will be able to purchase and renew insurance coverage; and mandatory disclosure of rating practices, benefit design, and premium structure.

Purchasing Pools to Increase Buying Power. Another health care reform strategy involves the formation of purchasing pools, which would allow or encourage employers to group together when purchasing insurance. The goal of this strategy is to allow employers, particularly those with fewer than 100 employees, to increase their ability to buy more efficiently and to have more choices. The rationale is that a group of small employers collectively would represent a larger number of members to an insurer and thus motivate the insurer to offer cheaper rates.

Networks for Providers and Payors. Many proposals also include incentives or mandates for providers and payors to form networks to provide care. These usually are termed "organized delivery systems," "health plans," or "HMOs." Such a delivery system would compete for enrollees against other systems in its region or geographic area.

Cost Controls to Limit Overall Spending. Cost control is a major component of most reform proposals and one of the drivers steering health care reform. Proposals include various strategies aimed at containing costs: health plans would receive a fixed rate for each member they cover to encourage provisions of cost-effective care; administrative simplicity would be achieved by providing one, standardized claim form and by moving the health care industry toward electronic submission of all claims; the rate of federal and state spending for Medicare and Medicaid would be reduced; the fee schedule used for Medicare providers would be expanded to Medicaid and the uninsured; and a competitive market would be created wherein health plans would disclose price information to facilitate competition, thus lowering overall costs.

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Health Care and Managed Care: How Compelling a Fit?
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