Public and private payers have increasingly turned to "managed" care as a way to control expenditures and increase access to healthcare. And, while most managed care currently exists in the provision of acute and primary healthcare, interest is growing in applying managed care structures to longterm care alone and in combination with acute care. To date, little real experience and less evidence have been accumulated regarding managed care for the elderly with chronic conditions or limitations due to physical or cognitive impairments. But given the cost of care of this population, it is understandable that public payers are interested in managing their care. Given the importance of access to healthcare for this population, caution seems advisable.
About 5.8 million people, or I7 percent of the elderly in 1995, had some limitation that would require the assistance of others to function and remain independent (Komisar, Lambrew, and Feder, 1996). The reasons for these limitations may or may not relate to medical conditions, but people who need assistance with these tasks tend to need medical care. In 1992, average Medicare expenditures were more than three times greater among beneficiaries with substantial functional limitations.' The vast majority of the elderly with long-term-care needs (71 percent) live in the community and receive a considerable amount of assistance from family, friends, and volunteers. But some people need the kind of care found in nursing homes; in I995, some 5 percent of the elderly population lived in such facilities.
The term managed care encompasses a broad range of arrangements directed at eliminating unnecessary and inappropriate care and substituting lower-cost alternatives. By emphasizing appropriate care for the patient, managed care has the potential to improve the quality of care for elderly people with disabilities. Outside of a managed care plan, provision of acute care and of most long-term care is fragmented. Care is not systematically organized, either within each sector or across sectors, or across payers. Different financing sources compound the fragmentation in service delivery and often create additional barriers to care. At its best, managed care offers the potential to reduce fragmentation in delivery and in administration; to avoid inappropriate, ineffective, and redundant care; and to provide appropriate care in a more timely manner.
Whether in practice managed care for any population lives up to its potential is unclear. Although relatively 'unmanaged" care may have inherent incentives to do more, the incentives inherent in managed care are to do less. Avoiding sick people or limiting needed tests, treatments, or specialists, for instance, are not examples of good managed care. Managing care should not simply mean providing less. Managing care should mean providing less to those who need less, providing more to those whose care needs are greater, and knowing who among plan enrollees fits into which category.
As interest grows in bringing elderly people with disabilities and chronic conditions into managed care, it is important to realistically assess what we know about managed care from practical experience as well as from theory. For policy makers, the research on effectiveness substantially trails the latest market developments. Nevertheless, a review of experience to date highlights accomplishments and concerns to be recognized as we move forward.
Experience of two kinds is relevant to the use of managed care for elderly people with chronic conditions and disabilities: (I) management of acute care and (2) management of acute care and long-term care in combination. Both approaches to managed care are being pursued in public programs. To a lesser degree, public programs are also exploring applying the concepts of managed care to long-term care by itself.
MANAGED ACUTE CARE
Although the vast majority of Medicare beneficiaries are in the traditional fee-for-service program for acute care needs, beneficiaries' participation in managed care is increasing rapidly and will continue to do so with implementation of the Balanced Budget Act of I997. …