Managed Care and Managed Competition: A Primer for Social Work

By Mizrahi, Terry | Health and Social Work, May 1993 | Go to article overview

Managed Care and Managed Competition: A Primer for Social Work


Mizrahi, Terry, Health and Social Work


National health care reform has been making front-page news since I began writing this column in 1991. President Clinton has touted this reform as the most important domestic issue to be tackled as part of his economic agenda to cut the deficit and stimulate productivity. By the time this column appears, a formal proposal by the Clinton administration will be presented to Congress under the leadership of First Lady Hillary Rodham Clinton (Toner, 1993). The administration is considering managed-competition models, and two single-payer bills, the National Health Security Act and the National Health Care Act, are also on the drawing board this spring.

This column discusses the complex world of managed care and managed competition, separate but related structures for financing and delivering health and mental health care. Because the terms mean different things to different constituencies, it is difficult to analyze and compare models. It is important in upcoming debates on any health care plan to keep a broad perspective and an open mind. Social workers should be open to considering innovations in health care; the basic principles developed by the National Association of Social Workers (NASW, 1991, 1993) can be used to evaluate and influence managed competition and promote a single-payer system. The basic question remains: How will the proposals that purport to manage services provide comprehensive, quality health care to all Americans while containing costs and ensuring equality and equity?

MANAGED CARE

The term "managed care" has come to replace the term "health maintenance organization" (HMO). The HMO approach to health care has changed in practice over the years, in many cases deviating from the original principles on which it was based. Traditional HMO models, such as Kaiser-Permanente Medical Care Plan, Health Insurance Plan of New York, and the Group Health Association of America, began in the 1930s as nonprofit, prepaid group practices. HMOs were established as progressive, consumer-oriented models of comprehensive health services provided to members in exchange for a fixed monthly or yearly premium (capitation). These models were developed in opposition to the dominant fee-for-services model, in which fees are paid by consumers to physicians who are usually in solo, private, entrepreneurial practice. Services in HMOs are usually delivered on-site by physicians who are salaried or who contract in groups with the HMO plan.

Traditional HMOs have shown that they can deliver care for a lower cost, usually because hospitalization use rates are lower. They emphasize preventive and primary care because it is good practice from a professional, business, and philosophical perspective. Overall, consumer satisfaction with HMOs has not been found to be less than that with traditional insurance.

Until the 1970s, some state laws prohibited HMO development. Under the Nixon administration, the concept and name of "health maintenance organization" were expanded through the Health Maintenance Organization Act of 1973. The original HMO concept expanded to include profit-making and proprietary models, as well as new types of organizational sponsorship known as independent practice associations (IPAs).

In IPAs, doctors remain in their own practices but agree to treat patients enrolled in a health plan. The IPA contracts with individual or groups of doctors to provide care at a negotiated rate per person for a fixed fee, for a flat retainer, or for a negotiated fee-for-service rate. IPAs have been the fastest growing type of HMO. Some IPAs rely on primary-care physicians to control referrals and hospitalizations.

Two newer models of managed care have entered the arena in the past few years. The first, preferred-provider organizations (PPOs), are networks of hospitals and doctors who have agreed to give the sponsoring organization discounted rates. Patients who stay within the system pay little or no additional costs, but they pay all or most of the bill if they use services outside the network. …

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