Managed Care

Managed care refers to a vast array of organizational and financial arrangements intended to control health care costs and improve quality of care. For most of its history, health care in the United States has been a fee-for-service system. Physicians were paid for the services they provided families and had almost complete control over decisions about treatment. Some believe that paying for medical care on the basis of quantity alone gives providers an incentive to provide more services than medically necessary. Managed health care directly challenged the system of fee-for-service in an effort to rearrange these incentives.

Health maintenance organizations (HMOs) is one example that dominated the landscape in the 1990s, the traditional form being large organizations that were contracted to provide health care services to a defined population for a prepaid fee. But management of care extends beyond HMOs and refers to the myriad ways that payers act to restrict the behaviors of patients and doctors. Health care consumers are constrained in the types of services that are covered and the doctors they can see. Care is also managed by how doctors are paid, from capitated arrangements through the use of bonuses or by withholding payment for meeting or not meeting particular standards of care. Finally, health care is managed through the direct monitoring of clinical decisions. For example, health plans may require preauthorization for certain health services, or the intensity of service provided may be monitored through concurrent use review. Whatever the form of management, the essential point is that managed care explicitly introduced third parties into the traditional relationships between families and their doctors, and these third parties assumed some of the responsibility for decisions about clinical care. After describing the origins of managed care, this entry focuses on the effects of managed care on costs and quality and the managed care backlash.