Managed Care Plans

Managed care is a health care system that coordinates the health care services for a select group of covered individuals and integrates the financing for these services. These systems most often include payment arrangements with the providers, hospitals, and specialists on a predetermined fee schedule. Managed care plans include a wide variety of organizational structure and payment methodologies. There are three basic types: health maintenance[Page 340] organizations (HMOs), preferred provider organizations (PPOs), and point-of-service (POS) plans.

There are four types of HMO models. In independent practice associations (IPAs) a separate, legal entity contracts with the HMO for a predetermined, negotiated fee. This type of arrangement is usually part of a practice where practitioners continue to provide care to the patients within their own practice and to the IPA as part of their business practice. The staff model, in contrast, is a model where the providers practice as employees of the HMO, are paid a salary, and do not generally have a private practice. The group model differs from the staff model and the IPA, as the contract with the HMO includes a group of multispecialty practitioners to provide care to the plan members. They are employed not by the HMO but by the group practice, and paid at a negotiated rate by the group practice. Last, the network model is one where two or more IPAs provide services and are paid a predetermined, fixed rate per covered life.

Preferred provider organizations (PPOs) are managed care plans that directly contract with independent providers for a negotiated fee for service, usually at a reduced or discounted rate. Although there are significantly better benefits for the services with little or no additional cost using the PPO, most of these plans allow benefits to the nonparticipating providers, but the benefits are fewer and not as broad, and the costs for copayments higher.

Point-of-service plans are open-ended benefit plans where the enrollee has the choice of either using the managed care program or going outside the plan for services. Their costs are generally much higher, including the monthly premiums, higher deductible, and coinsurance if they select outside the contracted providers. They may make their selection each time they access their health care benefits.

Usually managed care plans have a “gatekeeper” who is the first point of contact and generally drives the care of the patient. The need for hospital inpatient services, testing at laboratories, X rays, medication, and referrals to a specialist are determined by this practitioner. The “gatekeeper” is usually the primary care practitioner who is contracted with the managed care company. In most cases, this individual is an M.D. or D.O., but advanced practice RNs (nurse practitioners) and physician assistants (PAs), employed by the physician, can be used to provide care in the physician office. This primary care is considered the most efficient way to manage scarce health care dollars.

In recent years the federal government has encouraged that Medicare and, in some cases, Mandated Medicaid services be managed by managed care plans. This was seen as a necessary next step to manage the escalating numbers of the uninsured or the underinsured and the costs of health care. The burden to individuals, businesses, and the government was overwhelming and needed to be addressed. Many Medicare beneficiaries have determined that making the switch to managed care is in their best interest. These individuals “sign over” their benefits to the managed care company and the federal government pays the company on a predetermined rate (by diagnosis-related group, or DRG). The managed care company in turn provides the Medicare beneficiary the health care required. One of the important reasons why the Medicare beneficiary makes the switch is that the copayment of 20% that is typical in the Medicare program is waived and medication benefits are included in managed care plans and not in Medicare. One issue that quickly became apparent to the managed care companies is that the costs were high, with little benefit to the companies. Many managed care companies have stopped taking seniors (most of the Medicare population) as a result.

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