solution, but no one has been able to come up with one yet. Many different things have been
tried, but none have put a cease to the exorbitant costs, which most believe to be the main
problem. Out of everything tried, the most recent and popular system is known as managed care.
Managed care is the most common form of health insurance in the United States, and provides
more a cost efficient coverage than paying a fee-for-service charge. However, it is also a very
complicated system. Over the next few pages I am going to try and go over the main parts of the
managed care structure. In the end, I am going to decide the strengths and weaknesses of this
system, and decide whether or not I think it will be the answer to our system.
First I am going to go over exactly what managed care means, as simply as possible.
Managed care is an organized approach to delivering a comprehensive array of health care
services to a group of enrolled members through efficient management of services needed by the
members, and negotiation of prices or payment arrangements with providers. It has two main
functions; first it integrates the functions of financing, insurance, delivery, and payment with one
organizational setting, and it also exercises formal control over utilization.
Now I am briefly going to go over the history of managed care. Managed care dates back
to as early as 1882. Northern Pacific Railroad Beneficial Association was one of the first
employers to offer health care coverage. In 1910, the Western Clinic in Tacoma, Washington
offered medical services through its providers for a premium of only $.50 per month, which
served lumber mill owners and employees. In 1929, Blue Cross was originated when Baylor
Hospital in Texas agreed to provide coverage by the case on a prepaid basis for some 1,500
teachers. The Kaiser Foundation Health Plan was started in 1937 as well. In 1971, the Nixon
Administration announced a new national health strategy, which was the development of health
maintenance organizations. The federal government established grant and loan guarantees for
HMO's to reach a goal from 30 in 1970 to 1,700 by 1976, enrolling 40 million people, and 90
percent of the population by 1980. The HMO Act of 1973 authorized $375 million in federal
funds to help develop HMO's. Although the goals have not yet been met, managed care has
continued to grow throughout the past four decades. At the end of 1996, there were over 600
HMO's in operation, enrolling around 65 million members, which is about 1/4 of the population
Before I get into the different types of managed care organizations, I am going to go over
some cost control methods in managed care. Managed care organizations are different methods
used to control utilization of services. Utilization management requires three things. First, you
have to have an expert evaluation of which services are medically necessary in a given case. This
ensures that unnecessary services are kept to a minimum. Secondly it requires a determination of
how those services can be provided most inexpensively, while maintaining a high level of
quality of care. It also requires a review of the process of care and changes in the patients
condition to revise the course of medical treatment if necessary. The methods that are most
commonly used for utilization monitoring and control are choice restriction, gatekeeping, case
management, utilization reviews, and practice profiling.
The first method I am going to talk about is choice restriction. Traditional health
insurance gave the insured open access to any provider. This led to an over use of services. Most
of the managed care plans have some sort of restriction on who, and from where the patient...