Evolution of Managed Care
University of Phoenix
Evolution of Managed Care
Managed Care refers to a program that evaluates, coordinates and makes possible the care of individuals without the full financial risks involved. The goal of managed care was to meet the needs of select group of individuals and families by arranging their health care needs. One example would be employees or individuals paid a set fee to physicians for their services. These fees were set even before any services were rendered so the individual knew what the cost was going to be. Often times an organization would contract care for a certain physician controlling the cost of what the fee would be for their services. The evolution of managed care can be traced back to the early 19th century. Over the years there have been many changes to the managed care system to meet the needs and demands of the health services needed. With all the new changes that have taken affect the manage care system has rapidly grown. Through out this paper I will explain where, what and how managed care has changed to meet the needs of individuals. In 1929, Dr. Michael Shadid was considered to be the first managed care pioneer. He started a cooperative health care plan in rural Oklahoma (AMCRA, 1994). With the help from Oklahoma Farmers Union he enrolled several families who paid a predetermined amount and delivered care to these individuals. In 1929 another organization in Los Angeles offered the same service as Dr. Shadid. The Los Angeles Department of water and power contracted two doctors to offer their services to these individuals. Dr. Ross and Dr. Loos provided care for the workers and families of said organization. After 5 years these doctors opened, owned and controlled the first group practice (AMCRA, 1994). Around 1933 a Dr. Sidney Garfield and associates started providing medical care on a prepaid basis for workers on a construction project. Workman’s compensation insurance company paid a percentage of the premium income for these accident cases; workers contributed 5 cents from their wages for medical services. This same program was also used by Henry Kaiser in 1938. At the end of World War two, Kaiser opened his comprehensive health services to the public. Kaiser believed he could make it possible for millions of Americans to have comprehensive health services at a price they could afford (Firshein, J. 2009). In the late 1950’s two other types of managed care programs were introduced. The first program being individual practice association (IPA), this program was contracted with individual physicians or single specialty groups to provide care. These physicians would provide services at their offices that were enrolled in that type of program. These physicians were able to continue to see other patients that were not under the contract but were reimbursed differently. The second program was the network-model HMO and was contracted with one or more large multispecialty groups (Firshein, J. 2009). These network providers are reimbursed by capitation and receive a fixed monthly payment per person. In 1963 the Kaiser organization had reached the 3 million member mark. Two more states became involved with Kaiser’s organization; these states were Colorado and Ohio. Due to the rapid expansion with managed care in 1973 the HMO act was facilitated. This act was facilitated to help the federal government to provide comprehensive coverage and control costs. With that act loans and grants were provided to start and expand the Health Maintenance Organization (HMO). This act required company’s who had more than 25 employees to offer HMO plans along with other traditional insurances options. This was known as the dual choice provision. At this time HMO’s had basic requirements they had to provide to individuals. They had to offer a specified list of benefits, have the same monthly premium, and be structured as a non-profit organization. In 1995 the dual choice provision expired due to the rapid increase in HMO’s being so widespread (MCOL, 1995). By 1995 the total numbers of people enrolled in HMO plans were 50.6 million, in 1999 the memberships reached 81.3 million and in 2000 a slight decline was noticed to 80.9 million. With the dual choice provision in 2004 the HMO memberships total was 68.8 million and PPO membership total was 109 million. These totals are due to the changes that started taking affect with managed care (MCOL, 1995). In the last few years managed care has had three dramatic changes. The first change is with the managed care model. The HMO-model has been growing at a slow pace and the IPA model has grown rapidly. Half of the people who are on managed care have the IPA plan. With the rapid growth of HMO’s two new programs were developed to help the growth expansion. The first plan that was developed is the preferred provider organization (PPO’s). The PPO managed care plan contracts with a network provider for a discounted fee-for-service basis. This plan offers the enrollees financial incentives to use this plan. With this plan out of network services are costly and at times are restricted. The second plan that was developed is the point-of –service plan. This plan allows enrollees to choose either in or out of network providers when care is needed. However, the enrollee has to pay substantial co-pay for out of network services. The second major change that took affect was in the mid-1980. At this time the managed care industry went from being predominantly non-profit to being for-profit. The for-profit entities started out slow with only 18% in 1982 and by 1988 the percentage rose to 67%. The ownership of managed care plans changed during this time from hospital and health care providers to insurance companies and investors. The last major change was state governments used managed care as the solution to the rising Medicaid costs and the uninsured. During 1983 thru 1993 the percentage of Medicaid patients drastically increased form 1 to 15 percent. Many states are working to convert the Medicaid program into managed care programs. By converting to managed care programs this could help relieve some of the rising costs with Medicaid.
AMCRA Foundation Managed Health Care database (1994). The Basics of Managed Care. Retrieved July 28, 2009. From: http://aspe.hhs.gov/Progsys/Forum/Bascis.htm
Firshein, J & Sandy, L. The Changing Approach to Managed Care (2009). Retrieved July 29, 2009 from: www.rwjf.org?files/publications/books/2001/Chapter_04.html
MCOL. Positioning you for change in healthcare (1995) .Managed Care Fact Sheet. Copyright 2009. Retrieved July 26, 2009 from: www.mcol.com