Why is managed care a very broad term

Accountable health plan : This term is used to refer to managed competition, including the health plans that are authorized to offer the uniform benefits package. Administrative services only ASO : Usually associated with self-funded groups, this is when an insurance company, HMO, or third-party administrator provides claims-processing services, but the employer pays the claim costs.

Administrative services usually include billing, enrollment, coordination of benefits, payment check processing, subrogation, fraud investigation, and network rental. Balance billing : The practice of billing a patient for the amount remaining after the insurer payment and co-payment has been made. This practice is usually not allowed under most HMOs, but is dependent on the contractual arrangement between the healthcare provider and the health plan.

Behavioral Health : Specific benefits that are not covered by a commercial health plan, but rather a specialized network of behavioral health providers and programs. Beneficiary : In reference to Medicare, a person who's eligible to receive healthcare benefits. Benefit package : Services offered by an employer, government agency, insurer, or HMO under the terms of the contract.

Cafeteria plan : The method by which employees can pick and choose from a variety of benefits on a tax-favored basis. For example, employees may be able to choose from life insurance, disability insurance, dental coverage, cancer supplements, or child care reimbursement, and have costs deducted from paychecks before taxes are calculated; this lowers the amount of taxed income and increases net compensation.

Carrier : An industry term used to describe an insurance company or HMO that provides life, health, or other insurance programs with a financial risk. Commercial : Health insurance that covers medical expenses for the insured. Commercial health insurance can be categorized according to its renewal provisions and type or medical benefits provided.

Commercial policies can be sold individually or as a part of a group plan. These policies vary widely in the amount and type of specific coverage they provide.

Coordination of benefits COB : Provision regulating payments when a person is covered by more than one healthcare policy. For example, if an employee is covered under a group plan and also under a spouse's plan, the companies will coordinate payment of benefits so that each company pays the correct portion of the charges and doesn't reimburse the claimant for more than the cost of the medical care. Co-payment : A cost-sharing arrangement in which a covered person pays a specific charge for a specified service.

This amount is paid at the time services are rendered. Cost sharing : A broad term representing the ways in which a covered member shares in the cost of healthcare services with the health plan.

Examples of this include deductibles, co-payments, and coinsurance. County programs : Health benefit programs that are developed, maintained and governed by a county health department. Deductible : Amount that must be paid prior to receiving medical benefits from a health plan. Office visit co-payments are usually paid regardless of whether or not the deductible has been met.

Usually, the deductible is based on the calendar year. Dependent : An individual, other than the employee, who's eligible to receive coverage under the employee's healthcare plan. This is usually limited to spouses and children but can include grandchildren and foster children in some circumstances. The individual must usually rely on the employee for financial support. Disallowance : This occurs when an insurance company or health plan denies payment for certain benefits.

For example, if a claim is submitted for teeth whitening, it may be disallowed because of the cosmetic nature of the procedure. Drug formulary : A listing of prescription drugs that are approved by a health plan through participating pharmacies. If the plan is "open formulary" then coverage is provided for drugs that aren't on the formulary list; if the plan is "closed, select or mandatory" then coverage is only provided for drugs approved by the health plan on the formulary.

Duplication of benefits : This occurs when a person is covered by two or more health plans with similar coverage. For example, a person could be covered as an employee under a group plan and as a dependent under a spouse's health insurance policy.

Enrollee : A person who's enrolled in a health plan as an employee, not as a dependent. Exclusions : Specific illnesses, injuries or methods of treatment that aren't covered under an employee benefit plan. An example of this would be a pre-existing condition or a procedure, such as cosmetic surgery, that's not medically necessary. Exclusive provider organization EPO : A term used to describe a health plan that is similar to an HMO in that it provides benefits only if the insured uses the specified network of providers, but is usually offered as an insured or self-funded product.

EPOs usually mandate that coverage be channeled through a primary care physician. Explanation of benefits EOB : A statement sent to covered individuals by a health plan explaining the services provided, the amount billed and the level of payment by the health plan.

Formulary : The list of prescription drugs approved for use and covered by an HMO when dispensed through participating pharmacies. Typically, this includes generic drugs that have been found to be safe and effective, and excludes brand-name drugs.

Physician checkups and age-based screening for various diseases are important to identify potential health problems early -- before the costs of treatment become greater.

Managed care plans also often emphasize financial incentives for members to control their own healthcare costs. One widely used example of this is tiered pricing for prescription drugs. Members pay less for generic drugs than they do for branded drugs. PPOs are by far the most common form of managed care in the U.

HMOs tend to be the most restrictive type of managed care. They frequently require members to select a primary care physician, from whom a referral is typically required before receiving care from a specialist or other physician.

HMOs usually only pay for care within the provider network. These types of plans usually allow members to receive care out of network, but the member must pay more than if they use a network provider. Like PPOs, POS plans allow members to go out of network for care -- although they must pay more than they would for a network provider. Does managed care work? Opinions vary greatly about just how effective managed care actually is. Opponents point to high overhead costs at large HMOs and lower quality scores as signs that managed care doesn't work well.

But, as the old saying goes, "perception is reality". And the perception of insurers and employers seems to be that managed care controls costs better than healthcare that isn't managed.

The pie chart shown earlier paints a picture of how widespread enrollment of U. Another big indicator that managed care has enjoyed success is the performance of the stocks of health insurers that have heavily focused on managed care. Take a look at how three of the largest U.

Then there's the growth of managed care in government healthcare programs. The number of Medicaid members enrolled in managed care programs has more than doubled since The future of managed care Expect managed care to become an even bigger factor in Medicare and Medicaid. As more Americans age, federal and state governments will become even more desperate to find ways to control healthcare costs. The three large health insurers mentioned previously all stand to benefit from this trend.

The Carrier HMOs represented a very superficial change in the delivery system, not the fundamental change that is needed to achieve economical health care. These doctors not only lacked any incentive to cooperate with managed care, but they were motivated by resentment and fee-for-service to fight it. And they had a powerful weapon readily at hand: they could recommend to patients procedures, medications, and lengths of hospital stay that the HMOs would challenge or deny.

Recalling the studies documenting large amounts of inappropriate surgery, hospitalizations and prescribing, and wide variations in medical practice not explained by differences in medical need, an HMO doing its job properly would have to question many doctor recommendations. In addition, in many areas there is no professional consensus that could serve as the basis for a determination of medical necessity. So it is entirely understandable that patients would take the side of the doctor they knew and trusted and be furious at the insurer who was trying to deny payment for what the doctor recommended presumably for the unworthy goal of saving money.

In all the public discussion, it was assumed that of course the insurance company was in the wrong and the doctor was right. All the literature about inappropriate hospitalizations and surgery was forgotten. It is an unequal contest. Managed care can only work with the willing cooperation of doctors. And if managed care cannot work for this reason, America will have to turn for a solution to its cost problem more along the lines of what the Canadians have done, which American doctors are likely to like even less.

I am not optimistic. First, it is very hard to get employers and employees to understand the potential benefits of competition and the meaning and value of rational economic incentives in health care. It is hard to get voters and their representatives in legislatures to support the changes needed for responsible multiple choice arrangements e. Health care is a particularly difficult area in which to make and sell rational public policy because the issues are so complex.

Beyond that, I believe that advancing medical technology is facing us with a set of choices that will become increasingly painful. And costly new procedures are being developed all the time. I believe this is going to make it all the more important that we find ways of developing and motivating delivery systems that improve efficiency and provide costly services only when they are likely to provide good value for money.

The anti-managed care legislation working its way through federal and state legislatures is not likely to do much to ameliorate the backlash because it does not get at the fundamental causes. The causes of the backlash are much deeper than the specific irritations or grievances we hear about.

We in America have created an entitlements mentality. First, consumers must be required to face responsible choices with some protection for the poor.

That is, a consumer who wants the freedom of a fee-for-service wide-access plan should have to pay the full difference in premium with net after tax dollars. That means we need a limit on tax free employer contributions set at the level of a very efficient health plan, and employers must make defined contributions that do not subsidize more costly plans if they want to take advantage of the tax break for their employees.

Better still, as Nancy Dickey has recently written in a Sounding Board in the NEJM, the AMA proposes that the present tax exclusion be replaced by an income-related refundable tax credit usable only for health insurance.

This policy would give consumers a personal and serious reason to be interested in an economical health plan. I appreciate that this would be extremely difficult to sell politically, but the logic in support of it is overwhelming.

If we want public support for economizing policies, we must have citizens who believe they have a real personal interest in economical health care. In a market of truly cost conscious consumers, I would expect some health plans would include numerous economizing measures such as hour stays for uncomplicated deliveries, maximum use of outpatient surgery, acceptance of mandatory arbitration instead of the tort system for disputes, maximum use of generic drugs even when new brand name drugs offer a genuine if marginal improvement in outcome, etc.

It would be important that their members be well informed before joining. I think the worst thing about much of the anti-managed care legislation now passed or in process is that, acceding to the demands of middle and upper income insured people who do not realize they are in fact paying for their coverage, legislatures are outlawing the kind of truly cost-effective health care badly needed by people of modest means. Second, there needs to be a great deal more genuine consumer choice. We have a triple option plan at Stanford and it has proved to be very popular.

It reduces conflict because the terms of exit are pre-negotiated. But exit from the HMO network or the Preferred Provider network does cost the consumer substantially more money.

Individual choice of plan is important. It allows each person to choose the degree and method of cost containment that he or she finds least objectionable. And if things go badly, reasonable people will recognize that, having been given a choice, they are at least partly responsible for the outcome.

Third, I think there needs to be consumer cost consciousness both at the choice of plan level and at the point of service. People must have some reason for forgoing the diagnostic test they might want but which the doctor feels is of doubtful value. Fourth, we need to move from all-inclusive networks to including some very selective networks in the menu. Put alternatively, we need partnerships between medical groups and other delivery systems on the one hand and insurance carriers on the other where the medical groups make all the important decisions including pricing, and bear the consequences in a cost-conscious competitive marketplace.

The focus and market power would move from the carriers to the medical groups. Fifth, to make this possible, we need administrative arrangements that are capable of offering multiple choice to a defined population at a low cost. I know this is possible because CalPERS has offered public employees in California a choice of more than 20 plans at an administrative cost of less than one half of one percent of premium.

Economies of scale have something to do with this. The bi-partisan Managed Competition Act of provided for creation of a Health Plan Purchasing Cooperative for small employment groups and individuals in every state. Voluntary cooperatives raise serious problems of adverse risk selection. I hope some workable compromise can be found. Sixth, what about the doctors?

As I noted earlier, no plan can succeed without their support. So I am encouraged that the thoughts I am expressing here are along the same lines as those of Dr. Dickey and the AMA. Evidently, the cost unconscious demands of consumers are becoming a problem for many doctors too. In the world created by the reforms I have just outlined, some doctors would choose to work in prepaid group practices or similar arrangements, while others would choose to practice with no economic restraint at all in traditional fee-for-service.

But if most people with responsible choices choose various forms of managed care, including the most economical, as they typically do in employment groups that offer responsible multiple choice of plan, then increasing numbers of doctors would have to choose between a livelihood and the restraints of one or another form of managed care.

That would put doctors in an economic position similar to that of the rest of us. But I hope they would see that as their choice, their responsible choice. Enter the terms you wish to search for. Can It Be Fixed? November 01, The Consumer-Patient Side Let me begin with the consumer-patient side of the managed care revolution. Emergence of a Dysfunctional Industry Structure The next major problem area is the emergence of a dysfunctional industry structure.