Research Paper: Case Management Managed Care

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The Impacts of Case Management and Managed Care on Health Care Cost Reduction

The United States has the priciest health care system in the world, with per capita health expenditures far above those of any other country. For a lot of years, U.S. health care expenditures have been rising faster than the overall rate of inflation in the economy. A few experts have disputed that high and rising costs are not such a grave problem. "Most observers disagree with this view, pointing to the negative impact of employee health care costs on employers, the government budgetary problems caused by rising health care expenditures, and an association between high health care costs and reduced access for individuals needing health services" (Bodenheimer, 2005).

Managing health care cost growth is a basic challenge facing the health care system. After a brief break, health care spending is again rising much more rapidly than the economy as a whole. Most health economists agree that the use of ground-breaking technology has historically been the main driving force behind health care cost growth. This added spending may give valuable incremental health benefits and consequently be justified from a cost-effectiveness perspective, but apprehensions over growing costs have renewed policymakers' interest in cost suppression. Managed competition has been measured a basic component of cost suppression efforts for more than two decades. Even though evidence supports the idea that managed care organizations (MCOs) have lower spending compared with indemnity fee-for-service systems, debate persists over whether the rate of health care spending growth varies among diverse delivery systems. To a certain extent, evidence suggests that even though managed competition slows health care cost growth, the effects are not large enough to curtail the rising share of GDP dedicated to health care. This evidence is largely founded on statistical analyses of the diffusion of technology in health maintenance organizations (HMOs) or in markets with varying levels of HMO penetration (Chernew et al., 2004).

Managed Care

One way of looking at managed care is to consider it to be applied health insurance. It combines the accountability for paying for a distinct set of health services with an active program to manage the expenses associated with providing those services, while at the same time trying to manage the quality of and access to those services. An MCO commences to offer a wide range of care and services in acute care; these benefits are spelled out generally in advance along with any payments that the member of the plan will be liable for as co-payments or deductibles. "Finally, an MCO in this definition receives a fixed sum of money to pay for the benefits in the plans for the defined population of enrollees. Typically, this fixed sum of money is constructed through premiums paid by the enrollees, capitation payments made on behalf of the enrollees from a third party, or both" (the Basics of Managed Care, n.d.).

MCOs utilize one or more methods to control their costs. However, this feature of MCOs does not completely distinguish them from health insurers; for example, health insurers more and more use strategies such as preauthorization for services, consumer co-payments, and primary care gatekeeping as methods to control their costs. Most managed care includes placing care providers at financial risk for all or a considerable part of the costs of care; the inducements from such a circumstance offer the greatest prospective to transform incentives in the care and service systems. However, financial risk-taking is not the only form of managed care, nor does it always occur in unadulterated form. There are three levels of care management with regard to financial risk:

1. "Full risk - accepting all the financial risk for providing services (all the possible profits as well as the losses)

2. Partial risk - accepting a portion of the financial risk of service provision

3. No direct risk - but incentives are present for controlling cost, as in various case-managed primary care arrangements" (the Basics of Managed Care, n.d.).

Managed care has tried to alter the way in which health care is financed by changing the incentives in the health care system. What was once a source of revenue under fee-for-service has become a cost under managed care. Fee-for-service health care supports provision of health care services, while managed care dampens use of care unless completely necessary. In managed care, doctors and other health care providers make a profit by providing only the services totally necessary in treating patients and by preserving the health of its members. Fee-for-service providers profit as an alternative when people are sick and use health services, therefore having less incentive to keep people well (the Basics of Managed Care, n.d.).

Managed care, in effect, joins health care insurance and provision of services into one organization, and takes the insurance approach one step further. For a fixed fee, the managed care company agrees to provide a package of services. Having accepted a preset amount of money for the task, its incentives are to safeguard these funds. Its variety of strategies are not overall different from those accessible to insurance companies, but its incentive to contain costs is much stronger because its market advantage lies in offering lower costs in exchange for restricted options. Of course, when MCOs compete in a market area, the MCO also needs to structure benefits that appeal to consumers (the Basics of Managed Care, n.d.).

In theory, managed care can be successful in two ways. It can lower expenses for individual services, and it can advance the competence of service across the full range of a person's illness. By providing more effectual care early, it may stay away from more costly care subsequently; or by substituting less expensive modes of care it may accomplish the same ends less expensively (the Basics of Managed Care, n.d.).

In order to control costs, HMOs developed new payment methods like salaries, withholding agreement, payment at a preferred rate, capitation contract or lump sum. Their reason was to spread financial and medical risk over care providers and insurers. Nevertheless, because they vary from one HMO to another, it is hard to estimate their cost-control efficiency. An HMO can contract with numerous hospitals and, for one care provider use a discounted Fee for Service payment, but for another care provider use a capitation agreement. Finally, they can be inconvenient for the provider and cause risks for the insured (Simonet, 2005).

These instruments have overturned the practitioner's conventional role. Before their execution, a physician utilized his expertise to ask for more medical resources like tests, diagnostics and hospital resources to treat his patient. Once attached to an HMO, he had to administer the HMO's resources optimally. In reality, once a practitioner became part of an HMO, their salary could be a variable salary which prompted them to take up the role of the insurer's treasurer. Because they manage the HMO's resources and at the same time protect patients' interests, they become concurrently a judge who gives out scarce medical resources and a defendant of his patients requirements (Quaye, 2001). The doctor must provide the patient with the best care accessible, which may involve hefty costs. But as a judge running the HMO's purse and apportioning out care, he must keep costs low. Additionally, they must conform to a variety of protocols such as clinical guidelines (Fang et al., 1996). His clinical autonomy is considerably reduced.

Under Managed Care, financial incentives reward frugal practitioners. "These come in several forms: percentage on earnings, bonus on productivity, or both simultaneously. These incentives can also contain penalties (they may or may not be financial): physician exclusion, obligation to pay the total or a fraction of an HMO deficit, withholding on fees. A withholding contract allows the HMO to retain a share (15% to 25%) of the fees paid to the providers (be it a solo practitioner or a group physician). At the end of the withholding contract, comparisons are made in regard to an initial cap on health expenses or medical care consumption (hospital care, diagnostic tests, medical prescriptions)" (Simonet, 2005). If these are inferior to the cap, the sum that had been withdrawn was then returned to the care provider. Should the contrary occur, the HMO keeps the residual sum for itself. It is a strong device to persuade a practitioner to conform to a prescription target. Regrettably, patient interests are unlikely to be preserved under this system, as those physicians who are more likely to dispute an HMO decision are those who treat fewer Managed Care patients.

The presence of managed care organizations in a health care market may affect health care delivery for both managed care and non-managed care patients. By way of financial incentives to providers, and by more aggressively managing patient care than other kinds of insurers, managed care organizations may affect the procedure, price, and outcomes of care for plan patients. Perhaps just as important, though, is the prospective for managed care activity to bring about market-level alterations in patient care that affect… [END OF PREVIEW]

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APA Format

Case Management Managed Care.  (2012, June 25).  Retrieved June 16, 2019, from

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"Case Management Managed Care."  25 June 2012.  Web.  16 June 2019. <>.

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"Case Management Managed Care."  June 25, 2012.  Accessed June 16, 2019.