If you're like most Americans with health insurance, you probably belong to some type of managed care health plan. Managed care has grown rapidly in recent years and evolved in certain ways. You may be wondering where it's heading.
Although patients are generally happy with the minimal paperwork and lower out-of-pocket costs associated with managed care, the emphasis on cost cutting has led to a certain backlash. Most states have enacted managed care consumer protection laws, and Congress has debated a patients' bill of rights. In addition, physicians have begun to unionize. The spiraling cost of prescription drugs is another issue that begs to be addressed.
While health maintenance organizations (HMOs) and other managed care delivery systems have concentrated on lowering costs, many of them have been socked by rising claims and pharmacy costs. Profits have declined. Consequently, some companies have merged, and others have withdrawn from particular states altogether. The challenge faced by lawmakers will be to safeguard patients' rights without driving managed care providers out of business.
What is managed care?
First, a little history. In the past, health insurance was usually provided by traditional fee-for-service insurers, such as Blue Cross/Blue Shield. You paid the health-care provider and submitted a claim to your insurance carrier. Then, after your deductible was satisfied, you were reimbursed for some or all of your expenses. You could go to a doctor or specialist (or emergency room) as many times as you wanted. However, these uncontrolled claims resulted in high loss ratios for insurance companies, which in turn caused them to increase health-plan premiums significantly.
Because the industry needed to lower and control costs, managed care became popular. Managed care is a strategy for containing or minimizing medical care costs while delivering appropriate medical care. In managed care, patients pay significantly reduced fees to see their primary care physicians, but they usually can't see specialists or other medical service providers without their primary physician's approval.
To contain costs, managed care companies exercise control by denying or allowing insurance coverage for certain procedures, promoting generic drugs in place of brand-name drugs, and encouraging wellness programs and preventive measures. In fact, some companies now send registered nurses to workplaces on a periodic basis to educate employees regarding weight loss and nonsmoking.
Changes in managed care
Managed care grew rapidly in the form of HMOs, which require that the primary care physician act as gatekeeper for further care. In response to the public's frustration at being unable to access certain providers without authorization, preferred provider organizations (PPOs) and point of service (POS) plans have arisen in recent years to allow members to use both in- and out-of-network doctors and hospitals. However, these plans have higher co-payments and deductibles when you go outside the network.
State consumer protection laws
Most states have enacted at least one law concerning managed care. These laws may:
- Mandate coverage for certain medical conditions or services
- Forbid financial incentives for physicians who limit care
- Prohibit gag clauses (clauses that forbid physicians from disparaging the health plan or suggesting treatment that the plan does not cover)
- Specify when emergency room care is necessary
- Provide for complaints/appeals of coverage decisions
In recent years, Congress has considered the issue of patients' rights. Consumer groups, legislators, and the American Medical Association (AMA) have raised concerns about managed care and its effect on patients. Various bills have addressed information disclosure to patients, choice of providers and health plans, access to emergency services, participation in treatment decisions, nondiscrimination, confidentiality of health information, complaints and appeals, and consumer responsibilities.
Opponents of these bills argued that they were too costly, that they called for too much regulation, and that they made HMOs too vulnerable to lawsuits. Although Congress has not yet passed a comprehensive patients' bill of rights, this issue is popular with voters and will continue to be debated. The future probably holds some form of federal codification of managed care rights for patients.
Another hot issue involves prescription drug coverage for Medicare recipients. With the passage of the Medicare Prescription Drug, Improvement, and Modernization Act of 2003, Medicare beneficiaries can now join prescription drug plans offered by private companies or insurers that have been approved by Medicare.
In recent years, many physicians' organizations (such as the AMA) have pushed for unionization of doctors. In fact, some unions have already sprung up. In large part, this movement has stemmed from the growth of the managed care industry. In explaining why they wanted to join a union, several doctors cited a loss in their decision-making authority and a drop in reimbursements from HMOs.
In an attempt to cut costs, some HMOs specify the number of patients doctors should see per hour and deny coverage for certain procedures deemed medically necessary by the physicians. Doctors, watched over by plan accountants, are encouraged to minimize the number of tests, referrals, and hospitalizations they order. In addition, physicians whose expenditures for patients are regarded as too high are sometimes dropped from the health-care plan. Expect the unionization movement to gain strength.
This material was prepared by Broadridge Investor Communication Solutions, Inc., and does not necessarily represent the views of The Retirement Group or FSC Financial Corp. This information should not be construed as investment advice. Neither the named Representatives nor Broker/Dealer gives tax or legal advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. The publisher is not engaged in rendering legal, accounting or other professional services. If other expert assistance is needed, the reader is advised to engage the services of a competent professional. Please consult your Financial Advisor for further information or call 800-900-5867.
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