Managed care is essentially a system where health care costs are controlled while still maintaining high-quality care for the patient. This generally means that a party other than the doctor or patient (such as an employer or insurance company) influences the medical treatment provided by controlling the delivery and financing of health services.
How to Cut Costs
Employer health care costs are made up of three main components: employee incidence of illness, the cost of treatment and the percentage of costs paid by the employer. Managed care plans can address each of those elements to lower the overall cost of health care.
- Lowering employee incidence of illness is the most difficult element to control. However, preventive care, disease management, and wellness programs can yield healthier employees who are less likely to get ill or need medical care.
- Managing the cost of treatment can be accomplished through several mediums, namely through a type of health insurance plan. The plan may employ techniques such as negotiated contracts with a preferred physician network, ensuring the appropriate setting for treatment, managing the type of treatment to limit unnecessary or ineffective care, and frequent review of all utilization to ensure service is always medically necessary.
- Health insurance plans can also impact the third part of the equation: the percentage of costs paid by the employer. Most plans feature one or more employee cost-sharing devices, such as copayments, deductibles, and coinsurance. Not only does this shift cost away from the employer, it makes employees more aware of their expenditures and encourages them to make smarter health care decisions.
Types of Managed Care Plans
Common types of managed care plans (though not all plans fit into these categories):
- Health Maintenance Organization (HMO) – An HMO consists of certain health care providers that offer services at discounted rates to plan participants. Patients are required to only see providers within the network, or the HMO will not reimburse their care. They also have a primary care physician who is responsible for overseeing and coordinating all aspects of the patient’s care, including referrals to specialists.
- Preferred Provider Organizations (PPO) – A PPO also uses a provider network but it is not as limiting as the HMO. There is no primary care physician, so the patient has more freedom to see specialists. Patients can also access services out of the provider network, but those services are typically more expensive. Though less restrictive than the HMO, a PPO usually requires higher out-of-pocket costs for the patient.
- Point of Service (POS) – This plan is a combination between an HMO and PPO, in that a patient decides which type of plan to apply each time they seek care. Primary care physicians are not required but are encouraged through lower employee costs. Patients can use out-of-network services at their discretion but usually face higher costs.
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