MCO cession10-1

8/14/2019 MCO cession10-1

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Managed Care

Prepared by :

Dr. Alber G. Paules, CPHQ


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Whats Managed Care? The term Managed Care refers to a health

care insurance system that is concerned with

managing the care delivery(i.e.)managing theability to access different healthcare settings,

the degree of coverage, the financing methods,

and the resources used.

Organizations which provide managed care

services are called managed care organizations

or MCOs.


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Whats Managed Care ?

Managed Care tries to control the costs of

health care services while maintaining orimproving their quality (i.e.) maximizing the

valueof care offered.

Managed Care system usually focuses on

efficiency, appropriateness, and availability of

services to the patients.


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Key Players

Enrollees

(Consumers)

(Employees)

(Subscribers)

(Members)

Providers MCOs

Government

or Employer


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Now, MCOs are the predominant vehicles

for the provision and payment ofhealthcare benefits at the US.

About 85% of the American citizens areenrolled in managed care plans whetherthrough governmental programs, asMedicare & Medicaid or through private

entities(e.g.)employers.

Managed Care at the US


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In2000, there were187.4million Americanswith private health insurance coverage,35.2 million Medicare beneficiaries, and31.5million Medicaid recipients.

Medicare finances medical care for those65years old or older, those with end-stagerenal disease, and disabled people who are

entitled to Social Security benefits.



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Medicaid finances health care for poorcitizens. Each state establishes its owneligibility criteria according to income andresources. In addition, each state administersits own Medicaid program.

In 2000, for the population under 65, 40.5million citizens were uninsured (16.8%of US

population).



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Traditionally (especially prior to 1965), healthcare

was based essentially on what is known as (Cost-

based Retrospective Reimbursement). At that

time, physicians, hospital administrators, and

patients were all quite happy.

In 1965, the Johnson administration, instituted

Medicare and Medicaid. Initially, Medicare and

Medicaid programs reimbursed providers

retrospectively.

The Origins ofManaged Care


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Causes of the escalation of healthcare servicescosts since the 1960s, include: (this rise hasbeen a major factor that played a role in thegrowth of health care insurance industry)

1.Advancement in technology

2.Increases in the physician fees

3.Advances in pharmaceuticals

N.B.


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Other

expenditures

96%

Healthcare

expenditures

4%

Other

expenditures

91%

Healthcare

expenditures

9%

Pie Charts

showing total

federal

expendituresfor Health Care

1965 1970


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During the early 1980s, the situation started totake a dramatic turn; purchasers increased their

complaints about the rising costs of healthcare.

In addition, a view was emerging in the business

and political communities that Americas financialposition in the world was starting to slip coz of

rising healthcare costs.



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Since then, the American government tried to institute

mandatory legislations aiming at containment of

healthcare costs. For example, in 1983-1984, the

government implemented the Prospective Payment

System (PPS) and decided to use DRGs as the primary

mechanism to reimburse hospitals for their services to

theMedicarepopulation.



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It is a methodology used for tracking the resourcesconsumed by various diagnoses. Classification isbased on different body systems, age groupsetc.

TheMedicareprogram could initially develop a set of467DRGs. Each DRG was assigned prospectively adollar value.

DiagnosisRelated Groups

(DRGs)


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The methods most commonly used for utilization

monitoring and control are gatekeeping and

utilization review (prospective, concurrent, and

retrospective).

Utilization Control Methods

in Managed Care


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The PCP is often the first point of contact for the

patient. Acting as gatekeepers, many PCPs refer

patients to specialists when necessary.

The PCP might be a GPormight belong to one of

the following specialties: internal medicine,

pediatrics, orfamily medicine.

Primary Care Physician


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Insurance

People purchase healthcare insurance to

protect themselves from unexpected medicalcosts.

The insurer provides coverage of medicalcosts at apremium rate; the premium cost is

contributed by the employee through a

(Payroll deduction)


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Advantages of Group Insurance Plans:

1. Employers, especially large ones, are usually able

to obtain more favorable pricing and coverage

than individuals can.

2. The employer, not the employee, manages

administrative needs such as payroll deductions,

payment of premiums, and so forth.


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3. The employer can offer his/her employees morethan one type of defined benefits plan; the largerthe employer is, the more likely that multiplehealth plans will be available to the employees.

For example, the employee may be able to choose betweena high-option insurance plan (higher level of coverage,higher costs) andalow-option insurance plan(lower levelof coverage, lower costs).

Advantages of Group Insurance Plans:


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Deductible: the amount of money the member must first pay out ofpocket before any benefits by the plan are payable, commonly $100to$300during the year of coverage.

Once the deductible has been met, the member has to pay other payments:

Co-payment: a fixed amount of money the member must pay out ofpocket at the time of service after the deductible amount has been paid(e.g.)$10at each physician office visit and $5for each drug prescriptionfilled.

Co-insurance: a ratio co-payment; percentage of cost for service is paidby the insurance company, e.g.,80%, with remaining percentage paid by

the patient,e.g., 20%,(i.e.)80:20 ratio.

In addition to the premiums, the enrollees (insured

individuals) may pay a co-payment, aco-insurance,or a

deductible (Cost sharing methods).

Insurance Payments


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Insurance Payments All these cost-sharing methods serve asincentivesfor

the enrollee to use healthcare resources wisely and to

take care of own health.

One study showed that the cost sharing had animpact on lowering utilization without any significant

negative health consequences.


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Managed Care Organizations

(MCOs)

Managed Care may be thought of as a variety of models or

systems.

There are many types of managed care plans/techniques;

each is designed to fulfill a specific set of needs, and each has

inherent strengths and weaknesses.

Indemnity

insurancePPOs POS

Open panel

HMOsClosed panel

HMOs

Higher potential for control of Cost


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Market Share by

Health Plan Type (USA)

Traditional

71%

HMO

18%

PPO

11%

POS

0%

Traditional

5%

HMO25%

PPO

55%

POS

15%

1988 2004


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Retain the individuals freedom of choice of

providers.

The insurance company reimburses theproviders for medical expenses.

1. Traditional Indemnity Insurance companies

Types of ManagedCare Organizations


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2. Health Maintenance Organizations (HMOs)

HMOs were the first types of managed care

plans to appear on the market.

An HMO is distinguished from other types of

plans by the use of in-network providers by theenrollees.


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Types of ManagedCare Organizations2. Health Maintenance Organizations (HMOs)

HMOs place considerable emphasis on preventive

services, such as routine checkups.

As an incentive to the enrollees to seek wellness

care, HMO plans typically do NOT have annualdeductibles. HMOs have lower co-payments than

do other types of plans.


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2. Health Maintenance Organizations (HMOs)

Drawback: HMO plans were the most restrictive,

particularly with regard to choice of physicians.


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Types of Managed

Care Organizations

3. Preferred Provider Organization (PPOs)

PPOs differentiate themselves by offering out-of-

network options for enrollees.

They allow patients the choice of using physiciansand hospitals outside the network.


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Types of Managed

Care Organizations

3. Preferred Provider Organization (PPOs)

In contrast to traditional HMO coverage, PPO

coverage allows individuals to use non-PPO

participating providers; but for higher levels of co-

payments and co-insurances.

Documents

MCO cession10-1