Health Economics & Policy 3 rd Edition James W. Henderson

1. Health Economics & Policy3rd EditionJames W. Henderson Chapter 7 Managed Care

2. A New Paradigm • Managed care • Prospective payment • Incentive to limit care

3. HMO Enrollment, 1979-2001

4. Percentage of American Workers in Managed Care

5. History of Managed Care • Roots • Kaiser • ClintonCare • Emphasis shift • Managing care • Managing cost • Current practices

6. Types of Managed Care Plans • Health maintenance organizations • Preferred provider organizations • POS plans

7. The Theory of Managed Care Cost Savings • Easy access to primary and preventive care • Childhood immunizations • Female and reproductive services • Chronic illness management • Incentives for providers to practice cost effective care

8. The Practice of Managed Care Cost Savings • Selection of providers • Cost sharing arrangements • Capitation for general practitioners • Risk-sharing contracts • Practice guidelines and utilization review

9. Premium Allocation Under Capitation: An Example

10. Impact on Providers • Patient load • Time spent with patients • Use of physician extenders • Specialty referrals • Limits • Special panels • Patient turnover • Patient dumping

11. Mechanisms Leading to Reduced Cost • Patient selection • Underutilization of services • Lower quality of care • Cost-saving guidelines

12. Studies Examining Impact of Managed Care • Natural experiments • Randomized trials • Same-disease studies • Same-physician studies

13. Evidence of Managed Care Cost Savings • RAND (Manning et al,. 1984): per capita costs 28% lower under HMO due to fewer hospital admissions and shorter stays • Miller and Luft (1994, 1997): HMO cost savings of 10-15% due to shorter hospital stays, fewer tests, less costly procedures • Glied (2000): overall evidence inconclusive since managed care attracts healthier enrollees

14. Evidence of Managed Care’s Impact on Quality of Care • Miller and Luft (1997) and Robinson (2000): found mixed evidence on overall quality differences • Ware et al. (1996), Robinson (2000), and Hellinger (1998): poorer outcomes among members of vulnerable subpopulations—sick, elderly, poor

15. Managed Care and Its Public Image • Considerable economic success • Cultural and political failure • Patient/Provider Backlash • Patient rights • Humana law suit • UnitedHealth decision

16. The Future of Managed Care • Patients – Model too restrictive • Employers – Concerned over litigation prospects, disgruntled employees • Payers – Discovered cost control is unpopular and dangerous to corporate survivability • Providers – Risk sharing is risky. Balking at dual role of agent of patient (associated concern with quality) and agent of society (associated concern with costs)

17. Risk Averse Politicians • Lack political will to make managed care work • It takes willingness to • Impose limits on number of specialists, availability of technology, pharmaceutical R&D, prices paid providers • Stand at the center of the debate and defend set limits

18. A New Direction • Consumer driven health care – build on tradition of individual autonomy and cost conscious consumers • Complementary medicine • Informed consent • Expanding use of Internet • Direct-to-consumer advertising • Employer desire to get out of the health care business • Public distrust for government-run programs