Managed Care Models: The Benefit vs. Cost Balance

1. Managed Care Models:The Benefit vs. Cost Balance Presentation Developed for theAcademy of Managed Care Pharmacy Updated February 2015

3. Objectives To identify the types of managed care models To differentiate the level of control and cost per model To identify the role of pharmacy within these models

4. Managed Care Model Types • Health maintenance organization (HMO) • Preferred provider organization (PPO) • Point-of-service plan (POS) • Integrated delivery system (IDS)

6. Characteristics of HMOs • “Gatekeeper” principle • Primary care provider (PCP) serves as a gatekeeper and must authorize all medical services • Services not authorized by the PCP will generally not be paid for • Rationale for gatekeeper is to avoid unnecessary expenses • Preferred networks • Plans will only pay for services provided by healthcare providers that they have contracted with, aka “In Network” • Plans will not pay for “Out of Network” providers • Patient premiums are generally lower

7. Characteristics of PPOs • No gatekeeper • Patients can choose their own providers without having to use a designated PCP • Preferred networks with some out of network coverage • Patient can see any healthcare practitioner they want, but they are financially incentivized to see in-network providers • E.g., Patient pays 10% to see in-network vs. 50% to see out-of-network • Patient premiums are generally higher

8. Characteristics of Other Models Point of Service: Hybrid of PPO and HMO Members of a POS plan do not make a choice about which provider to use until the point at which the service is being used, but physicians may be at risk or contracted exclusively with the plan High-Deductible Health Plans (HDHPs): Lower premiums and higher deductibles than a traditional health plan; a form of catastrophic coverage

9. Shift Towards Integrated Models • Integrated Delivery Systems • A network of health care organizations all under the same parent company • Provide all healthcare services to a group of patients, such as within a geographic location • Includes PCPs, physicians, hospitals, pharmacies, and insurers • Note: Not all models include all groups • All working towards the same financial and clinical goals

10. Employer Decision: Benefit Controls vs. Cost Few Benefit Controls Higher Cost Lower Cost Highly Controlled Benefits

11. Benefit Control vs. Cost PPO POS HMO Less Control Higher Cost Higher Control Lower Cost

12. The Role of Pharmacy PBMs contract with multiple organizations to manage prescription drug benefits PBMs provide clinical and operational program support Formulary management, generic substitution, manufacturer contracting, drug utilization evalution PBMs usually have their own mail order pharmacy The pharmacy benefit is often outsourced to Pharmacy Benefit Managers (PBMs)

13. The Role of the Pharmacist in a PBM Develop and oversee utilization management strategies Prior Authorizations Step Therapy Quantity Limitations Participate in Pharmacy and Therapeutics Committee Negotiate rebates with manufacturers Conduct drug utilizations evaluations Monitor pipeline and patent expiration

14. Summary There are many different types of managed care models. Each model offers a choice to employers who buy these services. Employers must balance employee choice with cost when choosing. Pharmacists have varying roles within these managed care model types.

15. Thank you to AMCP members Wen Liu & Debbie Meyer for updating this presentation for 2015