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Chapter 9

Chapter 9. Managed Care and Managed Care Organizations (MCOs). NOTE: In Quiz 2 and the final exam this chapter will be a little more heavily weighed than other chapters. What is Managed Care?. Core feature: It integrates the functions of financing, insurance, delivery, and payment.

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Chapter 9

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  1. Chapter 9 Managed Care and Managed Care Organizations (MCOs)

  2. NOTE: In Quiz 2 and the final exam this chapter will be a little more heavily weighed than other chapters

  3. What is Managed Care? Core feature: It integrates the functions of financing, insurance, delivery, and payment

  4. Integration of the Quad Functions - 1 • Financing – contract negotiations between employers and MCOs • Insurance –  The MCO assumes risk  The need for an insurance company is eliminated  Risk is often shared with the providers

  5. Integration of the Quad Functions - 2 • Delivery – The MCO must arrange to provide a comprehensive array of services • Payment – Capitation  Discounted fees  Salary

  6. Other Characteristics of Managed Care • Defined group of enrollees • Limits on choice of providers • Utilization management • Financial incentives to providers for efficiency • Accountability for plan performance (quality)

  7. Enrollments in Managed Care: 2002 Private: 95% Medicare: 13% Medicaid: 55%

  8. Forces Behind Managed Care • Health Maintenance Organization Act 1973 provided federal funds to start new HMOs • Escalating health insurance costs – Figure 9-5, p. 333

  9. The System Before Managed Care Fee-for service • The insured had direct access to any provider, PCP or specialist • Itemized billing of charges by the provider to the insurer • Few, if any, controls over the amount of payment • Sickness coverage; no coverage for wellness and prevention • Insurers functioned simply as passive payers of claims

  10. Flaws in Fee-for-service • Various kinds of inefficiencies – see p. 332 • Moral hazard • Overutilization of specialty care • Charges set at artificially high levels • Provider-induced demand • Physicians benefited financially by putting patients in the hospital • Inefficiencies were absorbed by raising premiums

  11. Cost Control in Managed Care • Elimination of intermediaries – tight integration of quad functions • Control over reimbursement – capitation risk sharing or discounts • Utilization management

  12. Utilization Management • Choice restriction • In-network access – no open access • Out-of-network access, but pay extra • Gatekeeping by a PCP • Case management for complex cases • Utilization Review • Practice profiling

  13. Utilization Review (UR) • Case review • Determine the most appropriate type and level of service • Plan subsequent care

  14. Three Types of UR • Prospective UR • Concurrent UR and discharge planning • Retrospective UR

  15. Types of MCOs • HMOs • PPOs • POS Plans

  16. Why Different Types? HMOs did not become widely popular (except in California and Minnesota) – Figure 9-8, p. 341. The main drawbacks of HMOs were: • Choice restriction (for enrollees) • Capitation (for providers) • Utilization management (for both)

  17. HMOs • Emphasize preventive care • Capitation is the method used to pay providers • Carve outs for certain specialty services • In-network access • Gatekeeping • Standards of quality

  18. HMO Models • Staff • Group • Network • Independent practice associations (IPAs) Study from the textbook what these models are and their main advantages and disadvantages

  19. HMO Enrollments Figure 9-9, p. 344

  20. PPOs • Sickness care • Discounted fees is the method used to pay providers (no risk sharing) • Both in-network and out-of-network access • Generally, no gatekeeping • Generally, loose utilization management

  21. PPO Enrollments Figure 9-10, p. 346

  22. POS Plans • Cross between HMO and PPO • HMO features are retained • PPO features are available at the point of service

  23. POS Enrollment • Figure 9-11, p. 346

  24. Trends in Managed Care Figure 9-12, p. 347 Health insurance premiums Figure 9-13, p. 348

  25. Medicaid Enrollment • Balanced Budget Act 1997 allowed states to enroll Medicaid beneficiaries in managed care • Unavailability of managed care plans in some geographic locations • MCO pullouts • Primary care case management (PCCM) programs: direct contracting with providers by states

  26. Medicare Enrollment • Medicare beneficiaries have the option to remain in the fee-for-service program • Capitated risk contracts • MCO pullouts due to reduced capitation under the BBA 1997 • Problem: Medicare capitation is not based on risk adjustment

  27. Impact on cost, access, and quality

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