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Managed Care

Managed Care: PPO, HMO, POS, EPO


Managed Care is a term that is not as familiar to most people as the subsets of managed care are. 

Did you know that HMO, PPO, and POS plans are types of Managed Care programs? 

Managed Care was the term developed for the United States system of health care.  It is seemingly a complete failure, as costs and delivery of health care is perhaps our worst national problem.

The truth is that our health insurance system is broken, and the thousands of people employed in the Managed Care programs whether administrative or otherwise are in fact part of our overall economic woes.  If these people were employed in the production of something tangible instead of  being in the business of denying people and their health claims our entire economy would be different and by definition, better.



We must first talk about Capitation, which is the method of paying health care service providers (i.e. doctors).

Generally, these providers are contracted with a type of HMO known as an independent practice association (IPA). The HMO contracts with the providers to have the latter take care of patients enrolled in the HMO. Most often, payment for such a service is under the capitation system.

Under a capitation system, healthcare service providers (physicians) are paid a set amount for each enrolled person assigned to that physician or group of physicians, whether or not that person seeks care, per period of time.

The amount of remuneration is be based on the average expected health care utilization of that patient (more remuneration for patients with medical history). Other factors considered include age, race, sex, type of employment, and geographical location.


In any case, here is a quick definition of Managed Care and history from the good people at Wikipedia.org:

The term managed care is used to describe a variety of techniques intended to reduce the cost of providing health benefits and improve the quality of care (“managed care techniques”) for organizations that use those techniques or provide them as services to other organizations (“managed care organization or MCO”), or to describe systems of financing and delivering health care to enrollees organized around managed care techniques and concepts (“managed care delivery systems”). According to the United States National Library of Medicine, the term “managed care” encompasses programs:


…intended to reduce unnecessary health care costs through a variety of mechanisms, including: economic incentives for physicians and patients to select less costly forms of care; programs for reviewing the medical necessity of specific services; increased beneficiary cost sharing; controls on inpatient admissions and lengths of stay; the establishment of cost-sharing incentives for outpatient surgery; selective contracting with health care providers; and the intensive management of high-cost health care cases. The programs may be provided in a variety of settings, such as Health Maintenance Organizations and Preferred Provider Organizations.


History of Managed Care in America


The growth of managed care in the U.S. was spurred by the enactment of the Health Maintenance Organization Act of 1973.

While managed care techniques were pioneered by health maintenance organizations, they are now used by a variety of private health benefit programs.

Managed care is now nearly ubiquitous in the U.S, but has attracted controversy because it has largely failed in the overall goal of controlling medical costs. Proponents and critics are also sharply divided on managed care’s overall impact on the quality of U.S. health care delivery.

By the late 1990s, U.S. per capita health care spending began to increase again, peaking around 2002.  Despite managed care’s mandate to control costs, U.S. health care expenditures has continued to outstrip the overall national income, rising about 2.4 percentage points faster than the annual GDP since 1970.

Nevertheless, according to the trade association America’s Health Insurance Plans, managed care is nearly ubiquitous in the U.S.; 90 percent of insured Americans are now enrolled in plans with some form of managed care.

The National Directory of Managed Care Organizations, Sixth Edition profiles more than 5,000 plans, including new consumer-driven health plans and health savings accounts.


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