Econ+157+Topic+B+Managed+care

Econ+157+Topic+B+Managed+care - MANAGED CARE Econ 157 -...

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Unformatted text preview: MANAGED CARE Econ 157 - Topic B Econ 157: Mortimer 2/17/2010 1 What Are Managed Care Organizations? Fee-for-Service (FFS) plans provide incentives to over-consume health care Neither patients nor physicians pay for the entire cost of services Physicians get paid more as they provide more services Managed care organizations (MCOs) attempt to reduce inefficiencies arising from the traditional FFS setting Integrate insurance with the provision of care Negotiate discounted fees with providers in exchange for patient volume (i.e., selective contracting and patient steering) Limit patients choices in exchange for discounted prices Monitor utilization in order to control costs and provide guidance to providers (i.e., utilization review) Encourage preventive care Managed care accounted for 27% of employer-provided plan enrollment in 1988 and 92% in 2007 (Kaiser Family Foundation) Econ 157: Mortimer 2/17/2010 2 Payer Types Health Maintenance Organizations (HMOs) Typically require that patients see only in-network providers but they incur low out-of-pocket expenses Use gatekeepers (e.g., primary care physicians) to authorize services Unauthorized care is not reimbursed Staff-model HMOs employ physicians (e.g., Kaiser- Permanente) Independent practice associations (IPAs) set up a physician network via contracting Econ 157: Mortimer 2/17/2010 3 Payer Types Preferred Provider Organizations (PPOs) Encourage patients to use the preferred provider network by offering lower deductibles and copayment Subscribers pay more for care provided by out-of- network providers Do not use gatekeepers Contract with providers who offer discounts and create preferred networks Providers may offer discounts in exchange for patient volume and prompt reimbursement Econ 157: Mortimer 2/17/2010 4 Provider Contracts Physician Contracts Most HMO and POS plans pay their network physicians on a capitation basis (e.g., an actuarial per-member-per- month (PMPM) fee) Physicians may be also responsible for some costs (e.g., lab tests) Physicians bear financial risk! Physicians with capitation contracts may purchase stop- loss coverage to reduce the risk If the cost of care reaches a certain threshold (e.g., $ per patient or all patients), the insurer (not necessarily the same payer) will cover additional expenses PPO contracts do not involve capitation Balance billing (receiving a discounted fee from the insurer and bill the patient the remainder) is not allowed Providers are subject to utilization review Econ 157: Mortimer 2/17/2010 5 Provider Contracts Hospital Contracts 41% of hospitals had capitated contracts in 2004 Capitation is more common in urban areas Managed care plans prefer to contract with nonprofit hospitals and large hospitals (Zwanziger and Meirowitz (1998)) Hospital costs are lower in the markets with high managed care penetration and a large number of...
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This note was uploaded on 04/15/2010 for the course ECON 157 taught by Professor Staff during the Spring '08 term at University of California, Berkeley.

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Econ+157+Topic+B+Managed+care - MANAGED CARE Econ 157 -...

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