3 - Managed care(1)

3 - Managed care(1) - Managed Care What is it? How is...

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Managed Care What is it? How is managed care expected to affect health care costs and patient outcomes? How do we measure the effects of managed care on patient outcomes and costs? How does the spread of managed care affect the rest of the health market? What do we observe in the real world (some recent health economics research? Aizer (2007) Ware et al. (1996) Cook (2007), Balsa et al. (2007)
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We’ve already learned… Health insurance will generally increase people’s consumption of health care Insured people consider out of pocket cost of care rather than true cost of care As a result, they purchase beyond point at which MB=MC For insurance to provide a net benefit to society, the benefits of reduced patient risk must exceed costs of excessive consumption
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What is managed care? MCOs are involved in both the delivery of health care AND the provision of health insurance MCOs expected to lower costs and possibly offer integrated, comprehensive services Traditional insurance has incentives to over- consume Managed care has incentive to under-consume
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What is managed care? Managed care mechanisms used to contain costs and/or improve quality of care Mechanisms targeted at patients Co-payments Prior authorization Denial of payment Second opinion programs – MCO pays for second opinion from a physician who will not perform the surgery Physician gatekeeper – patient must see primary care doctor to gain access to a specialist Steering of patients to specific providers Focus on preventive care
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Mechanisms targeted at providers of health care Selective contracting, in which MCOs negotiate prices and contract selectively with local physicians and hospitals Capitation (with stop-loss and/or reinsurance to protect against large losses) Utilization review Holdbacks - MCO holds back a part of payments due to physicians (e.g., 15%) until the end of the year, to see if total treatment costs within plan are on target Drug formularies – patients limited to or encouraged to use certain brands or kinds of drugs (e.g., generics)
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Organizational Structure Extensive reliance on health care information systems Goal: design information networks that improve process of care De-emphasis of hospital Primary care providers are usually gatekeepers in MCOs Direct patients to cost-effective treatment settings
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Organizational Structure Read pp. 230-238 (text) FFS – fee for service HMO – (1) provide relatively comprehensive health care, few out of pocket expenses but require that all care be delivered through network; (2) primary care doctor – “physician gatekeeper” - must authorize most services provided;
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3 - Managed care(1) - Managed Care What is it? How is...

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