Benefits and risks associated with managed care.pdf

Limiting their choice to a specific network of

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limiting their choice to a specific network of providers, in order to better manage their health care. Another difference between HMOs and indemnity plans rests in financing providers. Indemnity plans are based on benefits in cash. Patients pay for care directly to the provider and are later reimbursed by their insurer in cash. Conversely, HMOs work on the principle of benefits in kind, meaning a patient receives the majority of healthcare services free of charge (without any direct payment) and insurers reimburse the majority of costs of those services directly to providers. Managed care was created in reaction to a sharp rise in health care costs. It was also created as an alternative to state control of costs, administered through public budgeting (providers received a budget, which effectively limited their costs, costs above the budget were not reimbursed) or via state decisions on what services the insured were entitled to based on their age, health state, etc.
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6 The goal of these changes was to slow down the rise of medical costs and to increase health care quality at the same time. Indeed, a slower growth in US healthcare costs along with improvements in efficiency and competition for funding occurred in the 1980s (see graph). However, patient surveys carried out in the end of the 1990s also showed patients believed cutting costs came at the expense of service quality. Furthermore, in health care as well as in other sectors, the 1990s saw an increase in competition for customers, who demanded ever more personalized products. Discontent with the limited selection of providers emerged as more patients than before demanded the right to choose their services and providers. Several states reacted by introducing stricter controls on health care quality, while insurers responded with a wider range of health care plans as well as a loosening of the tight oversight of costs within managed care. A sharp rise in health care costs since 2000 was one of the consequences. Graph: Change in the health care costs to GDP ratio in selected OECD countries Source: Kaiser, 2011 (a) The graph shows that the USA saw the sharpest rise in health care expenditure in the 1980s (the health care expenditure to GDP ratio grew by 3.2%), 1990s brought about a significantly slower growth, while the new millennium saw another sharp rise. The origins and importance of managed care in the US were influenced by the specific US financing structure of health care, where several health insurance modes coexist side by side (INEKO, 2009): 1. Traditional insurers (fee-for-service plans or indemnity plans). Traditional insurers reimburse treatment selected by the insured from any provider. Due to broad provider accessibility traditional insurers are more expensive than insurers with a limited provider network. The insurer does not cover the full cost of treatment; patients pay a basic fee themselves. Patients also share a part of the costs above this fee; however, for the most part they are covered by the insurer. Insurers generally
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7 define an annual ceiling for patient expenses. Costs exceeding this ceiling are
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  • Spring '16
  • Health Maintenance Organizations

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