What Is Managed Care in Healthcare?

Managed care is a healthcare financing and delivery system common in the United States. If you belong to a health insurance plan that connects you with specific providers and medical facilities.

Managed care plans, also known as managed care organizations, are companies responsible for managing care and costs for their enrollees. Managed care plans are focused on controlling overall costs while ensuring enrollees have access to a provider network and receive high-quality care. Its goal is to better serve its members by focusing on Care Management and prevention in order to increase positive, healthier outcomes.

Managed care has existed in one form or another for decades, with significant growth since the early 1970s and the enactment of the Health Maintenance Organization Act. Over the years, the managed care plan approach has evolved from a narrow focus on costs and utilization to more comprehensive preventative medicine, population health, and Care Management strategies.

Let’s dive into more details about managed care and the importance of Care Management.

What is a managed care plan?

A managed care plan is a type of health insurance plan. Managed care plans are healthcare companies focused on managing care for enrollees to limit costs and keep the quality of care high. Managed care plans exist across Medicaid, Medicare, and commercial markets. Familiar names include United HealthCare, Anthem, and Humana.

What organizations do managed care plans work with? On the funding side, managed care plans contract with payers seeking coverage for individuals — such as the federal Medicare program, state Medicaid programs, and private employers. On the payment side, managed care plans contract directly with providers, health systems, and other organizations to deliver services to covered enrollees.

Managed care plays a major role in the nation’s Medicaid program. Medicaid and the Children’s Health Insurance Program (CHIP) provide insurance to more than 70 million individuals in the United States. Medicaid enrollees typically qualify for coverage based on income or disability status. Eligibility levels vary by state.

More than 41 state Medicaid programs contract with managed care plans to deliver care to Medicaid enrollees. Many of these programs focus on mainstream managed care, which provides services and benefits to the broader population of Medicaid enrollees. Medicaid managed care plans contract directly with states to cover Medicaid enrollees and are required to follow state-mandated eligibility and benefits. Managed care has emerged as a standard feature in state Medicaid programs to enable better control over costs, covered benefits, and quality of care. Managed care continues to evolve in state Medicaid programs.

Some states are deploying these programs focused specifically on populations with chronic or complex conditions. They generally focus on enhanced care coordination and integration models, which enable specific populations to access an enhanced set of benefits to manage their conditions. Managed care plans play an important role in coordinating benefits for these initiatives.

States are also focusing on value-based initiatives for mainstream and specialty managed care programs. Value-based initiatives align payment incentives for managed care plans and providers — they tie payment to the achievement of specific healthcare outcomes, patient experience goals, and the reduction of unnecessary care.

Types of managed care

There are several categories of managed care plans. The most common ones are outlined below.

Health maintenance organizations (HMOs)

HMOs often have lower monthly premiums and manage care by placing restrictions around which providers enrollees can see. HMOs typically require enrollees to see in-network providers — those providers for whom the plan is directly contracted (providers not included in the plan’s network are referred to as out-of-network providers). Frequently, HMOs also require enrollees to see their primary care provider and obtain a referral before seeing a specialist. Preventive care appointments, such as annual wellness visits, are fully covered. HMOs often cost less but offer fewer choices than other options.

Preferred provider organizations (PPOs)

PPOs offer more flexibility to enrollees and generally have larger provider networks, but may cost more. Enrollees in a PPO can seek care from both in-network and out-of-network providers. PPOs utilize a preferred provider network and offer in-network care at a lower price. Referrals from a primary care provider are not usually required to access specialty care. PPOs cover preventive care at 100%. Since beneficiaries have more flexibility in the providers they see, monthly premiums are likely to be higher than premiums for an HMO plan.

Point of service (POS) organizations

POS organizations are essentially a hybrid of the HMO and PPO models. Enrollees have the flexibility to see providers that are in-network or out-of-network but pay a higher share of costs. POS plans may require you to see your primary care provider for a referral before seeking specialist care. POS plan enrollees pay more to see out-of-network providers unless their primary care provider makes a direct referral. POS plans seek to offer enrollees flexibility and choice in seeking care while controlling costs and utilization.

Exclusive provider organizations (EPO)

An EPO typically offers a local network of providers and hospitals for enrollees to choose from and usually costs less than a PPO plan. Out-of-network care is generally not covered except in cases of emergencies. While premiums for EPOs can be lower, the restrictions around seeking in-network care are important for enrollees to consider.

How managed care organizations benefit from Care Management

As mentioned, managed care’s main purpose is to focus on prevention and long-term health outcomes. Care Management and proactive care can achieve those goals.

Managed care organizations are tasked with fully administering health plan coverage, engaging with enrollees, managing utilization of services, maintaining strong provider networks, controlling costs, and ensuring quality care is delivered. A comprehensive Care Management approach benefits managed care plans in streamlining efforts, improving patient care and outcomes, and reducing the need for avoidable costs and services. Care Management includes activities and interventions aimed at improving the quality and coordination of care. It also aims to eliminate duplication and support patients and their families in managing health conditions.

For example, Diane is a 56-year-old woman with a history of cancer and is enrolled in a managed care plan. The Care Management approach utilized by her managed care plan identifies a “gap” in care or a discrepancy between recommended care and actual services. Diane has not received her yearly mammogram. Her health insurance plan notifies her primary care provider and also has a care coordinator reach out to Diane directly. The care coordinator facilitates an appointment at a local imaging center, asks Diane if she has any barriers to attending the appointment, such as lack of transportation, and answers any questions Diane has.

The Care Management approach of the health insurance plan identified a need, engaged with the patient, and intervened to make a connection to care. This aligns the goals of access to care and improved outcomes directly related to a patient’s specific needs.

How a Care Management platform enables effective managed care

A Care Management platform aligns with the goals of managed care plans and providers alike. Implementing a Care Management solution allows care teams and clinicians to communicate effectively, understand patient needs, and engage with managed care plans for both individual and population-level care.

Managed care goals of ensuring access to quality care, engaging with enrollees, and controlling healthcare costs are dependent on clear and comprehensive communication and data-sharing. An intuitive Care Management platform is the key to enabling effective managed care. To learn about how a Care Management platform like Welkin works and how it can help you reimagine managed care, head to the how it works page.

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