Understanding Managed Care

Managed care means that health care is paid for in advance. Funds come from payments made regularly into an account by all members in the managed care plan, members' employers, Medicare, or Medicaid. When care is received, the person pays only a small part of the cost (as a deductible or copayment). Managed care organizations manage health care using a fixed budget. They also have set amounts that they will pay for each service.

Managed care has many variations. So one explanation of managed care does not fit all. For example, a person can choose a health maintenance organization (HMO) or preferred provider organization (PPO). There are many more HMOs than PPOs. When people are choosing a managed care organization or switching from one to another, information about preexisting health problems cannot be used to deny them access to health care insurance. Doing so is against the law.

Different types of managed care plans are available. Anyone who has a managed care insurance plan should keep a copy of the description of the plan handy for easy reference.

Managed care has several advantages, particularly for older people. Some managed care plans are designed specifically for older people. These plans coordinate the services of the needed health care practitioners at the appropriate sites of care (such as hospital, rehabilitation facility, or long-term care facility). Managed care organizations encourage access to health care services in the home so that older people may be able to avoid a stay in a hospital or long-term care facility.

Managed care may emphasize prevention. For example, in some plans, people are notified when they need a particular screening test, such as mammography to check for breast cancer. Managed care organizations provide information about care that can help prevent problems in older people. For example, practitioners and members may be sent information about the benefit of annual influenza (flu) vaccination. The information includes specific steps to follow so that members know how to get vaccinated. Practitioners may be sent guidelines about which tests and treatments are helpful to older people and which are unnecessary or may do more harm than good.

Managed care organizations may try to identify members who have specific needs, who need complex health care, or who are likely to develop a disorder. To identify such people, these organizations may periodically send members health appraisals to fill out. Information is also collected from doctor's visits, insurance claims, and pharmacies. This information is used to tailor a managed care plan to fit individual health care needs. Then these organizations distribute guidelines for managing specific needs. For example, members who use many prescriptions within a short time may be sent a letter describing the risks of taking many drugs. They are advised to bring all their drugs (prescription and nonprescription) to their primary care doctor. The doctor can then check to make sure the drugs the person is taking are appropriate and not likely to interact harmfully with one another. The doctor can also sometimes simplify the drug schedule or recommend strategies for remembering to take drugs as prescribed.

Information about a member may be available to health care practitioners. Such information is kept in a central database and can be accessed from different places of care. With accessible and complete health care information in one place, a person's practitioners can know about all of the person's medical problems, avoid duplicating treatments and tests, and take steps to prevent harmful interactions among drugs.

Managed care has some disadvantages. HMOs cover care provided only at specific facilities and by certain health care practitioners. People must choose from a list of approved facilities and practitioners. If a person receives health care at another facility or from another practitioner without prior authorization, the HMO often refuses to pay for any of the costs. However, true emergencies handled through the closest hospital are usually partly or fully covered. Some HMOs have a point-of-service option. With it, people may choose facilities or practitioners outside the network, but the copayment is higher. PPOs allow some choice of facilities or practitioners but are more expensive than HMOs. Managed care does not usually include long-term care.

A formal referral approved by the primary care doctor is usually required before a person can see a specialist or undergo certain diagnostic tests. In such cases, the specialist or testing facility usually refuses to see the person without the referral or requires the person to pay directly for the service. Each person is responsible for having the correct referral form.

Most managed care plans limit coverage of some types of health care. For example, certain procedures, such as cosmetic surgery, may not be covered. Sometimes the total number of treatments (for example, the number of physical therapy treatments or visits for mental health problems) is limited during a year or over a lifetime. People can talk to their doctor about what types of care are covered. Managed care organizations also provide a list of tests, treatments, and other resources that are covered.

See the sidebar Who Needs Long-Term Care Insurance?