Managed Care

There are so many problems with our society’s health care. Everyone wants to find a

solution, but no one has been able to come up with one yet. Many different things have been

tried, but none have put a cease to the exorbitant costs, which most believe to be the main

problem. Out of everything tried, the most recent and popular system is known as managed care.

Managed care is the most common form of health insurance in the United States, and provides

more a cost efficient coverage than paying a fee-for-service charge. However, it is also a very

complicated system. Over the next few pages I am going to try and go over the main parts of the

managed care structure. In the end, I am going to decide the strengths and weaknesses of this

system, and decide whether or not I think it will be the answer to our system.

First I am going to go over exactly what managed care means, as simply as possible.

Managed care is an organized approach to delivering a comprehensive array of health care

services to a group of enrolled members through efficient management of services needed by the

members, and negotiation of prices or payment arrangements with providers. It has two main

functions; first it integrates the functions of financing, insurance, delivery, and payment with one

organizational setting, and it also exercises formal control over utilization.

Now I am briefly going to go over the history of managed care. Managed care dates back

to as early as 1882. Northern Pacific Railroad Beneficial Association was one of the first

employers to offer health care coverage. In 1910, the Western Clinic in Tacoma, Washington

offered medical services through its providers for a premium of only $.50 per month, which

served lumber mill owners and employees. In 1929, Blue Cross was originated when Baylor

Hospital in Texas agreed to provide coverage by the case on a prepaid basis for some 1,500

teachers. The Kaiser Foundation Health Plan was started in 1937 as well. In 1971, the Nixon

Administration announced a new national health strategy, which was the development of health

maintenance organizations. The federal government established grant and loan guarantees for

HMO’s to reach a goal from 30 in 1970 to 1,700 by 1976, enrolling 40 million people, and 90

percent of the population by 1980. The HMO Act of 1973 authorized $375 million in federal

funds to help develop HMO’s. Although the goals have not yet been met, managed care has

continued to grow throughout the past four decades. At the end of 1996, there were over 600

HMO’s in operation, enrolling around 65 million members, which is about 1/4 of the population

(Tufts 1998).

Before I get into the different types of managed care organizations, I am going to go over

some cost control methods in managed care. Managed care organizations are different methods

used to control utilization of services. Utilization management requires three things. First, you

have to have an expert evaluation of which services are medically necessary in a given case. This

ensures that unnecessary services are kept to a minimum. Secondly it requires a determination of

how those services can be provided most inexpensively, while maintaining a high level of

quality