Impact of Managed Care on Health-Care System

Impact of Managed Care on Health-Care System

The purpose of this research is to examine the impact of managed care on the American health-care system. The plan of the research will be to set forth the context in which the issue of managed care has assumed importance and then to discuss both its effect on and its effectiveness in the U.S. health care system.

Managed care is the name given to a system of health-care service delivery that rations access to medical services in ways designed to control costs and spread the financial risk to the entity funding the program, “generally accomplished by reducing access to the most expensive types of care and substituting less expensive interventions” (Penney, 1997, p. 48). Like standard health-insurance programs, managed care facilitates the provision of medical care by drawing from a large financial pool paid into by participants. The insurance company or managed care company (MCO) subsidizes the cost of medical care to covered persons, making money in part on the difference between the money pool and claims for subsidized service made by sick people. The financial risk is spread because the MCO or insurance company is gambling that there are more healthy than sick people.

A key difference between MCOs and traditional insurance plans, however, is that traditional insurance plans are structured around a so-called fee-for-service concept. What that comes down to is that insured patients may seek care from physicians and institutions of their choice, filing claims based on covered conditions or situations very much at patient discretion, within the coverage limits of a given insurance plan. Similarly, medical-service providers have historically had discretion in the selection of patients. There is less discretion available to medical-service providers who contract with an MCO; anyone covered by the MCO may be entitled to care (Rosenbaum & Others, 1997). Discretionary aspects of service delivery under fee-for-service systems has in rece…

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