Managed Care is utilized to describe healthcare delivery systems which emphasize reducing the cost of healthcare, while providing better access to care, and better treatment outcomes. The movement to managed care began back in the 1970’s, but more and more states are switching to this healthcare business model. This trend will continue over the next decade spurred on by healthcare reform, the affordable care act, and a governmental pressure to reduce the cost of healthcare in the United States.
Managed Care Organizations, or MCOs, utilize the following techniques to decrease the cost of care:
- A set of designated doctors and healthcare facilities, known as provider networks, which furnish healthcare services to the patient, or MCO enrollee
- Explicit standards for selecting providers
- Formal utilization review and quality improvement programs
- An emphasis on preventative treatment
- Financial incentives for enrollees (or patients) to practice judicious use of healthcare resources
The movement to managed care is trending in many states, and so far this trend has remained below the radar of public awareness. Currently all but three states enroll Medicaid beneficiaries into a Managed Care Organization. Managed Care enrollment is expanding, and in many states such as Kansas, Florida, Texas, and Tennessee, other segments of the healthcare population are being enrolled in Managed Care. But as organizations are going through this transition, they are finding that success from a financial perspective can be difficult to achieve.
Enrollment of Medicaid eligible populations has been fairly straightforward from a cost control perspective. That is because a large amount of previous claims data exists for this population, allowing for reasonable and adequate rate setting. When Managed Care is expanded to cover patients, or conditions, in which there is little historical data on treatment cost, it can be much more of a challenge.
Two of the nation’s largest MCO organizations have downgraded their profit forecasts for the upcoming year. One of these organizations reduced it by nearly 43%, and with more costly claims data information coming in, the question will be:
Can Managed Care Organizations reign in healthcare costs, and what will happen if they are unsuccessful?
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