Many health plans today, and even many Medicaid plans, are considered managed care organizations (MCOs), and this concept is not exactly very new.
In the 80s, MCOs were credited with controlling ballooning healthcare costs, and they eventually grew to dominate American health insurance.
The National Library of Medicine
provides a good definition for us to break down the idea of managed care and tie it into your experiences as part of a health plan.
Health insurance plans intended to reduce unnecessary health care costs through a variety of mechanisms, including: economic incentives for physicians and patients to select less costly forms of care; programs for reviewing the medical necessity of specific services; increased beneficiary cost sharing; controls on inpatient admissions and lengths of stay; the establishment of cost-sharing incentives for outpatient surgery; selective contracting with health care providers; and the intensive management of high-cost health care cases
Probably the biggest part of the definition you will recognize is the bit about “selective contracting with health care providers”. This is where your provider network comes in. These health plans tend to negotiate directly with a select group of doctors, clinicians, and pharmacies to set prices that the insurer guarantees will be paid for care. This negotiated rate or allowable cost is paid for through a combination of the patient’s out-of-pocket expense and insurer’s payment to the provider.
Theoretically, these contracted providers are offering cheaper care, which could be enabled because the insurer can say “we can direct our members to get care from you, so the increased quantity of patients can justify lower cost per patient”.
Some other parts of the definition can explain some of the other more concerning parts of modern health insurance. Here are some translations for you to think about.
economic incentives for physicians and patients to select less costly forms of care
“…primary care physicians may receive incentives to be conservative in using referral or hospital services, and FFS [fee-for-service] physicians may be rewarded when the plan, the provider group, or individual provider does well on various measures like cost, utilization, patient satisfaction, and quality of care”
This was an excerpt
from an article on financial incentives under MCOs. One concern is the risk of physicians not giving enough care to get these incentives.
This also gives us some clues for why an insurer may not be trying its best to cover as many providers as possible. Take this quote
The more physicians in a pool, the smaller each physician’s incentive to control costs. Alternatively, an organized risk pool may discipline its members, either formally or informally.
Smaller provider networks are simply easier to enforce the needs of the health plan.
programs for reviewing the medical necessity of specific services
Insurance claims and processing them is a huge business in and of itself, because it facilitates what many health plans try to do in the utilization review process
When a patient is admitted to the facility, a first level review is conducted for appropriateness; this includes medical necessity, continued stay, level of care, potential delays in care and progression of care.
Medical necessity determines whether the hospital admission is appropriate, justifiable and reimbursable.
So yeah, a health plan can deem your treatment unnecessary (assuming there aren’t regulations preventing that in the process of claims review).
increased beneficiary cost sharing
Basically this means higher patient out-of-pocket spending in the form of deductibles, co-pays, and co-insurance. The idea is that patients who have to pay more up-front costs will be discouraged from getting treatments they don’t need.
controls on inpatient admissions and lengths of stay
Inpatient admissions are fancy talk for hospital admissions. Health insurers want to reduce these admissions and the length of stays at the hospital, because these visits tend to be comparatively expensive.
have pointed out that patients typically come in two ways – through emergency department visits and “scheduled elective admissions”. Let’s start with the second bit, which we can translate to admissions the patient plans in advance, like for a surgery. This may be controlled through requiring a referral for these procedures and admissions, which makes the referring provider something of a gatekeeper to control costs.
To reduce emergency department visits, the health plan will typically want to encourage care coordination and continuity of care for members in the health plan. This means physicians are encouraged to address and provide plans to maintain long-term health to prevent emergencies that may emerge. These ideas attempt to help long-term wellness by ensuring doctors are all on the same page with regards to ongoing conditions, treatments, and medications; as well as following through on long-term developments in a patient’s history, respectively.
the establishment of cost-sharing incentives for outpatient surgery
Outpatient care is received through places that are not in a hospital, like the office of your specialist provider. Surgery in outpatient locations tend to be cheaper, because there is not as much overhead as in a hospital, so the MCO may make patients pay patients lower out-of-pocket cost for getting surgeries here.
intensive management of high-cost health care cases
The majority of health expenses faced by a health plan usually come a small set of members in the health plan, so the reasoning is that managing the cost of care for these members will reduce overall costs the most effectively.
These may be members with serious chronic conditions like some cancers, AIDS, and ALS or those suffering “catastrophic events” like stroke, heart attack, accidents, and complicated births.
The health plan’s management of high cost care can be summed up with these common elements
efforts to find less costly alternatives to the care (usually hospital care) that would be provided for specific patients in the absence of case management;
willingness to approve payment for services not covered by the patient’s benefit plan, if doing so will help reduce overall costs; and
concurrence from all relevant parties—patient, family, and physician—in implementing cost-saving alternatives for meeting the patient’s needs.