Health Care Management and Policy

Health Care Management and Policy encompasses the strategic planning, organization, and implementation of health care services, focusing on the intersection of health care access, quality, and costs. In the United States, this field is particularly complex due to ongoing debates in Congress and state legislatures about how best to deliver care while controlling costs. Key concerns include the rising costs of health care, the increasing burden on businesses to provide employee health insurance, and the millions of Americans lacking adequate insurance coverage. Managed care systems, which include organizations such as Health Maintenance Organizations (HMOs) and Preferred Provider Organizations (PPOs), aim to provide care while controlling costs, but often face criticism over limitations in patient choice and provider reimbursement.

Emerging trends in health care policy also emphasize preventive care and consumer-driven health plans, which shift some financial responsibilities onto employees while encouraging healthier lifestyle choices. These initiatives aim to mitigate costs associated with chronic conditions and improve overall productivity in the workforce. Despite recent reforms, such as the Patient Protection and Affordable Care Act, challenges remain in ensuring equitable access to health care, particularly for underserved populations. Ultimately, effective health care management requires a collaborative approach among government, providers, insurers, and the business community to navigate these intricate issues and promote sustainable health care solutions.

Published in: 2021

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Subject Terms

Health Care Management and Policy

Abstract

This article concerns health care policy in the United States and its effect on business. The public policy issues in regard to health care are complex and continue to be a subject of debate in Congress and in the state legislatures. What is not a matter of debate is the need to contain costs and improve access to health care. Effectively meeting these challenges requires the mutual efforts of the government, health care providers, health insurance companies, and the business community. The following article will provide an overview explaining how health care is provided to the public and includes a discussion of some challenges facing policy makers and the associated business issues.

Overview

The public policy issues concerning health care are often intertwined with various business concerns, which have an impact on the decisions of lawmakers and eventually in the pricing and allocation of health services. While these issues have long been the focus of political debate, by the early twenty-first century, policy makers became concerned that overall health care costs were rising at an alarming rate. Many questions remain regarding who will shoulder the financial burden of mushrooming costs, while "business executives have expressed blunt frustration with the rising cost to businesses of insuring employees and pensioners for healthcare" (Webster, 2006, p. 639). In addition to these challenges, another serious issue confronting policy makers is the fact that millions of Americans do not have health insurance, and the only access they have to health care is emergency room access (Webster, 2006). The 2010 passage of the Patient Protection and Affordable Care Act was intended to combat this unequal access to health care through the introduction of various reforms, including the creation of exchanges through which Americans can purchase affordable health insurance plans.

Managed Care Systems. Many Americans have access to health care under employer-provided managed care systems. A managed care plan monitors access to health care while attempting to control quality and contain costs. Some common managed care plans include health maintenance organizations (HMOs), preferred provider organizations (PPOs), and point of service (POS) systems.

While many individuals have access to managed care systems, these health plans have not been successful in containing health care costs. Initially, managed care systems such as HMOs were designed to curb rising costs while providing adequate health care for enrollees. However, many people felt HMOs placed too much restriction on their choices of physicians, who, in turn, felt their practices and decisions related to patient care were being overly restricted. Enrollment in HMOs peaked in the early part of the 2000s as more people enrolled in alternative PPOs and point of service plans. Because these plans offer more choice, they usually cost more, and this has prompted employers to scale back on their contributions, resulting in higher premiums, deductibles and co-payments for employees (Dixon, 2004).

Health Savings Accounts. As the cost burden increasingly shifted to employees, business lobbying groups appealed to Congress to broaden health savings accounts (HSAs), which allow participants to set aside funds, tax free, to cover normal out-of-pocket medical expenses. This enables individuals to purchase insurance plans that have higher deductibles while providing them with a tax incentive to do so. If the money in the account is not used by the end of the year, it can be rolled over to the next year (Business Insurance, 2006).

Caught between the employers trying to cut costs and the third-party payer trying to make a profit is the health care provider. Managed care plans contain financial incentives and management controls aimed at directing patients to providers who are required to provide appropriate, cost-effective treatment, and this ultimately requires health care providers to understand business management. This situation has led to a redefining of the doctor-patient relationship. Moreover, employers must have greater expertise in the business of managed care, as controlling costs will require greater scrutiny of various plans (Hall, 2005).

Formation of Management Groups. In addition to the need for health care providers to have business management skills, participating in a health care network has resulted in increased administrative costs which have led many providers to pool resources and form medical groups. While the quality of medical care largely depends on a physician's capabilities, the type of medical group in which a provider works can affect the quality of care as well. In general, studies have shown that well-managed medical groups can provide quality, cost-effective medical care (Casalino, 2006).

Applications

Managed Care Systems. For many Americans, access to health care is largely determined by their employers, and there are a number of factors that affect a company's choice of a managed care program. One of the key considerations for businesses is cost, and there are number of managed care systems to choose from, including HMOs, PPOs and Point of Service care. The following is a brief look at those plans.

Health Maintenance Organization (HMO). An HMO acts as both an insurer and a provider of specific medical services. Most services are financed by fixed payments that are made in advance to a provider for the delivery of specific services. Some of the factors that determine these payments include the range of services provided by the physician, the number of patients involved, and when the services are provided. Health care services can be provided at the organization's own facility or at hospitals, doctors' offices, and clinics that are included in a network agreement. Typically, primary care physicians coordinate a patient's treatment, and if need be, patients are then referred to specialists.

Preferred Provider Organization (PPO). A PPO is an organization of providers where the insurer contracts with a limited number of physicians and hospitals to provide health care at specific levels of reimbursement for each service. The preferred providers are often subject to restrictions regarding the appropriateness of care provided. While the patient does have some flexibility in health care decisions and selecting providers, patients have financial incentives to use providers that are in the network.

Point of Service (POS). Point of Service combines the features of HMOs and PPOs, since the patient only pays a co-payment or low co-insurance for contracted services within a network of preferred providers. This is also referred to as in-network care. However, like traditional fee-for-service insurance, people participating in these programs can also seek out-of-network care.

Cost Containment: Preventative Care. For businesses that are in a position to offer health care coverage, there is a valid reason to contain costs, since annual premiums paid by employers for individual and family plans can be costly. In addition to containing costs by paying lower premiums, businesses are looking for other alternatives. One innovative approach is to encourage employees to take greater responsibility for their health. In doing so, employers are looking to shift the focus of health care coverage from treatment to prevention. According to one survey, "low back pain, depression, heart disease, diabetes mellitus, and obesity are considered the costliest conditions in terms of employee absenteeism, decreased productivity and disability" (Dixon, 2004, p. 29).

Consumer-Driven Health Plans. Shifting the focus to prevention is leading to a greater use of consumer-driven health plans, and this is enabling employers to control cost increases. By steering health care coverage to prevention and consumer-driven plans, a number of health care related expenses can be mitigated. Without such programs, employers typically spend more for employee absenteeism, disability program use, workers' compensation costs, and family medical leave. Ultimately, these costs manifest themselves in productivity losses. According to some studies, implementing prevention programs for some businesses have led to 28% reductions in sick leave, 26% reductions in direct health care costs and 30% reductions in workers' compensation and disability costs (Dixon, 2004).

In particular, smoking cessation programs are evidence of immediate benefits for employers and employees alike. It is well documented that cigarette smoking is the leading cause of preventable death. Moreover, there are a host of other illnesses associated with smoking that eventually lead to the need for acute care. According to a 2004 study, "providing care for these illnesses increases costs for employers, and the CDC estimates that companies spend up to $3,856 per smoker per year in direct medical costs and lost productivity" (Dixon, 2004). In order to implement an effective preventive care program, employers need to establish procedures to monitor these systems, and this requires resolving some key questions, including (Dixon, 2004, 30):

Which clinical preventive services should be offered through the benefit plan?
Is there sufficient evidence to support inclusion of particular clinical service features in the benefit design?
Do the programs improve health and lower risks?
Do the programs reduce inappropriate health care utilization and costs?
Is the productivity of employees and overall organizational health improved due to these programs and services?

The National Business Group on Health (NBGH) released an extensive guide for employers to assist them with answering these questions, and those guidelines speak to the fundamental goals of prevention (Ceniceros, 2006, 26):

Encourage individuals to avoid or delay disease by practicing healthy lifestyles.
Identify individuals who could benefit from treatment for a condition about which they are unaware.
Prevent further disability among individuals with established diseases.

By shifting the emphasis from acute care to preventive care, and requiring consumers to pay more for health care costs, the NBGH believes that consumers will begin to make healthier lifestyle choices. Moreover, because they have a greater responsibility for covering health care costs, consumers will be driven to seek out providers who offer effective and affordable health care services. The NBGH has a number of other initiatives on its agenda, including giving workers provider cost information and the pay-for-performance initiative (Shepherd, 2006).

One key for an effective consumer-driven health plan is for participants to have greater access to information about health-care providers, including recommended treatments and alternatives, quality and safety, pricing, and any other information that will enable consumers to make informed choices about their health care. Not only will consumers be better able to make health care decisions, transparency of health care providers will increase competition, and this will result in quality improvements in the care that is provided as well as cost containment (Business Insurance, 2006).

Pay-for-Performance. Pay-for-performance programs are quality control procedures intended to eliminate the misuse or overuse of health care services and reduce the number of preventable deaths and injuries. Groups such as the NBGH have lobbied in favor of applying the pay-for-performance model to Medicare, noting that "would harness the government's leverage as the largest purchaser of health care in the U.S. to improve the quality and efficiency of Medicare and the overall health care system" (Business Insurance, 2006, p. 15). The Patient Protection and Affordable Care Act created several pay-for-performance initiatives for Medicare, including the Hospital Readmissions Reduction Program, which seeks to reduce the number of patient readmissions related to factors such as inadequate treatment or complications from treatment.

There are a number of other cost control methods available to employers, including specialty drug management and prescription drug tiers—that is, setting different price guidelines for brand name and generic drugs—as well as greater use of technology that will lead to analysis aimed at determining if patients are getting the best care available. In short, the goal is for consumer-driven plans to reduce health care costs as closer scrutiny of care increases competition. If employees are living healthier lives by virtue of participating in preventive care plans, the cost of their health care will be less than it traditionally has been for acute care. In the end, this will be mutually beneficial for employees and businesses (Business Insurance, 2006).

Viewpoints

The Development of Managed Care. As businesses look to reduce their premiums, it is inevitable that costs will be shifted to employees. At the same time, some smaller businesses may not be able to offer health care benefits, and it is possible that more people will become uninsured. Prior to the passage of the Affordable Care Act, this led many individuals to enroll in public health care programs such as Medicaid, a program intended to provide health care and health-related services to low-income individuals, and seek health care at community health centers, free clinics, and even hospital emergency rooms. The introduction of the health insurance exchanges provided low- and moderate-income Americans who do not qualify for Medicaid the opportunity to purchase subsidized insurance plans. Despite the introduction of the exchanges, it remains important that communities develop better strategies for providing health care to the uninsured. These strategies include encouraging physicians to provide charity care while relying on managed care safety-net models in order to better coordinate health care (Taylor, 2006).

A managed care safety-net model is one that is employed at community health centers and free clinics. In order for this model to be used, people must enroll in the health center or clinic. In so doing, their health care can be better coordinated and they can be given better access to preventive and primary care as well as prescription drugs. One necessary condition for the success of these programs is donated care. In this regard, physicians and other health care providers must volunteer to work at the health centers and clinics and agree to see a certain number of patients. In addition to donated care, physicians can also agree to provide care at a discount.

Other Health-Related Financing Issues. According to America's Health Insurance Plans (AHIP), a lobbying group that represents the health insurance industry, "one of the most important health care challenges the nation faces is to create an integrated health information technology system" (Managed Care Outlook, 2006, p. 10). There are two initiatives in this regard: creating a database of electronic health care records and removing barriers to electronic drug prescription. AHIP contends that electronic health records will enable physicians to provide patients with better care as well as to provide that care more expediently. Moreover, electronic drug prescriptions can improve patient safety by decreasing errors that result from communication errors and eliminating excessive laboratory tests (Managed Care Outlook, 2006).

Pharmaceutical pricing is another issue of particular concern. Since prices are escalating, some Americans have sought to purchase needed drugs at a discount from neighboring countries such as Canada. At the same time, many of these drugs are produced by U.S. pharmaceutical companies and then exported to Canada. By re-importing the drugs back to U.S. at lower prices, the market for pharmaceuticals is being undercut, and this is not beneficial to U.S. pharmaceutical companies (Managed Care Outlook, 2006).

Conclusion

The movement toward consumer-driven care programs, the efforts of groups such as the NBGH, and the passage of the Patient Protection and Affordable Care Act have been important steps toward the reform of the health care system in the United States. At the same time, it is up to individuals to take greater responsibility for their heath care by leading healthier lives and having more savvy when it comes to choosing health care providers. In any case, people will continue to need access to private and public health systems, and containing the cost of health care is a shared responsibility.

Terms & Concepts

America's Health Insurance Plans (AHIP): A lobbying group that represents the health insurance industry.

Consumer-driven health care: Health care coverage that shifts the emphasis from acute care to preventive care and that requires consumers to take more responsibility for their health.

Health care: Reasonable and necessary medical aid, medical examinations, medical treatments, medical diagnoses, medical evaluations, and medical services.

Health maintenance organization (HMO): An organization that provides for a wide range of comprehensive health care services for a specified group at a fixed periodic prepayment..

Managed care: A health care system that delivers appropriate health care services to covered individuals through arrangements with selected providers.

National Business Group on Health: A lobbying group that represents large businesses with regard to health care policy.

Preferred provider organization (PPO): A health care delivery system in which the employer or insurer enters into contracts with health care providers (physicians, hospitals, etc.) to provide health care services at a discount.

Preventive care: Health care aimed at preventing illness rather than treating acute illness.

Point of service (POS): A hybrid network model that combines features of HMOs and PPOs.

Public policy: A set of action guidelines or rules that results from the actions or lack of actions of governmental entities.

Bibliography

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Health Care Management and Policy

On this Page

Subject Terms

Health Care Management and Policy

Abstract

Overview

Applications

Viewpoints

Conclusion

Terms & Concepts

Bibliography

Suggested Reading