Managed care for cancer

ALSO KNOWN AS: Health maintenance organizations (HMOs), preferred provider organizations (PPOs)

DEFINITION: Managed care is a process used by health insurance plans to pay for and coordinate the delivery of healthcare services to people covered under the managed care plan.

Prevalence of managed care: Managed care is the most predominant form of health insurance in the United States. The majority of private health insurance plans are managed care plans. The Kaiser Family Foundation and the Health Research and Educational Trust survey estimate that around 75 percent of employees enroll in an employer’s group health insurance under a managed care plan. The prevalence of managed care in public health insurance plans has grown rapidly since 1990. Approximately 70 to 75 percent of people enrolled in Medicaid receive services through managed care, representing a 900 percent increase from 1991. The Medicare program, which has traditionally provided public health insurance through an indemnity plan, has seen increasing enrollments in its managed care Medicare Advantage plans.

Principles of managed care: Health insurance was once primarily organized as an indemnity or fee-for-service system. Persons covered under an indemnity health insurance plan can visit any physician or medical facility they choose and submit a claim to the insurer for reimbursement of a certain percentage of the medical expenses. In response to escalating healthcare costs, managed care systems were developed and promoted as a way to pay for medical services and control the quality, accessibility, utilization, and cost of those services. As a result, persons covered under a managed care plan have limitations on which healthcare providers they can use and must follow the plan’s procedures in accessing the healthcare providers to receive coverage.

Managed care has many forms, but all plans share a few fundamental principles and processes. Managed care plans control the access of persons covered under the plan (covered persons) to medical services. Medical services are only covered if they are provided by certain healthcare providers that are either on the staff of the managed care plan or under contract with the plan. Covered persons are assigned to or can choose from a list of primary care physicians, usually family doctors, internists, pediatricians, or obstetricians/gynecologists. The primary care physician’s role in coordinating care is to eliminate inappropriate and unnecessary services. They provide preventive and routine care to covered persons and act as gatekeepers to arrange and authorize care from other healthcare providers. The patient must, therefore, obtain a referral from the primary care physician before seeking nonemergency medical care from a specialist, hospital, or outpatient facility.

Managed care plans also use utilization reviews to determine the medical necessity or appropriateness of services. Reviews can occur before, during, or after services are rendered. Because these reviews determine whether the plan will cover the medical expenses, patients are encouraged to seek preauthorization for services requiring review. For example, a patient with cancer who must undergo an operation to biopsy or remove a tumor may need to arrange for preauthorization of the surgery to determine the amount of coverage the plan will provide.

Managed care plans can influence a patient’s quality of care. The plans impose standards for selecting healthcare providers associated with the plan. The plans also have formal quality assurance programs and provide incentives for plan doctors to use best practice protocols or treatment guidelines based on medical experts' standards of care. Through case or disease management programs, plans identify covered persons with chronic healthcare needs and coordinate with the primary care physician to establish a cost-effective treatment plan and monitor patient outcomes.

To manage costs, plans may restrict certain treatments or limit inpatient admissions and lengths of stay, favoring outpatient care when possible. Healthcare providers associated with managed care plans are reimbursed at negotiated rates. Some plans pay a fixed amount, called a capitation payment, for each healthcare provider providing services to covered persons, regardless of the number or type of services rendered. Other plans negotiate with providers and reimburse them for expenses at a discounted rate. Incentives built into such plans can be financial and oriented toward a good health outcome for the patient.

Types of plans: Three primary types of managed care plans exist: health maintenance organization (HMO) plans, point-of-service (POS) plans, and preferred provider organization (PPO) plans.

HMOs are the oldest and strictest form of managed care. Enrollment in HMO plans peaked in 1996 and began to decline thereafter, but HMOs are still a prevalent form of managed care. HMOs pay for services delivered by healthcare providers who are employees of the HMO or those under contract with an HMO as network providers. The covered person is usually responsible only for a fixed copayment. Care is delivered through a primary care physician, and care from other providers must be authorized by the primary care physician. Typically, other providers must be associated with the HMO.

An HMO usually offers a POS plan, sometimes called an open-ended HMO plan. Under a POS plan, the covered person can receive services from a healthcare provider who is not an HMO employee or network member. These services are available at a higher cost to the covered person through a deductible and coinsurance and frequently do not require a referral from a primary care physician.

A PPO plan is a form of managed care offered by insurers other than HMOs and is currently the most popular form of managed care plan. The insurer contracts with a network of area healthcare providers who agree to accept set fees for services given to covered persons. The plan offers financial incentives for covered persons to receive care from in-network providers, such as low copayments. Covered persons can receive care from healthcare providers, including primary care physicians, who are not members of the PPO network, but only at a higher cost through deductibles and coinsurance. Covered persons may also be responsible for paying the difference between what the insurer paid the out-of-network healthcare provider and what the provider charged. Covered persons can often make self-referrals and do not need to get a referral from a primary care physician.

Consumer protections: Because managed care plans make coverage decisions that can restrict access to care, many federal and state consumer protection laws govern managed care practices. These laws apply only to managed care plans that are state-regulated. Many states allow a covered person with a chronic illness to pick a specialist as a primary care physician since going through a primary care physician for referrals is time-consuming. Other states allow primary care physicians to give standing referrals to persons with chronic illnesses, such as cancer, who need special medical care over a long period.

Managed care plans can deny coverage of a service based on their assessment that coverage is not provided for under the contract, the proper procedures in obtaining the services were not followed, or the services were not appropriate or medically necessary. Managed care plans must follow state and federal rules for internally reviewing covered persons’ complaints and appeals concerning denial of coverage. Most states have enacted procedures for external or independent reviews, especially when denial of coverage was based on a determination by the insurer that services rendered were not appropriate or medically necessary. Several states require persons employed by insurance companies who decide on the medical necessity of care to have medical credentials or a current in-state medical license. Many states have established an ombudsman office to act on behalf of covered persons during disputes with insurers over denial of coverage.

States have prohibited managed care plans from compromising physicians’ medical opinions. Most states prohibit gag clauses in healthcare provider contracts that would keep doctors from informing patients of their treatment options. Federal law bans the use of gag clauses in Medicaid and Medicare plans. States have also banned rewarding doctors for performing less costly procedures or prescribing less costly drugs.

Finally, many states produce a report card on managed care plan performance. The report cards detail how well a managed care plan handles complaints, covers and delivers care, and gives access to specialized care. Some reports also include measures of healthcare providers associated with managed care plans.

Bibliography

Buckley, John F., and Nicole D. Prysby. State by State Guide to Managed Care Law. Aspen, 2022.

Jefford, Michael, et al. "Improved Models of Care for Cancer Survivors." The Lancet, vol. 399, no. 10334, 2022, pp. 1551-60. doi.org/10.1016/S0140-6736(22)00306-3.

Kongstvedt, Peter R. Managed Care: What It Is and How It Works. 5th ed., Aspen, 2020.

Marcinko, David E., and Hope R. Hetico, editors. Dictionary of Health Insurance and Managed Care. Springer, 2006.

Marton, James, et al. "A Tale of Two Cities? The Heterogeneous Impact of Medicaid Managed Care." Journ. of Health Economics, vol. 36, 2014, pp. 47–68.

"Medicaid Managed Care." Capitol Ideas, vol. 56, no. 3, 2013, pp. 14–15.

Modestino, Alicia Sasser. "The Impact of Managed Care on the Gender Earnings Gap among Physicians." Research Rev., vol. 19, 2013, pp. 18–21.