Legal Definitions - managed care

Managed care refers to a structured system for delivering healthcare services that aims to control costs and improve the quality of care by managing access to services, negotiating prices with healthcare providers, and emphasizing preventive care. These systems typically involve a network of doctors, hospitals, and other healthcare professionals that patients must use or choose from to receive coverage and benefits.

• Example 1: Health Maintenance Organization (HMO) Plan

  Imagine a person named Sarah who enrolls in an HMO health insurance plan through her employer. Under this plan, Sarah must choose a primary care physician (PCP) from a specific list of doctors within the HMO's network. If Sarah needs to see a specialist, such as a dermatologist or a cardiologist, her PCP must first provide a referral. Without this referral, the HMO plan will not cover the specialist visit.

  This illustrates managed care because the HMO actively manages Sarah's access to healthcare services. By requiring her to select a PCP within its network and obtain referrals for specialists, the HMO controls which providers she sees and ensures that care is coordinated, which helps to manage overall costs and utilization of services.

• Example 2: Preferred Provider Organization (PPO) Plan

  Consider David, who has a PPO health insurance plan. David has the flexibility to see any doctor or specialist he chooses, even without a referral. However, his plan offers significantly lower co-payments, deductibles, and out-of-pocket costs if he chooses healthcare providers (doctors, hospitals, clinics) that are part of the PPO's "preferred" network. If David decides to see a doctor outside this network, his costs will be substantially higher.

  This demonstrates managed care through financial incentives. While offering more choice than an HMO, the PPO still manages care by encouraging David to use its network of preferred providers, with whom the organization has negotiated discounted rates. This strategy helps the PPO control healthcare expenditures while giving members some flexibility.

• Example 3: Point-of-Service (POS) Plan

  A family named the Lees has a POS health insurance plan. They are required to choose a primary care physician (PCP) within the plan's network, similar to an HMO. This PCP then coordinates their care and provides referrals for specialists within the network. However, the Lees also have the option to seek care from doctors or specialists outside the network without a referral, but if they do, they will pay a much higher percentage of the cost themselves, similar to an out-of-network PPO option.

  This scenario exemplifies managed care by combining features of both HMOs and PPOs. The POS plan manages care by encouraging in-network use through a PCP gatekeeper for lower costs, while still offering the flexibility (at a higher price) to go out-of-network. This hybrid approach allows the plan to manage costs and care coordination while providing members with a broader range of choices.