Health Care Systems - Managed health care vs. fee-for-service
Modern managed health care grew out of a desire to reform the traditional health care system, or the fee-for-service method of charging for health care.
Under the fee-for-service method, doctors and hospitals got paid for each service they performed. There were no limits on their treatment decisions; doctors or hospitals could order as many tests as they felt necessary, for example. Doctors and hospitals made a lot of money under this system because they decided the prices charged for every visit. However, patients did not always benefit because their insurance companies would often only pay a percentage of the fees being charged. For example, if a doctor charged $100 for a checkup, but the insurance company felt that $80 was a fair price, the patient would have to pay the extra $20, until a certain deductible was met. (A deductible is the amount of money, as determined by the health care plan, a patient must pay for services before the health care plan will pay for any medical bills.)
The different types of fee-for-service include indemnity plans and reimbursement plans. In an indemnity plan, the insurer sets an amount that it will pay for a specific medical service. In a reimbursement plan, the patient must pay all fees up front and then file claims to be reimbursed by the insurer. Fee-for-service health care is no longer widely in use. Most people today have some kind of managed care insurance.
Sometimes doctors reach an agreement with a managed care organization called capitation, wherein the doctor is paid per person. Under this agreement, doctors accept members of the plan for a certain set price per member, no matter how often the member sees the doctor. For example, the doctor may be paid $20.00 per member every month and that amount doesn't change if the member comes in for five appointments that month or none.
There are many kinds of managed care organizations, but there are some common characteristics among them. All managed care organizations supervise the financing of medical care delivered to members. They all are concerned with cost-effectiveness, or saving money. By buying services in bulk, for many members at a time, managed care organizations can get lower prices with doctors and hospitals. Managed care organizations also reduce costs by limiting choice, which means providing members with a list of doctors from which to choose and lists of labs where tests can be performed. Even doctors are provided with lists of medicines from which to choose. Different plans have different restrictions on choice. Many people feel that limited choices are the downside of managed care. Generally, a member can expand the possible choices if he or she is willing to pay more.
At the same time, managed care organizations take care of the delivery system for their members. For example, they manage who provides the health care, where it is provided, and the different kinds of doctors in their particular system. Nurses, doctors, therapists, pharmacists, and hospitals are all a part of the delivery system.
FINDING THE PERFECT MATCH
Managed care organizations make the primary care physician the core of health care delivery. Choosing a primary care physician is one of the most important choices in any managed care plan. The primary care physician is responsible for the total care of a member and may also act as a gatekeeper to additional medical services, which means the primary care physician is responsible for referring the patient to other doctors, or specialists. A specialist is a doctor who concentrates on only one area of medicine, such as a dermatologist (skin specialist) or cardiologist (heart specialist).
The first step in choosing a primary care physician is to look at the plan's list of approved physicians. Choosing just any doctor won't do; it is important to find a doctor whose style and approach to health care matches that of the patient. It's recommended that a person ask family and friends about doctors they have seen in the past and would recommend. They may be able to provide important information about how long it takes to get an appointment with a specific doctor or whether the doctor is understanding and easy to talk to. It is also appropriate to ask the insurance plan about the doctor's credentials and whether the plan has received any feedback on the doctor from patient surveys.
In making the final decision there are some other questions to consider:
- Is the location of the doctor's office convenient?
- What are the office hours? Does the office open early? Does the doctor make appointments after 5 P.M. ? Does the doctor have Saturday hours?
- Is the office clean and orderly? Is the office staff friendly and polite?
- How do patients communicate with the doctor? Does the doctor have an answering service or voice mail where a patient can leave a message? Will a nurse return calls? Will someone return the call within twenty-four hours?
Making an interview appointment is one way to question the doctor. A phone interview can be sufficient if there is not time to make an appointment. If a patient has a chronic (frequently recurring) condition or special health care concerns, it is even more important to find a doctor with a similar approach to treatment and with experience in treating the specific condition.
Choosing a primary care physician is not a permanent choice. Patients can consult their plan handbook for instructions about how to change doctors. Some plans will limit the number of times one can change doctors within a year. Make sure to alert both the insurance plan and the doctor's office (so that patient records can be transferred) if changing doctors.
The Referral Process
Understanding the referral process is critical to navigating the managed care organization. Managed care organizations require patients to get a referral from the primary care physician (the doctor responsible for a patient's total health care) in order to see a specialist. A referral is like a permission slip from the primary care physician. It allows patients to seek treatment from a specialist when the primary care physician is unable to treat the patient's problem. This is one way to keep insurance costs down. Without a referral, the patient may be charged full price for any medical care received by a specialist. Plans deal with referrals in different ways. Certain regular health visits may not require a referral. For example, women can often see a gynecologist (doctors who specialize in treating the female reproductive system) without getting a referral from the primary care physician. The complexities of the referral process may be a factor in the choice of an insurance plan.
Types of Managed Health Care Plans
Managed health care is an alphabet soup of confusing abbreviations: HMOs, PPOs, POS. What do they all mean? Surprisingly, many people do not know.
HEALTH MAINTENANCE ORGANIZATIONS (HMO). HMOs were designed to provide one-stop-shopping for patients: everything a patient might need with no hidden costs. An individual or an employer pays for health coverage in advance by paying the health coverage premium (the amount paid for an insurance policy). Provided a patient stays within the plan, there will not be any additional costs except for copayments, if applicable.
Health maintenance organizations are called such because HMOs generally cover preventative care, such as yearly checkups and immunizations. HMOs have a self-interest in keeping people healthy because healthy people don't spend a lot of money on health care. HMOs want to promote preventive health care so problems are caught or stopped before they can start. HMOs also control the quality of health care for members. The majority of services must be pre-approved by the primary care physician. The referral process allows all service to be reviewed by the HMO for necessity, appropriateness, and cost.
Of course, there are good parts and bad parts of this system. Good HMOs use referrals to screen out bad or inappropriate medical practices. However, bad HMOs can use referrals to limit care that is really necessary for the health of the patient. One criticism of HMOs is that decisions about the necessity or appropriateness of care are made not by doctors but by business people who may care more about cost than quality of care.
There are several different kinds of HMOs. The two most common are staff model HMOs and independent practice associations (IPAs). The staff model HMO is the best example of the one-stop-shopping approach. The doctors, medical records, labs, and pharmacy are all housed within one location. Sometimes services may be off-site from the central location. Patients may have to go to another location to see a specialist, but the specialist must still work for the same HMO system.
IPAs are made up of doctors, both primary care physicians and specialists, who see plan members in their own offices, instead of under one roof. Doctors may participate in several different IPAs. One advantage to IPAs is that there may be a larger selection of doctors and specialists from which to choose than in a staff model HMO. It's necessary to weigh these advantages
against the convenience of the staff model HMO to make the best choice for oneself. Some people will have more choices than others. They will either ask their insurance company what kind of HMOs are available for them depending on what they can afford, or they will have to pick whatever their employers offer them.
There are several more types of HMOs, but the major difference among the types is in the details of the agreement made between the managed care organization and the doctors, such as patient access to doctors, referrals, and payment arrangements.
PREFERRED PROVIDER ORGANIZATION (PPO). A preferred provider organization is another kind of health plan in which members have their health care paid for only when they choose from a network of doctors and hospitals. The network is a group of health care providers who have contracts with the PPO. The health care providers agree to offer a discount rate to PPO members. The PPO coordinates referrals and reviews treatment recommendations from participating doctors. A PPO can offer more choice and flexibility in choosing a doctor than an HMO. However, if a member sees a doctor outside of the network, the member will be required to pay part, or all, of the fee.
POINT OF SERVICE (POS). A point of service plan offers the most choice to the individual by combining HMOs, PPOs, and more traditional health care plans. The member can choose at the time of each visit, or what's referred to as "the point of service," which doctor to see. For example, while a patient may choose to use a primary care physician from an HMO for a regular checkup, he or she may later decide to go out of network for another service, such as to a cardiologist, or heart specialist. Therefore, the patient chooses, each time there is a need for a doctor, who he or she is going to see. A POS plan has different levels of cost to the member. For example, a member can see a doctor in the HMO for no extra cost, a doctor in the PPO network for some out-of-pocket cost, or even go to a doctor outside of the HMO or PPO for a higher outof-pocket cost. The PPO may still require referrals from a primary care physician. Since plans vary, members should fully understand the costs and restrictions before visiting a doctor.
Carve outs are medical services that are separated from the rest of the services within a health care plan. These services are contracted for separately from all other medical services. Carve outs often include mental health and substance abuse treatment, dental and vision care, and pharmacy benefits. Some plans offer these services as a piece of their regular coverage while other plans "carve out" the services, and members choose whether or not the coverage is desired, for an additional premium cost. Specialty HMOs can be set up for one set of medical services, such as dental services. Specialty HMOs operate just like regular HMOs but may have different rules about referrals, so it's important to check out the requirements for making use of these benefits. Check out the fees for seeing specialty providers and the process for getting referrals. There may also be separate lists for participating physicians in specialty areas like counselors, therapists, and dentists.
MANAGED INDEMNITY. The managed indemnity is the final option for patients choosing fee-for-service plans. A member of a managed indemnity plan can choose to see any doctor. However, members must get prior approval for outpatient procedures and hospitalizations. Managed indemnity plans do not always cover preventative health care visits, and members sometimes have to file claim forms for certain services.
There are many kinds of managed health care organizations. Every managed care plan has rules for using its services, especially for referrals. These rules can be complicated but are important for an individual to understand when choosing a health care plan. The trick is to assess one's needs for health care and match those needs with the most accommodating managed care plan. A little homework early on can make for a productive relationship with the managed care organization.