Managed Care - Impacts

Impacts

The overall impact of managed care remains widely debated. Proponents argue that it has increased efficiency, improved overall standards, and led to a better understanding of the relationship between costs and quality. They argue that there is no consistent, direct correlation between the cost of care and its quality, pointing to a 2002 Juran Institute study which estimated that the "cost of poor quality" caused by overuse, misuse, and waste amounts to 30 percent of all direct health care spending. The emerging practice of evidence-based medicine is being used to determine when lower-cost medicine may in fact be more effective.

Critics of managed care argue that "for-profit" managed care has been an unsuccessful health policy, as it has contributed to higher health care costs (25-33% higher overhead at some of the largest HMOs), increased the number of uninsured citizens, driven away health care providers, and applied downward pressure on quality (worse scores on 14 of 14 quality indicators reported to the National Committee for Quality Assurance).

The most common managed care financial arrangement, capitation, places health care providers in the role of micro-health insurers, assuming the responsibility for managing the unknown future health care costs of their patients. Small insurers, like individual consumers, tend to have annual costs that fluctuate far more than larger insurers. The term "Professional Caregiver Insurance Risk explains the inefficiencies in health care finance that result when insurance risks are inefficiently transferred to health care providers who are expected to cover such costs in return for their capitation payments. As Cox (2006) demonstrates, providers cannot be adequately compensated for their insurance risks without forcing managed care organizations to become price uncompetitive vis-a-vis risk retaining insurers. Cox (2010) shows that smaller insurers have lower probabilities of modest profits than large insurers, higher probabilities of high losses than large insurers, provide lower benefits to policyholders, and have far higher surplus requirements. All these effects work against the viability of health care provider insurance risk assumption.