The impact of managed care
The application of managed care in the health industry spread rapidly in the 1980s and 1990s. The motivation behind the introduction of the programs was to reduce the cost of healthcare while maximizing the quality of care (Parys, 2014) . Managed care came as an alternative to the traditional fee-for-service (FFS) system. Under the FFS system, the patient pays a fee set by the healthcare organization depending on health services offered. The insurer partially or fully covers the cost. That means the insurer would have to pay high fees for severe illnesses and prolonged hospital stays. It also meant that it was difficult for insurers and states to project the costs of healthcare.
Managed Care Organizations (MCOs) are a network of medical professionals and healthcare organizations that provide services to patient under managed care plans. In these plans, the state or insurer pays a fixed fee to MCOs regardless of the services offered or the number of patients served. By removing the relation between the level of service and the fees paid, managed care plans encourage healthcare organizations to reduce costs (Halm, Press, Tuhrim, Wang, Rojas, & Chassin, 2010) . For example, hospitals cannot overutilize health resources in order to charge patient higher fees as they would do under FFS (Parys, 2014) . Wi th that, questions have been asked over whether managed care has reduced the quality of care.
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Different literatures conclude there is no significant effect of managed care on the quality of care. This is because the plans have both cost and quality incentives. For example, to lower the cost of healthcare, MCOs focus on preventive and appropriate care (Parys, 2014) . Emergency visits and prolonged hospital stays reduced the profit that MCOs make under managed care plans. So they focus on avoiding them. Halm et al. (2010) did a study to compare the quality of care offered to MCOs and FFS patients who required carotid endarterectomy (CEA). The study found no significant difference in the quality of care offered to patients under the two programs. The finding was consistent with other literatures on the topic.
Employer sponsored health insurance plans vs. private insurance plans
The purpose of health insurance is to pool resources and help patients cover medical costs. It is necessary because the costs of healthcare are high, and they can overwhelm the families when one member falls sick. In America, people can buy private insurance or rely on employer-sponsored plans.
In employer-sponsored health insurance plans, the employer pays part of the insurance premiums for their employees. It is also referred to as group insurance. The employer finds an insurer on behalf of the employees and negotiates a tailored plan. Due to collective bargaining, the insurer charges less premiums per employer that they would charge if the employee negotiated individually (Besley, Hall, & Preston, 1999). Most employers deduct the employee’s share of the insurance premiums from their pre-tax income and submit to the insurer. Traditionally, most employed Americans relied on employer-sponsored insurance plans, but such programs have challenges for both the employer and the employees (Besley, Hall, & Preston, 1999). On the employer’s side, the rising cost of healthcare means that paying insurance premiums is strenuous; the rate of increase in the healthcare cost is higher than of the average income (Amadeo, 2019) . On the employee’s side, they lose control of their insurance as they are not free to find an insurer that suit s their individual needs.
In private health insurance, the employee shops for their health insurance directly or through insurance agents. The employee is also responsible for paying the insurance premiums, though some employers assist by paying the employee health insurance allowances in their salaries. Generally, the main difference between employer-sponsored and private insurance plans is that in private insurance plans, the employee has control over the choice of the insurer, the health coverage plan, and the benefits.
References
Amadeo, K. (2019, June 15). The Rising Cost of Health Care by Year and Its Causes. Retrieved September 15, 2019, from The Balance: https://www.thebalance.com/causes-of-rising-healthcare-costs-4064878
Besley, T., Hall, J., & Preston, I. (1999). The demand for private health insurance: do waiting lists matter?. Journal of public economics , 72 (2), 155-181
Halm, E. A., Press, M. J., Tuhrim, S., Wang, J., Rojas, M., & Chassin, M. R. (2010). Does Managed Care Affect Quality? Appropriateness, Referral Patterns, and Outcomes of Carotid Endarterectomy. American Journal of Medical Quality , 448-456.
Parys, J. V. (2014, October 19). How Do Managed Care Plans Reduce Healthcare Costs? Retrieved September 15, 2019, from Columbia University: http://www.columbia.edu/~jnv2106/jvanparys.jmp.pdf
