Managed care: Practice, pitfalls, and potential

Area of Science:

• Health Services Research
• Health Economics
• Healthcare Management

Background:

• Managed care strategies aim to coordinate healthcare services and control costs.
• Utilization review and case management reduce expensive service use.
• Provider risk-sharing incentives are crucial for managing healthcare intensity.

Purpose of the Study:

• To review the effectiveness of managed care in coordinating and altering healthcare delivery.
• To identify reasons why managed care cost savings have not reduced overall expenditures or premiums.
• To propose policy recommendations for optimizing managed care outcomes.

Main Methods:

• Review of managed care activities and organizational impacts.
• Analysis of utilization review and case management program effects.
• Examination of provider incentives and their role in cost management.

Main Results:

• Managed care demonstrates a substantial capacity for reducing healthcare costs.
• Cost efficiencies have not led to lower insurance premiums or moderated total healthcare expenditures.
• Purchaser awareness and concern for cost-effective care are identified as significant gaps.

Conclusions:

• Managed care's potential for cost reduction is significant but currently unrealized.
• A lack of purchaser engagement with cost-efficiency hinders savings translation.
• Reforming insurance by separating financing, risk spreading, and program management is proposed to unlock managed care benefits.