Today, the United States’ health care system is not only complex, but it’s also drastically different from what it used to be. For most of the last century, health care was run and financed by indemnity plans or otherwise known as fee-for-service plans. As its name implies, in fee-for-service systems, physicians and other health care providers are paid for each service performed. In this system, the doctor would perform a given service, and then charge the patient a specific fee. In return, the patient would pay for the service either out-of-pocket, or if he or she had health insurance, they would send the bill to their insurer for reimbursement. This plan was favorable for both the physicians and the patients. Doctors had a great deal of earning
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According to Shi and Singh, managed care is a system of health care delivery that:
(1) Seeks to achieve efficiencies by integrating the four functions of health care delivery – financing, insurance, delivery, and payment, (2) employs mechanisms to control (manage) utilization of medical services, and (3) determines the price at which the services are purchased and, consequently, how much the providers get paid (p. 8).
In this model, the primary financer is the employer or the government depending on the case at hand. When purchasing the insurance, instead of buying it through a traditional insurance company, the employer deals with managed care organizations, such as a health maintenance organization (HMO) or a preferred provider organization (PPO), to offer health coverage to its employees. Under managed care, MCOs function as insurance companies and pledge to deliver health care services, previously agreed upon under the health plan, to its enrollees. This contract between the MCO and member of the health plan includes: the covered services in which the member is entitled to; and the selected providers from whom the enrollees can choose to select to receive medical care from (Shi & Singh, …show more content…
During this time, the U.S. economy was facing immense pressure of rising health care costs. In fact, in 1960, national health expenditures only equated to $27.4 billion, or 5.0% of the gross domestic product. By 1970, this number jumped to an alarming $74.9 billion, or 7.0% of the gross domestic product (Centers for Medicare and Medicaid Services, 2012). This was due to physicians being rewarded for doing more. The more tests and procedures they performed, the more fees they could charge, and the greater their income was. This resulted in physicians performing a greater deal of procedures and ordering a larger amount of tests than what was in fact necessary for a patient’s treatment. Studies from the early 1970s indicated that nearly 25 percent of invasive procedures were inappropriate or not required (Rodwin,
According to Shi and Singh, managed care is a system of health care delivery that:
(1) Seeks to achieve efficiencies by integrating the four functions of health care delivery – financing, insurance, delivery, and payment, (2) employs mechanisms to control (manage) utilization of medical services, and (3) determines the price at which the services are purchased and, consequently, how much the providers get paid (p. 8).
In this model, the primary financer is the employer or the government depending on the case at hand. When purchasing the insurance, instead of buying it through a traditional insurance company, the employer deals with managed care organizations, such as a health maintenance organization (HMO) or a preferred provider organization (PPO), to offer health coverage to its employees. Under managed care, MCOs function as insurance companies and pledge to deliver health care services, previously agreed upon under the health plan, to its enrollees. This contract between the MCO and member of the health plan includes: the covered services in which the member is entitled to; and the selected providers from whom the enrollees can choose to select to receive medical care from (Shi & Singh, …show more content…
During this time, the U.S. economy was facing immense pressure of rising health care costs. In fact, in 1960, national health expenditures only equated to $27.4 billion, or 5.0% of the gross domestic product. By 1970, this number jumped to an alarming $74.9 billion, or 7.0% of the gross domestic product (Centers for Medicare and Medicaid Services, 2012). This was due to physicians being rewarded for doing more. The more tests and procedures they performed, the more fees they could charge, and the greater their income was. This resulted in physicians performing a greater deal of procedures and ordering a larger amount of tests than what was in fact necessary for a patient’s treatment. Studies from the early 1970s indicated that nearly 25 percent of invasive procedures were inappropriate or not required (Rodwin,