Managed Care

Related Topics

It’s important to understand that today, just about all health coverage plans are some type of “managed care” plan. Gone are the days of traditional indemnity (also called “fee for service”) insurance, where patients chose their own doctors, paid for their care, and were reimbursed by their insurance company for some or all of their doctor’s bills. These days, managed care is the name of the game.

Under managed care plans such as HMOs and PPOs, the insurer or health plan pays doctors or hospitals directly for some or all of the cost of the medical services its members receive. For example, physicians may be paid a fixed annual per-member (“capitation”) rate, regardless of how many times the covered individual visits the physician. The health plan goal is to take away financial incentives to prescribe too much care.

Health plans may also impose rules aimed at managing the care that their members receive, such as requiring members to obtain prior authorization before elective hospitalizations or requiring referrals from primary care physicians before seeing certain specialists.