Managed Care and Its Costs in the US Health Care

Subject: Healthcare Financing
Pages: 5
Words: 1183
Reading time:
5 min
Study level: College

Managed care is one of the tendencies that exist in the current U.S. healthcare market. Its original goal was to introduce a sufficient managerial mechanism to enhance the quality of the provided services while relying on the methods of cost-effectiveness (Collins, Piper, & Owens, 2013). The primary goal of the paper is to understand the evolution of managed care and its ability to increase the accessibility of medical services. Simultaneously, it is vital to evaluate the role of healthcare plans in optimizing costs, analyze and compare three models of the managed care organizations, and discuss new trends.

Evolution of Managed Healthcare

The development of managed healthcare began before World War II and was presented in the form of the Health Maintenance Organization (HMO) and Blue Cross (Fox & Kongsvedt, 2013). These pre-paid healthcare plans continued to exist, as it helped attract employees and complied with the consumers’ expectations of the high-quality healthcare while increasing the demands for these products. During the war, the HMOs continued to expand slowly while in the 1970s the healthcare market experienced inflation, and, as a consequence, it was necessary to introduce the concept of managed care in the 1980s (Fox & Kongsvedt, 2013). The need to decrease costs and enhance the profitability of the healthcare segment and favorable conditions for the economic growth in the country were the primary reasons for the consolidation and fast development of HMOs in the 1990s.

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Apart from the rapid expansion in the 1990s, the majority of the consumers were not satisfied with the existing healthcare reform, as HMO was a requirement by their employers, and the workers did not have an opportunity to choose another plan (Fox & Kongsvedt, 2013). It led to the development of Medicaid and Medicare programs that exist today. Nonetheless, high percentages of the uninsured population, the rapidly escalating costs, and the financial crisis required to introduce the Affordable Care Act reform (ACA), as it aims at expanding coverage and attempts to decrease governmental expenditures.

Managed Healthcare and Access to Medical Services

As was mentioned earlier, one of the reasons for the growth of managed care is its ability to increase the accessibility of healthcare. In this instance, its capability to focus on the financial aspects and monitor them effectively helps maintain the costs at a low level. Nowadays, healthcare institutions tend to use the principles of business intelligence and rely on provider network management (Ashrafi, Kelleher, & Kuilboer, 2014). Using these business concepts has a direct impact on the affordability and the overall costs of the provided services.

Meanwhile, these matters have a reflection on the accessibility of the services, as focusing on the financial component allowed Medicaid to increase its overall social coverage and reduce the percentage of uninsured individuals (Collins et al., 2013). In turn, it not only enhances the affordability of healthcare but also aims at delivering superior quality. Simultaneously, taking advantage of the provider network management allows the medical institutions and governmental authorities to distribute financial resources effectively while covering the needs of the patients in different geographical locations and minimizing disparities. Overall, managed care has a beneficial impact on the accessibility of medical assistance and contributes to the effective utilization of resources.

Efficacy of Managed Healthcare Plans Regarding Costs

One cannot underestimate the significance of the managed healthcare plans and their ability to optimize costs. In this instance, their working mechanisms are vehemently connected to the Affordable Care Act reforms and the need to expand the groups that are eligible for the Medicaid coverage (Collins et al., 2013). In this instance, enhancing the existing financial systems was one of the central aims, as, otherwise, this reform will be a potential cause of the rising costs. In this instance, one of the principal benefits of the managed healthcare plans is their working mechanism, as it has a unique blend of managerial and accounting practices while taking into account the needs of the customers in the long-term.

The ability of the plans to pay equal attention not only to accessibility and quality but also to the costs of healthcare makes them highly beneficial for monitoring the inflows and outflows of cash. Apart from the benefits indicated above, there is statistical information that proves that the concepts of the managed healthcare plans are effective. For example, one of the plans under the management of Medicaid was able to decrease the expenditures of the medical facilities within the four years by $1 billion (Collins et al., 2013). Overall, the ability of the programs to consider healthcare regarding various costs makes them one of the essential parts of managed care since they assist in increasing affordability and accessibility of the medical practices.

Three Models of Managed Care Organizations (MCO)

To ensure the effectiveness of managed care, various models tend to exist. For example, one of them is the Individual Practice Association (IPA). It represents the network of physicians and nurses, who tend to operate from their offices (Fox & Kongsvedt, 2013). Nonetheless, they work together with IPA by establishing tariffs for the medical assistance offered within the prepaid program while taking advantage of the fee-for-service payment scheme (Fox & Kongsvedt, 2013). Another model that has some similarities with the IPA is the Preferred Provider Organization (PPO).

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It also offers a network of specialists that provide medical assistance. Nonetheless, the main differences are a focus on the particular group such as workers of one company, the absence of the prepaid scheme, and the right of potential patients to take advantage of the services outside this practice. In this instance, the patients have more freedom and can select the best options. Lastly, medical institutions can employ an entirely different scheme by using the principles of the Management Services Organization (MSO). It aims at establishing various networks and systems that target at enhancing the quality of the delivered services and control the financial transactions.

Managed Care Trend and Its Effect on Healthcare

Based on the analysis of managed care indicated above, managed Medicaid could be considered as one of the most important trends that will have a critical impact on the optimization of the healthcare system in the USA. The recent ACA reform attempts to provide universal coverage by including seniors and youngsters as eligible candidates for Medicaid (Jacobs & Callaghan, 2013). Its ability to reduce the percentage of uninsured individuals signifies that this trend will have a positive effect on increasing access to healthcare in the recent future.

At the same time, its current policies concerning readmission of the patients to the hospitals and centralized and well-developed system of controlling expenditures will also continue to evolve in a positive direction by decreasing costs and contributing to the effective distribution of financial resources (Jacobs & Callaghan, 2013). Simultaneously, its sophisticated quality control and concepts of patient-centered care not only ensure that the equal medical opportunities are offered but also high-quality services that comply with their needs are provided. Overall, managed Medicaid will continue to have a positive impact on the healthcare system in the United States of America while encouraging innovation of the medical services that are available to everyone.


Ashrafi, N., Kelleher, L., & Kuilboer, J. (2014). The impact of business intelligence on healthcare delivery in the USA. Interdisciplinary Journal of Information, Knowledge, and Management, 9(1), 117-130.

Collins, S., Piper, K., & Owens, J. (2013). The opportunity for healthcare plans to improve quality and reduce costs by embracing primary care medical homes. American Health & Drug Benefits, 6(1), 30-38.

Fox, P., & Kongsvedt, P. (2013). The essentials of managed health care. Burlington, MA: Jones & Bartlett Learning.

Jacobs, L., & Callaghan, T. (2013). Why states expand Medicaid? Party, resources, and history. Journal of Health Politics, Policy, and Law, 38(5), 1023-1050.

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