Health Policy Issues An Economic Perspective Copyright © 2015 Foundation of the American College of Healthcare Executives. Not for sale.

Chapter 19 The Evolution of Managed Care Copyright © 2015 Foundation of the American College of Healthcare Executives. Not for sale.

LEARNING OUTCOME Explain what is meant by managed care, why it came about, what the evidence shows on how well it has performed, and how it is evolving Copyright © 2015 Foundation of the American College of Healthcare Executives. Not for sale.

LECTURE Why Managed Care Came About What Is Managed Care? What Are the Types of Managed Care Plans? Exhibit 19.1 How Has Managed Care Performed? Exhibit 19.2 The Issue of Biased Selection Copyright © 2015 Foundation of the American College of Healthcare Executives. Not for sale.

LECTURE (CONTINUED) How Has Managed Care Performed? (continued) Rise in Health Insurance Premiums Onetime Versus Continual Cost Savings Exhibit 19.3 Exhibit 19.4 Patient Satisfaction and Quality of Care Medicare Advantage HMOs Versus Traditional Medicare Copyright © 2015 Foundation of the American College of Healthcare Executives. Not for sale.

LECTURE (CONTINUED) How Has Managed Care Performed? (continued) Managed Care’s Spillover Effect How Has Managed Care Evolved? Economic Prosperity of the 1990s Higher Prices for Hospitals, Physicians, and Prescription Drugs Regulation of Managed Care Copyright © 2015 Foundation of the American College of Healthcare Executives. Not for sale.

LECTURE (CONTINUED) What Recent Developments Managed Care Has Undergone Changing Cost-Containment Approaches Report Cards Pay for Performance Consumer-Driven Healthcare How the Affordable Care Act Affects Managed Care Accountable Care Organizations continue to discussion Copyright © 2015 Foundation of the American College of Healthcare Executives. Not for sale.

The Trend Toward Managed Care Exhibit 19.1 Copyright © 2015 Foundation of the American College of Healthcare Executives. Not for sale. return to lecture

How an HMO Allocates the Premium Dollar Exhibit 19.2 return to lecture Copyright © 2015 Foundation of the American College of Healthcare Executives. Not for sale.

Exhibit 19.3 Annual Percentage Increase in Health Insurance Premiums for the United States, California, and the CPI, 1988–2013 return to lecture Copyright © 2015 Foundation of the American College of Healthcare Executives. Not for sale.

Trends in Hospital Utilization per Thousands: United States, California, and New York, 1977–2012 Exhibit 19.4 return to lecture Copyright © 2015 Foundation of the American College of Healthcare Executives. Not for sale.

DISCUSSION Why has there been an increase in government regulation of managed care? What changes are insured consumers likely to see in the future in their financial responsibility for healthcare? Copyright © 2015 Foundation of the American College of Healthcare Executives. Not for sale.

SUMMARY Health insurance premiums once again began to rise sharply as a consequence of The economic prosperity that led to employee demands for less restrictive health plans in the 1990s Hospital mergers and physician consolidations that resulted in higher provider prices and drug prices Regulations imposed on managed care plans Advances in medical technology Managed care plans have demonstrated less ability to control costs today than they had previously. Copyright © 2015 Foundation of the American College of Healthcare Executives. Not for sale.

SUMMARY (CONTINUED) Employers and employees are searching for new approaches to limit their premium increases. Employers are shifting more of the insurance premium to their employees. Health plans are developing new cost- containment strategies. Health plans are using report cards and beginning incentive-based payment. High-deductible/low-premium CDHC plans shift financial risk to consumers. Copyright © 2015 Foundation of the American College of Healthcare Executives. Not for sale.

SUMMARY (CONTINUED) The market is responding to rising premiums by offering a variety of health plans, as consumers have different preferences and budgets. Greater emphasis is being placed on consumer cost sharing to hold down costs and use of services. It is too early to judge whether ACOs will be able to achieve their objectives, given the lack of financial incentives for Medicare enrollees to choose lower cost ACOs. Copyright © 2015 Foundation of the American College of Healthcare Executives. Not for sale.