Question

What is the evidence concerning the effect of managed care? Is managed care cheaper for employers that traditional indemnity approaches? Does managed care give enrollees a better deal (i.e., the same or better health care at lower cost)? Discuss factors that make answering some of these questions difficult to get right.

Answer 1

The presence of managed care organizations in a health care market may affect health care delivery for both managed care and non managed care patients. Each strategy for managing healthcare risk has important and unique implications for the patient-provider relationship and for quality of care. Managed care organizations may generate certain types of spillover effects by increasing competition in the health care market, changing the structure of the health care delivery system, and changing physician practice patterns. Managed care organizations control moral hazard in the use of medical care by adopting various types of supply side mechanisms intended to affect the behavior of providers treating patients enrolled in their plans. The actions taken by managed care organizations to influence treatment patterns for their enrollees may also affect the types of treatments received by patients not enrolled in these plans.

Health insurance plans can be broadly divided into two large categories: (1) indemnity plans (also referred to as "reimbursement" plans), and (2) managed care plans.

Indemnity plans:- An indemnity plan reimburses you for your medical expenses regardless of who provides the service, although in some cases your reimbursement amount may be limited. The coverage offered by most traditional insurers is in the form of an indemnity plan.

Yes, Managed care give enrollees a better deal than indemnity plan. Managed care plans are better suited for the average individual because they end up being more cost effective in the long run. In contrast, indemnity/reimbursement plans usually hit you with more out-of-pocket charges (in the form of deductibles and copayments) and often place caps on the amount of benefits you can receive over your lifetime. Indemnity plans do give you more freedom, however, than managed care plans in terms of using the healthcare provider of your choosing. So, as with anything else, the choice between managed care and indemnity plans ultimately depends on your personal circumstances and preferences.