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Navigating the United States Health Care System: Managed Care vs. Traditional Care

The United States health care system can be intricate and confusing. By understanding some of the factors that affect the care you receive and knowing how to navigate the increasingly complex health care system, you can make better decisions and ultimately receive better care.

Traditional Health Care vs. Managed Care

Historically, the United States health care system consisted of a large number of independent health care providers who owned their own practices. These were either solo practices or joint practices owned by multiple physicians who practiced together in a group setting. In addition, most communities had independent, not-for-profit hospitals.

As the managed care philosophy began to take hold of the health care system, physicians, hospitals, and other health care providers increasingly became limited contractually into networks. When providers agree to join a network, they agree to provide care to certain health plan members (patients) at fees established by the network. Network providers also agree to abide by other cost control and practice guidelines set by the network.

In general, managed care differs from the traditional health care system in the following ways:

Selecting a Provider

With traditional insurance, consumers can choose any physician they want, at any time they want, including specialists. Managed care plans require members to choose a physician from the list of in-network physicians provided by the plan. Requirements for choosing specialists vary. In some plans, members can select any specialist from the list of in-network doctors. In others, the individual’s primary care physician must make a referral.

Quality of Care

With traditional insurance, consumers are responsible for determining if their provider is qualified to provide the kind of care they need. They must also somehow determine if the care they receive is appropriate. Managed care plans usually assess a provider’s qualifications before he or she can join its network. They also conduct regular patient satisfaction surveys and monitor clinical outcomes in order to assess and maintain quality of care. In addition, most states require managed care plans to have a formal grievance procedure which allows members to challenge any care decisions or coverage denials made on their behalf.

Paying For Care

Under a traditional insurance plan, providers are paid on a “fee-for-service” basis, meaning that the insurance company pays the provider for each appointment or service. As the provider adds services or performs more procedures, the bill adds up. Typically, the patient pays the bill up front and the insurance company reimburses based on the terms of the policy. Managed care plans pay providers in a variety of ways. The central tenet is that managed care payment practices do not induce providers to perform unnecessary or overly expensive services or procedures. They also encourage members to assume more responsibility for their own care by focusing on preventive care and maintaining a healthy lifestyle.

How Does Managed Care Control Costs?

Managed care plans employ a variety of strategies to control health care costs. These strategies vary by organization and by the type of health plan.

Managed care plans have become the predominant model for health insurance in America. While the system has managed to deliver some measure of cost savings over the traditional fee-for-service model, the health care system overall is still challenged by rising costs.

Critics of managed care are also quick to point out several disadvantages of the system. In extreme cases, it has limited the services and providers available to patients.

In addition, managed care has provided no help to the problems of the millions of Americans without health coverage, or to those in rural areas where the population and risk pool are too small to allow a managed care plan to operate successfully.

Some common ways that managed care plans attempt to reduce costs are:

• Contracting with providers to provide care for a certain volume of members at reduced rates

• Sharing with providers the financial risk of providing care

• Setting criteria for selecting providers and establishing provider networks

• Establishing programs that monitor the amount and quality of care being given (utilization review)

• Focusing on preventive care and health promotion in order to reduce the incidence of disease and the costs associated with treating disease

Managed care plans are believed to be responsible for the growing emphasis on individuals taking responsibility for their own health care and making wiser choices based on the cost of care.

For more information about managed care, visit, or

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