March 2004
What are the various models/types for managed care?
Answer:
Models of Managed Care
There are several models or types of managed care arrangements. While all types of managed care plans attempt to control access and utilization (and thereby cost), they use different methods to do so. Among the characteristics that distinguish managed care plans are the degree of financial risk placed on the physician or plan and the contractual relationship between the physician and the plan (see Table 1). This section describes the characteristics of the most common types of managed care plans, including HMOs, point-of-service plans (POS), and preferred provider organizations (PPOs). In general, HMOs are the most restrictive (e.g., have the narrowest provider networks and little, if any coverage for services provided by non-network providers), and PPOs the least restrictive (e.g., have the broadest provider networks and at least some coverage for services provided by non-network providers). It is important to note, however, that as managed care has evolved, the elements that distinguish the various delivery system types from each other have blurred and plan types are becoming more difficult to distinguish.
Medicaid has increasingly encouraged enrollment in managed care, and it uses two models (HMOs and Primary Care Case Management - PCCM). More than half of Medicaid beneficiaries (about 57% in 2002) are enrolled in managed care.*
Table 1: Managed Care Plan Characteristics
Type of Health Plan |
Risk Bearing by Providers |
Physician Organization |
Exclusive Relationship with Physicians |
Benefits - Coverage Outside of Network |
||
Staff Physicians |
Large Group(s) |
Network Solo/Small-Group Physicians |
||||
HMO |
Often |
Varies |
Varies |
Varies |
Varies |
No |
Staff |
No |
Yes |
No |
No |
Yes |
No |
Group |
Yes |
No |
Yes |
No |
Yes |
No |
Network |
Yes |
No |
Yes |
No |
No |
No |
IPA |
Yes |
No |
No |
Yes |
No |
No |
Mixed |
Often |
Varies |
Varies |
Varies |
Varies |
No |
PPO |
No |
No |
Varies |
Often |
No |
Yes |
POS |
Often |
Varies |
Varies |
Varies |
Varies |
Yes |
Source: Miller, R.H., and Luft, H.S. (1994.) Managed care plans: Characteristics, growth, and premium performance.
Annual Review of Public Health 15 :437-59. Health Maintenance Organizations (HMOs)
Among managed care plans, HMOs generally have more restrictive provider networks with tighter contractual arrangements, and contracts are most typical between an HMO and provider groups, rather than between an HMO and individual providers. HMOs also generally offer less choice for enrollees, since enrollees must seek care from contracted providers or the services will not be covered (i.e., enrollees will have to pay for those services out of pocket). One key characteristic of HMOs is that the HMO generally pays providers a fixed monthly or annual fee (i.e., a capitation payment) to provide all the services a member needs. Enrollees typically pay a co-payment for each service they receive (e.g., $10 per office visit), but do not have an annual deductible (e.g., a member must pay the first $500 out of pocket before insurance applies) that is common in PPOs. Several models or types of HMOs are described below.
Staff model HMO. In the staff model HMO, the managed care organization hires physicians on a full-time basis and pays them a set yearly salary. All premiums and revenues received from members go directly to the HMO. Many of these HMOs (e.g., Harvard-Pilgrim Health Plan) own their own clinics or hospitals, so most of the care can be provided on site. In this model, physicians generally have less opportunity to receive financial rewards for decreasing costs and they have less decision-making autonomy. Members also have less provider choice since health care services are only covered if provided by staff physicians.
Group model HMO. In this model, the HMO contracts with one physician group, usually a large multispecialty group, to deliver care for its members. Depending on the contractual arrangement, the physician group may provide care exclusively to the HMO members (e.g., the Kaiser Foundation Health Plan), or it may also provide care to other patients who are not members of the HMO (e.g., Geisinger Health Plan). The HMO pays the medical group a capitated rate (i.e., a set monthly or annual amount to provide all necessary care to the member and to cover administrative costs.)
Network model HMO. Similar in some aspects to the group model HMO (e.g., capitated payments to providers), the network model HMO involves contracts between a health plan and several physician groups that can be either single or multispecialty groups.
IPA model HMO. This involves contracts between an HMO and an independent practice association (IPA). An IPA is a separate legal entity that is comprised of physicians. The IPA receives a payment (generally capitation) from the health plan and has individual contracts with participating physicians to provide services. These contracts between the IPA and the physicians can be capitated or fee-for-service or a combination of the two.
Mixed model HMO. As mentioned previously, changes over time in characteristics of various types of HMOs have made them harder to categorize. Mixed model HMOs represent those that have characteristics of more than one of the HMO types described above.
Preferred Provider Organizations (PPOs)
In a PPO, the health plan contracts with a variety of individual physicians, physician groups, hospitals, and other health care providers. Physicians are typically paid on a fee-for-service basis, but this is generally a negotiated, discounted rate (compared with the physician's usual, customary, and reasonable charges). Enrollees may or may not have an annual deductible, as deductibles are becoming less common in PPOs. Enrollees typically are responsible for a co-payment for services (e.g., $15 per office visit, $10 per prescription) or co-insurance (e.g., 10% of the provider's negotiated rate). Enrollees usually receive services from providers in the PPO's network; however, they have the option to see providers outside the network. If enrollees choose to obtain health services from non-network providers, enrollees will generally have a reduced benefit level, either in the form of deductibles (or higher deductibles) and/or higher co-payments.
Point of Service (POS) Plans
Point-of-service plans evolved in response to a desire to combine the benefits of both the HMO and PPO models and are often described as a hybrid between the two, or as an HMO with PPO "wraparounds." Enrollees must seek care from network providers to receive the highest level of benefits. These benefits are typically similar to those in an HMO (e.g., a co-payment for each service provided, but no annual deductible). Those who obtain services outside of the network can still obtain coverage for the services, but the level of benefits is lower (e.g., the member often has to pay a deductible and/or higher co-payments).
Primary Care Case Management (PCCM) Model
This model is specific to Medicaid and involves primary care providers (usually an individual physician or a physician group practice, but sometimes also including nurse practitioners, nurse midwives, or physician assistants) who authorize and manage services for Medicaid beneficiaries enrolled in their practices. Providers receive a small monthly case management fee, as well as fee-for-service payment for other services provided.