Health Care Management & Policy
This article concerns health care policy in the U.S. and its effect on business. The public policy issues in regard to health care are complex and continue to be a subject of ongoing debate in Congress and in the state legislatures. What is not a matter of debate is the need to contain costs and improve access to health care. Effectively meeting these challenges requires the mutual efforts of the government, health care providers, health insurance companies and the business community. The following article will provide an overview explaining how health care is provided to the public and includes a discussion of some challenges facing policy makers and the associated business issues.
Keywords America's Health Insurance Plans (AHIP); Consumer-Driven; Health Care; HMO; Managed Care; National Business Group on Health; Point of Service (POS); Preferred Provider Organization (PPO); Preventive Care; Public Policy
The public policy issues concerning health care are often intertwined with various business concerns, which have an impact on the decisions of lawmakers and eventually in the pricing and allocation of health services. While these issues have long been the focus of political debate, by the early twenty-first century, policy makers became concerned that overall health care costs were rising at an alarming rate. Many questions remain regarding who will shoulder the financial burden of mushrooming costs, while "business executives have expressed blunt frustration with the rising cost to businesses of insuring employees and pensioners for healthcare" (Webster, 2006, p. 639). In addition to these challenges, another serious issue confronting policy makers is the fact that millions of Americans do not have health insurance, and the only access they have to health care is emergency room access (Webster, 2006). The 2010 passage of the Patient Protection and Affordable Care Act was intended to combat this unequal access to health care through the introduction of various reforms, including the creation of exchanges through which Americans can purchase affordable health insurance plans.
Managed Care Systems
Many Americans have access to health care under employer-provided managed care systems. A managed care plan monitors access to health care while attempting to control quality and contain costs. Some common managed care plans include health maintenance organizations (HMOs), preferred provider organizations (PPOs), and point of service (POS) systems.
While many individuals have access to managed care systems, these health plans have not been successful in containing health care costs. Initially, managed care systems such as HMOs were designed to curb rising costs while providing adequate health care for enrollees. However, many people felt HMOs placed too much restriction on their choices of physicians, who, in turn, felt their practices and decisions related to patient care were being overly restricted. Enrollment in HMOs peaked in the early part of the 2000s as more people enrolled in alternative PPOs and point of service plans. Because these plans offer more choice, they usually cost more, and this has prompted employers to scale back on their contributions, resulting in higher premiums, deductibles and co-payments for employees (Dixon, 2004).
Health Savings Accounts
As the cost burden increasingly shifted to employees, business lobbying groups appealed to Congress to broaden Health Savings Accounts (HSA), which allow participants to set aside funds, tax free, to cover normal out-of-pocket medical expenses. This enables individuals to purchase insurance plans that have higher deductibles while providing them with a tax incentive to do so. If the money in the account is not used by the end of the year, it can be rolled over to the next year (Business Insurance, 2006).
Caught between the employers trying to cut costs and the third-party payer trying to make a profit is the health care provider. Managed care plans contain financial incentives and management controls aimed at directing patients to providers who are required to provide appropriate, cost-effective treatment, and this ultimately requires health care providers to understand business management. This situation has led to a redefining of the doctor-patient relationship. Moreover, employers must have greater expertise in the business of managed care, as controlling costs will require greater scrutiny of various plans (Hall, 2005).
Formation of Management Groups
In addition to the need for health care providers to have business management skills, participating in a health care network has resulted in increased administrative costs which have led many providers to pool resources and form medical groups. While the quality of medical care largely depends on a physician's capabilities, the type of medical group in which a provider works can affect the quality of care as well. In general, studies have shown that well-managed medical groups can provide quality, cost-effective medical care (Casalino, 2006).
Managed Care Systems
For many Americans, access to health care is largely determined by their employers, and there are a number of factors that affect a company's choice of a managed care program. One of the key considerations for businesses is cost, and there are number of managed care systems to choose from, including HMOs, PPOs and Point of Service care. The following is a brief look at those plans.
Health Maintenance Organization (HMO)
An HMO acts as both an insurer and a provider of specific medical services. Most services are financed by fixed payments that are made in advance to a provider for the delivery of specific services. Some of the factors that determine these payments include the range of services provided by the physician, the number of patients involved, and when the services are provided. Health care services can be provided at the organization's own facility or at hospitals, doctors' offices, and clinics that are included in a network agreement. Typically, primary care physicians coordinate a patient's treatment, and if need be, patients are then referred to specialists.
Preferred Provider Organization (PPO)
A PPO is an organization of providers where the insurer contracts with a limited number of physicians and hospitals to provide health care at specific levels of reimbursement for each service. The preferred providers are often subject to restrictions regarding the appropriateness of care provided. While the patient does have some flexibility in health care decisions and selecting providers, patients have financial incentives to use providers that are in the network.
Point of Service (POS)
Point of Service combines the features of HMOs and PPOs, since the patient only pays a co-payment or low co-insurance for contracted services within a network of preferred providers. This is also referred to as in-network care. However, like traditional fee-for-service insurance, people participating in these programs can also seek out-of-network care.
Cost Containment: Preventative Care
For businesses that are in a position to offer health care coverage, there is a valid reason to contain costs, since annual premiums paid by employers for individual and family plans can be costly. In addition to containing costs by paying lower premiums, businesses are looking for other alternatives. One innovative approach is to encourage employees to take greater responsibility for their health. In doing so, employers are looking to shift the focus of health care coverage from treatment to prevention. According to one survey, "low back pain, depression, heart disease, diabetes mellitus, and obesity are considered the costliest conditions in terms of employee absenteeism, decreased productivity and disability" (Dixon, 2004, p. 29).
Consumer-Driven Health Plans
Shifting the focus to prevention is leading to a greater use of consumer-driven health plans, and this is enabling employers to control cost increases. By...
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