Children and managed health care: analysis and recommendations.


This article lays the foundation for the other articles in this journal issue, which examine the effect of managed health care arrangements on a particular population: children. Although managed care has been used to finance and deliver health care services for decades, the meaning of this term often has been unclear to health care consumers and practitioners because new forms of managed care have evolved rapidly. The one consistent and unifying concept across all managed care arrangements is that enrollees obtain care from a network of participating health care providers who contract with the managed care organization and abide by the organization’s rules. The uncertainty of what managed care is has made it difficult to measure the effect of these arrangements on health service delivery and health outcomes, especially in the pediatric population, where the development of outcome and quality measures lags behind that for adults. The incentives posed by managed care suggest both potential advantages and disadvantages to these arrangements for children. On the positive side, managed care enrollment may offer a “medical home” for primary care services to children who otherwise would obtain only episodic care; improve the coordination of health care services; and encourage more preventive health services. On the negative side, under capitated reimbursement, health plans have an incentive to enroll only healthy children with the lowest expected health care expenditures, and providers have an incentive to offer fewer services than may be appropriate. Managed care also may limit enrollees’ choice of providers, particularly for specialty care. Despite the paucity of information about the effect of managed care on the delivery of pediatric health services and on child health outcomes, children are disproportionately being enrolled in managed care plans. In the early 1990s the prospect for major health care policy changes appeared high with the attention of the Clinton administration and with Congress poised to enact health care reform. While no major bill was passed, significant change has occurred in the health care field, largely because of the rapid adoption of managed care. So swift was the growth that as of 1995, some 73% of Americans who received their health insurance through an employer were enrolled in a managed care plan, up from 51% just two years earlier.1 The significance of this change is only partially understood today. Managed care has existed under a variety of forms and names as a means of Dana C. Hughes, Dr.P.H., is assistant adjunct professor in the Department of Family and Community Medicine, and at the Institute for Health Policy Studies at the University of California, San Francisco. Harold S. Luft, Ph.D., is Caldwell B. Esselstyn Professor of Health Policy and Health Economics, and Director at the Institute for Health Policy Studies at the University of California, San Francisco. The Future of Children CHILDREN AND MANAGED HEALTH CARE Vol. 8 • No. 2 – Summer/Fall 1998 26 THE FUTURE OF CHILDREN – SUMMER/FALL 1998 financing and delivering health care for more than 50 years, though the number of persons enrolled in managed care plans was relatively low until the past dozen years. Many of the new managed care plans differ substantially from the older forms of managed care, on which most of the available research is based. Thus, the extent to which past experience can help to predict future effects is limited. However, research on managed care does suggest that this move is likely to at least partially achieve its intended objectives of helping to contain costs and improving access to care for at least some of those enrolled. Managed care also may have some unintended consequences, such as reducing access to needed care for certain high-risk populations. It may improve the quality of care for some, while making it worse for others. The purpose of this article is to lay the groundwork for exploring what the transition to managed care might mean for a particular population segment: children. Inasmuch as children are beneficiaries of employmentbased insurance, they are increasingly enrolled in managed care plans along with their parents. Children are also being enrolled in managed care plans through the nationwide conversion of state Medicaid programs from fee-for-service to managed care. Today, most states have implemented managed care programs for a majority of Medicaid beneficiaries, principally those who are enrolled through Aid to Families with Dependent Children (AFDC), a program that is composed primarily of children.2 Children’s vulnerability as managed care enrollees is related to the fact that their needs for health services are significantly different from those of adults. By nature, children grow and develop at rapid rates, placing them at special risk of the effects of illness and injury. If health problems are not identified and treated, they can affect a child’s cognitive, physical, behavioral, and/or emotional development. With children, it is not enough to simply identify and treat a condition; it is essential to do so early and as frequently as necessary to prevent or minimize the adverse effects on overall growth and development.3 Children with undetected and inadequately treated health problems may face the consequences later in life. Children are also distinct from adults in that they are entirely dependent on their adult caregivers for health services.3,4 Children are considered incapable of making decisions about health care on their own, purchasing services or insurance themselves, and making judgments about the appropriateness of services. Thus, the type, quantity, quality, and cost of their health care are dependent on the ability of their adult caregivers to obtain appropriate services. The type, severity, and frequency of health conditions that children experience also differ from those of adults.3,4 Children usually experience a wider variety of health problems than adults, but they are usually less severe. Conversely, adults are more likely than children to have chronic degenerative conditions.3 Certain childhood conditions, although relatively mild in single instances, can lead to long-term disabilities. Chronic otitis media (ear infections), for example, if unchecked, 27 Managed Care and Children: An Overview History of Managed Care The term “managed care” is a rather recent addition to the health care lexicon, appearing first in the early to mid-1980s. It encompasses a variety of financing and delivery systems, including classic health maintenance organizations (HMOs). Even the term “HMO,” however, was developed long after the creation of many of the organizations that fit its description. The roots of these organizations go back decades to the group practice prepayment plans, such as Ross-Loos, Kaiser, and Group Health, which developed during the 1920s to 1940s. The concept of prepayment can be traced back to the 1850s in California, where groups of settlers, through fraternal orders or immigrant societies, arranged for the provision of medical care for their members. Some of these groups continued in existence for more than 100 years.5 The early founders of group practice prepayment plans, such as the Ross-Loos clinic in Los Angeles and the Kaiser programs, believed that health care could be improved by combining prepayment of services, which eliminated the financial barriers faced by patients at the time they needed care, with the sharing of medical records and the ease of consultation in a medical group. The focus was on the improvement of medical care quality, rather than financial success, and many of the concepts in these plans built on a public health approach that encouraged prevention and a populationbased focus. Thus, these plans included prenatal care, well-baby visits, and immunizations in their standard benefit packages, with small or no copayments, in an era when even the hospital costs of maternity stays were often excluded from traditional insurance. By the early 1970s there was increasing evidence that group practice prepayment plans, or prepaid group practices (PGPs), took care of their populations at a substantially lower cost than—and with comparable quality to—fee-for-service providers. In fact, one well-designed study showed even better prenatal care among women in a prepaid group practice—the Health Insurance Plan of Greater New York—than among those in the general population.6 The Nixon administration wanted to encourage people to enroll in such prepaid plans as a cost-containment measure, but faced stiff opposition from organized medicine, which found the idea of prepaid group practices anathema. There were, however, some examples of medical society–sponsored plans that accepted financial responsibility for the review of services delivered by their members.7 These “foundations for medical care” were acceptable to the American Medical Association (AMA), probably because of their relatively open panels, which included nearly all the physicians in a geographic area. Nixon’s strategy for prepaid health plans developed a new name—health maintenance organizations—to incorporate two types of delivery systems: the prepaid group practice and the independent practice association (IPA), a new term for the foundation model. In the 1980s, in a similar attempt to relabel existing concepts, the term “managed care” was applied to identify these two new varieties of HMOs, as well as other approaches by the insurance industry that more tightly controlled medical care utilization through selective contracting with smaller panels of providers. This brief historical digression is intended to point out that some managed can lead to hearing loss and sometimes learning disabilities. Other rare but severe conditions such as spina bifida and sickle cell disease manifest themselves early and require ongoing monitoring and expensive tertiary care services. Given the differences between adults and children, the crucial issue to be considered in this journal is whether the changes in benefit packages, referral relationships, and incentives associated with managed care benefit or harm children. Such effects may be similar to the effects for adults, or there may be a different effect for children, either because their needs are different or because the design of managed care programs has focused largely on adults. 28 THE FUTURE OF CHILDREN – SUMMER/FALL 1998 care plans can trace their heritage to organizations that have been at the forefront of attempting to improve both medical care coverage and quality for decades, and have data to back up these claims. In contrast, other organizations under the managed care rubric were established with a costcontainment focus, and have little history in the reorganization and coordination of medical care delivery. The available research evidence is drawn largely from the first group of health plans, while most public perceptions of managed care may stem more from the behavior of newer managed care models. This disconnect makes it complicated to undertake a critical review of the evidence on managed care, while simultaneously being policy relevant. Managed Care Defined The term “managed care” refers to a variety of financing and delivery arrangements. The single unifying characteristic of these various approaches is that those enrolled in managed care plans are encouraged or required to obtain care through a network of participating providers, who are selected by the managed care organization and who agree to abide by the rules of that organization.8,9 This is in contrast to fee-for-service arrangements, in which patients typically may seek care from any licensed health care professional or organization, and providers may perform services based on their individual judgments about what is appropriate or needed. An insurer, however, may decide after the fact not to reimburse the patient for certain services received. The primary purpose of limiting the range of providers available to patients enrolled in managed care plans is twofold: to control the patient’s access to services, and to control the behavior of health care providers. A limited network of providers not only restricts utilization to those providers within the plan but also permits the plan to exert control over participating providers with respect to utilization. By controlling access to and use of health care services, plans can better control health care costs. While the primary rationale for limited networks may be cost control, this approach also provides a tool whereby a responsible plan may exclude providers of poor quality. The nature of managed care, however, may dissuade the best providers from belonging. Thus, the implications for quality must be considered. The ways in which managed care plans control access and utilization vary among the different managed care models. The extent to which enrollees may seek services from providers outside of a plan’s network depends on the type of managed care plan and the model adopted by the plan. For example, most HMOs do not provide coverage for services outside of their networks. Beyond this single, consistent characteristic of managed care, plans vary widely in other important ways. As Table 1 illustrates, plans differ in terms of the degree of risk that is placed on the physicians, as opposed to the plan or the payer; the relationship among the physicians within the network; and the exclusivity of the relationship between the plan or intermediary and the medical group. n HMO plans usually have two defining characteristics: providers are at direct or indirect financial risk for providing services, and enrollees have no coverage for out-ofnetwork use. The five commonly identified types of HMO plans presented in Table 1 are distinguished from one another by the organization of physicians who deliver the services and by the exclusivity of the relationship between the plan or intermediary and large medical groups. n Preferred provider organization (PPO) plans have three defining characteristics. First, they do not put their network physicians at risk by capitating per-enrollee reimbursements. Instead, they normally pay physicians on a fee-for-service basis, often at a rate discounted from usual, customary, and reasonable charges. Second, PPO enrollees usually receive services from a network of solo or small-group physicians and a network of hospitals that have nonexclusive relationships with the PPO, though some enrollees may receive services in large-group practices. Third, PPO enrollees Those enrolled in managed care plans are encouraged or required to obtain care through a network of participating providers. 29 Managed Care and Children: An Overview receive some benefit coverage if they obtain health care services from a non-network provider. n Point-of-service (POS) plans may be thought of as HMOs with PPO “wraparounds.” They are defined by one typical characteristic. Enrollees can choose to obtain services out-of-network and still obtain some coverage for those services. POS plan enrollees pay higher premiums than do those enrolled in traditional HMOs. Trends in Managed Care Enrollment During the past 15 years, the health care system in this country has been dramatically transformed from one dominated by fee-for-service arrangements to one dominated by managed care. Within this short period, the number of Americans enrolled in some form of managed care has risen 14-fold.10 It is estimated that more than 58 million people were enrolled in HMOs and 10.8 million were covered by POS plans in 1995.11 Enrollment figures for children are more sketchy; an estimated 16.7 million children, or 22% of all children under the age of 20, were enrolled in managed care plans in 199412 (see Table 2). Children are more likely to be enrolled in managed care than their distribution in the population would suggest. In 1994, children represented nearly 33% of HMO enrollment, but only 29% of the U.S. population. This rapid and widespread move toward managed care is largely a reflection of payers’ interest in controlling their costs.1,13 Both employers and government sponsors are under increasing pressure to contain costs, including those related to health insurance for their employees. Many employees are willing, although not always happy, to enroll in managed care plans, which typically require less employee cost sharing than fee-for-service alternatives. In some employer-sponsored health plans, as well as most state Medicaid programs, consumers are no longer given the choice between managed care and fee-for-service arrangements, but instead are required to accept managed care enrollment. Although both increases in health insurance premiums and growth in Medicaid spending have slowed in recent years,1,14 forecasters predict that managed care will continue to assume Exclusive Physician Organization Relationship with Benefits Type of Risk Network Solo/ Coverage Health Plan Bearing Staff Large Small-Group InterOutside of by Physicians Group(s) Physicians mediary Physicians Network Providers HMO Often Varies Varies Varies Varies Varies No PGP Yes No Yes No Yes Yes No Staff No Yes No No Yes Yes No Network Yes No Yes No No No No IPA Yes No No Yes Varies No No Mixed Often Varies Varies Varies Varies Varies No PPO No No Varies Often Varies No Yes POS Often Varies Varies Varies Varies Varies Yes Table 1 Source: Miller, R.H., and Luft, H.S. Managed care plans: Characteristics, growth, and premium performance. Annual Review of Public Health (1994) 15:437–59. Characteristics of Common Types of Health Plans 30 THE FUTURE OF CHILDREN – SUMMER/FALL 1998 a greater proportion of the market. Understanding the implications of these trends is essential not only for the populations currently enrolled but for future enrollees as well. The largest increases in managed care enrollment have occurred in the private market, although participation in managed care also has risen in government programs such as Medicaid. Since the early 1980s, when federal restrictions on managed care enrollment were much more relaxed, the number of Medicaid beneficiaries enrolled in managed care has risen 15-fold, from three-quarters of a million in 1983 to more than 13 million in 1996.2 While enrollment in managed care is increasing across the country, it has not taken hold to the same degree in all regions. Managed care typically is more popular in urban than in rural areas, although there is considerable variation across metropolitan areas. A recent survey of persons with commercial health insurance that examined enrollment in fee-forservice, POS, PPO, and HMO plans in 177 metropolitan statistical areas found that, overall, 22% of individuals reported being enrolled in fee-for-service plans, 4% in POS plans, 34% in PPOs, and 40% in HMOs15 (see Figure 1). These averages mask the high degree of variation within each category. In addition, this survey revealed some regional patterns, with the highest HMO enrollment in the Pacific West, the highest PPO enrollment in the South, and the highest fee-for-service enrollment in the Northeast. Managed Care and Families From the perspective of a family with children that is looking for a suitable health plan, some of the characteristics that distinguish various types of managed care—and even the differences between managed care and fee-for-service plans—may not be apparent, with some notable exceptions. Under managed care, parents usually select for their child a primary care provider, who provides the bulk of care and approves referrals to specialists as appropriate. This approach has the advantage of assuring linkage to a “medical home” in the form of a primary care provider who is chiefly responsible for a child’s care. However, a family that switches to managed care from a fee-for-service plan or from another managed care plan may find that its usual physician or hospital is not part of the new plan’s network. Restrictions Indicator Year 1989 1993 1994 (Under 15 years of age) (Under 15 years of age) (Under 20 years of age) Percentage of U.S. 17.4 20.8 22.2 children in HMOs Children as percentage 26.7 26.1 32.6 of HMO enrollment Children as percentage 21.6 22.0 28.8 of U.S. population a Note: The American Association of Health Plans, the principal source for these data, changed its methodology in 1994 to count HMO members under 20 years of age rather than under 15 years of age. The 1993 data are shown for comparison. Source: Leatherman, S., and McCarthy, D. Opportunities and challenges for promoting children’s health in managed care organizations. In Health care for children: What’s right, what’s wrong, what’s next. R.E.K. Stein, ed. New York: United Hospital

5 Figures and Tables

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@article{Deal1998ChildrenAM, title={Children and managed health care: analysis and recommendations.}, author={Laura Deal and Patricia H Shiono and Richard E. Behrman}, journal={The Future of children}, year={1998}, volume={8 2}, pages={4-24} }