Managed Care is Dead.

Long Live Managed Care

A quick history and overview of
Americas private health
insurance plans
Jonathan P. Weiner, Dr. P.H.
Professor or Health Policy & Management
Johns Hopkins Bloomberg School of Public Health
(jweiner@jhsph.edu)
At lightning speed, this primer session
will:

Provide a brief history and nuts-and-bolts

overview of health insurance and managed care
in the US.

Highlight some reasons for and effects of the

recent Managed Care Backlash.

Help provide a context for understanding health

care reform proposals presented at this
conference.
AllslidescopyrighttheJohnsHopkinsUniversity2008 2
 Of course its all about the money -- US
health care spending: 1962-2008
2500

2000
Dollars (billions)

1500

1000

500

0
1962 1966 1970 1974 1978 1982 1986 1990 1995 1998 2000 2008
Source: HCFA, CMS Year
3
 Health spending vs GDP in OECD nations:
The US is the outlier

6500
Per capita health Spending ($PPP)*

6000 United
States
5500 Belgium
Luxembourg

5000 Australia
4500 Switzerland
Norway

4000 Austria Iceland

Canada
3500 France
Germany Netherlands Denmark
3000 Greece
Ireland
Czech Italy
2500 Republic
New Zealand
Finland
Portugal
2000 Spain
Japan
Sweden
United Kingdom
Slovak
1500 Republic Korea

1000 Hungary
Poland
500 Turkey Mexico

0
0 5 10 15 20 25 30 35 40 45 50 55 60 65 70
*Purchasing power parity
Per capita GDP (thousands $PPP)*
Source: OECD in Figures, 2006, 2007 4
Alternative approaches for financing /
organizing health care
Government employed providers
Government social insurance
Mandatory buy-in
Entitlement for special populations
As benefit of employment
Insurance
Direct care or access to contract providers
Union/worker collectives
Privately purchased health insurance
Out of pocket / private pay
Charity care
5
 Proportion of Americans with health
insurance: 1940-2008

100
90
80
70
% Insured

60
50
40
30
20
10
0

Year

6
 US Health Insurance: Some Historical
Highlights
1930s -- Blue-Cross/ Blue Shield and Hospital Association.

1930s Prepaid-Group Practices (PGPs) and

Union/Employers

1950s Commercial insurers get into the act

1960s -- Federal great society Medicare and Medicaid

1970s - The Health Maintenance Organization (HMO) Act

(the unholy alliance of AMA sponsored IPAs and union
friendly PGPs)

7
 Why Employers Got Involved In Health
Care in the US

Healthy employees are productive employees

European immigrant / union expectations

Tax advantage

Attracts good employees

Employers filled the vacuum in the 1930-50s,

(now stuck in this role).

8
Health Insurance Coverage in the U.S., 2006

Total = 296.1 million

9
SOURCE: Kaiser Commission on Medicaid and the Uninsured/Urban Institute analysis of March
2007 CPS.
 Most Americans get health insurance privately, but
the public sector bankrolls almost half of all care

(% Distribution of Personal Health Expenditures by Payer, 1980-2006)

Private Funds

Public Funds

.
Source: Kaiser Family Foundation calculations using NHE data from Centers for Medicare and Medicaid Services, Office of the
Actuary, National Health Statistics Group,

10
 The Most Important Chart in this Presentation:
(Private Health Insurance Premiums, Workers Earnings
and General Inflation, 1988-2007)

3.7%

2.6%

.
Source: Kaiser/HRET Survey of Employer-Sponsored Health Benefits, 1999-2007; 11
The Rise and Fall of Managed Care is
Embodied in this Trend Line

In the late 1980s the

bankrollers of the system said
enough was enough, and the
era of managed care was
born. HMOs and their
techniques served as the
model.
12
Managed Care Organization's Approximate
Share of the Health Insurance Market in 1988 &
2008

1988 2008

MCO 25% FFS 15%

FFS 75%
MCO 85%

FFS 75% MCO 25% FFS 15% MCO 85%

13
The US Health Insurance / Managed Care
Models (and approx market share in 2008)

Traditional Fee-for Service (Unmanaged)

15% (Mainly Medicare)

Preferred Provider Organization (PPO) and other

loose managed care plans
47% (includes consumer defined health plans /
high deductible health plans)

Health Maintenance Organization (HMO)

38% (includes point of service open-HMO)

14
The Key Ingredients of Managed
Care

Care management
aka, utilization/disease management

Vertical integration / coordination of

independent providers

Financial risk sharing with providers and

consumers

15
 Types of health plans have shifted
over the years (employer based plans)
1988 73% 16% 11%

1993 46% 21% 26% 7%

1996 27% 31% 28% 14%

1999 10% 28% 39% 24%

2000 8% 29% 42% 21%

*
2001 7% 24% 46% 23%
*
2002 4% 27% 52% 18%
*
2003 5% 24% 54% 17%

2004 5% 25% 55% 15%

2005 * 3% 21% 61% 15%

2006 3% 20% 60% 13% 4%

2007 3% 21% 57% 13% 5%

0% 20% 40% 60% 80% 100%

Conventional
HMO
PPO
*Source: Kaiser/HRET Survey of Employer-Sponsored Health POS-HMO
Benefits, 1999-2007; KPMG Survey of Employer-Sponsored Health
Benefits, 1993, 1996; The Health Insurance Association of America
CDHP/HDHP
16
 Private managed care plans care for the majority of
Medicaid / S-CHIP enrollees (Trends 90-04)

Enrollment (in millions)

44.
42.
40. 4
7
50 36. 1
33. 33. 33. 33. 33. 6
45 30. 32. 30. 31.
4 6 4 2 7
28. 1 9
40 9 9
25. 3
35 3 17.4
17.5
17.0
30 15.8
25 14.9
16.7 14.3 14.2
19.9
25.8 23.6
20 28.6
27.3
15 25.6
23.0 25.3 26.9
20.8 23.1
10 17.8 18.8
15.3 16.6
13.3
5 7.8 9.8
2.3 2.7 3.6 4.8
0
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004

Number Enrolled in Traditional Medicaid Programs

Number Enrolled in Medicaid Managed Care

Source:KFF
17
 Medicares Private MCO (Medicare Advantage)
Enrollment has Waxed and Waned

35%
30%
% of Beneficiaries in MCOs
25%
20%
15%
10%
5%
0%
1992 1994 1996 1998 2000 2002 2004 2006 2008

Source: CMS

18
The managed care backlash
and public perceptions

19
US Consumer Perceptions

20
US Publics Perception on
Regulation and Managed Care

21
 Consumers Dont Really Understand Why Health Care Costs
are Rising
Percent who say each is a one of the single biggest factors in rising
health care costs:

Drug/insurance companies making too 50%

much money
Too many medical malpractice suits 37%

Fraud and waste in the health care system 37%

Doctors/hospitals making too much money 36%

Administrative costs in handling insurance 30%

claims
People getting treatments they dont really need 30%

People needing more care due to unhealthy 29%

lifestyles
Use of expensive new 28%
drugs/treatments/technology
The aging population 23%

More people are getting better medical care 12%

SOURCE: ABC News/KFF/USA Today Health Care in America Survey (conducted September 7-12, 2006) 22
 The backlash has not had much impact on MD /
MCO financial relations (Trends in Physician Contracting and
Managed Care Revenue, 1996-2005)

1996-97 1998-99 2000-01 2004-05

Physicians with No Managed
Care Contracts 9.4% 8.6% 9.2% 11.5%*

Average Number of Managed

Care Contracts Among
Physicians with 1 Managed 12 13 13 13
Care Contract
Physicians with No Managed
Care Revenue 5.7% 5.2% 5.8% 8.6%*

Revenue from Managed Care

Among Physicians with 1%
Managed Care Revenue 42% 45% 45% 44%
(Mean)

*Change from 2000-2001 is statistically significant at p<.001.

23
Source: Center for Studying Health System Change, Community Tracking Study
24
25
The three decades of private health insurance: The
solutions must be here somewhere??

Open Consumer
FFS HMO MCO
Access Driven HC

Provider MCO Product We gotta try

Dominance Expansion
Something new
Costs out of MC
Backlash
Control

27