Healthcare financing-Managed Care Plans Assignment Details Healthcare financing in the United States is complex and involves numerous stakeholders. As U.S. healthcare costs started to rise in the 1970s, the health maintenance organization (HMOs) in the United States evolved with the Health Maintenance Organization Act of 1973. Thereafter, other managed care plans proliferated

Healthcare financing-Managed Care Plans

Managed care plans are designed to help control the cost of healthcare. As a type of health insurance, managed care plans involve a contract-based relationship between health care providers and facilities. The two parties ensure that health care services are accessible and affordable. Managed care plans have attracted immense popularity due to their effectiveness in reducing the costs of healthcare. As a result, a significant percentage of insurance providers have included the managed care component for cost control purposes. Various managed care plans have metamorphized over the years and seek to create a balance between low-cost care and quality health services (Sekhri, 2000). This discussion will provide detailed information regarding managed care plans using selected plans. Managed care plans have revolutionized the health landscape by highlighting critical aspects related to quality and cost containment.

Health Maintenance Organizations (HMOs)

Health Maintenance Organizations (HMOs) are plans that involve patients’ selection of a primary provider within a network. This provider is usually responsible for making referrals to other specialists. The insurance company only reimburses or pays the in-network providers (Heaton & Tadi, 2021). Firstly, one of the main advantages is the affordability of the plan. The low cost of the HMO plans increases the restrictiveness by reducing the freedom of choice. Secondly, the patients and insurance companies can predict the cost of care for each month. It is possible to forecast the cost of care. In terms of controlling costs, these forecasts are beneficial, which leads to the third advantage. The deviations that exceed the historical costs can be investigated to ascertain validity. This aspect of control is critical to the success and efficiency of managed care plans. The ability to control costs using a fixed monthly rate increases the likelihood of cost savings. Enrollees who register voluntarily have recorded prepaid group practices (PGP) costs that are 10 to 40 percent lower than those incurred by conventional insurance clients (Tollman, Schopper, & Torres-cantero, 1990).

The issue of the actual amount of savings is still debatable. Finally, the ability to penalize physicians financially ensures that the providers observe the set amounts. In case of required excessive, preauthorization is necessary. This approach increases the transparency of HMOs. While one may highlight those capped costs indicate less utilization of the health services, it is important to note that it also curbs the misuse of these services. For instance, physicians only recommend the necessary tests, medications, admission days, and interventions (Tollman, Schopper, & Torres-cantero, 1990). This saves the consumption of resources unnecessarily which is likely to occur when using traditional insurance plans.

Disadvantages

Firstly, the low cost of the HMOs reduces the freedom of choice in terms of primary providers. This limited choice may affect access to more sophisticated treatments. Secondly, HMOs have poorly prioritized preventive care and focused more on the management of curative care costs. Preventive care is better at addressing population health than curative care. However, very limited efforts have been directed towards the expansion of preventive care. In addition, physicians lack incentives to promote preventive over curative care. However, prevention costs may be perceived as high in the short term without considering the benefits. The cost sensitivity of HMOs does not offer physicians and patients an allowance to explore preventive care because it may open loopholes for unnecessary treatments and medications and increase care costs, which contradicts the objective of managed care plans (Tollman, Schopper, & Torres-cantero, 1990).

Thirdly, the voluntary nature of enrollment in HMOs is limited, leading to discrimination. In the USA, HMOs are known for enrolling young and healthy individuals. Discrimination tactics against the chronically ill-aged population have been observed. These chronic conditions are viewed as a prohibitive cost. For instance, mental patients may not benefit from HMOs due to the need for numerous consultations and the difficulty of treatment. Since cost is an important aspect of HMOs, the plan does not cover the admission days for psychiatric conditions. The need for long-term treatment of various mental illnesses is unattractive for insurance companies (Tollman, Schopper, & Torres-cantero, 1990). This aspect increases the health gap between mentally ill individuals and other kinds of patients and demands that patients fund such treatments out of pocket.

Finally, the patients who enroll for HMOs have difficulties accessing emergency care that has not been referr