What is Managed Care?

Managed Care is a way of delivering quality healthcare at an affordable price by shifting financial risk and management of patient care away from government agencies and into the private sector. A Managed Care Organization (MCO) accepts a per-person, per-month payment for managing the health of a group of patients. This shift from the public to the private sector allows MCOs to play to their strengths, negotiating best rates with healthcare providers and providing equal or better service at a lower price, which is good, both for patients and taxpayers. 

The biggest difference between Managed Care and government-run health coverage, such as the Medicaid program in Arkansas, is how the incentives are organized. The traditional government system works on a “pay-per-claim” basis, which works like this: a Medicaid patient goes to the doctor; the doctor orders tests; and those tests, whether necessary or not, are paid with taxpayer dollars. Through this traditional system, there is no watchdog in place to filter out unnecessary testing or prevent overcharging for services. When these claims are investigated, the process is extremely slow and ineffective. There is no infrastructure in place to allow the government to track patients with the same efficiency as professional health insurance providers. And as a result, doctors and hospitals are incentivized to promote costly testing over positive outcomes.

Managed Care, on the other hand, is aimed at rearranging these incentives to encourage better healthcare quality and better outcomes for patients, at a lower cost to taxpayers. By moving from a “pay-per-claim” to a “pay-for-performance” model, Managed Care Organizations are incentivizing doctors to keep patients healthy, to forego unnecessary testing that drives up costs across the board without improving patient care, and to invest in preventative care for all patients. With the Managed Care model, those healthcare providers who show the best results for patients will benefit the most from this new arrangement.

Partners for a Healthier Arkansas is a coalition of health insurance providers seeking to apply the Managed Care model, which eliminates the one-size-fits-all health care approach for most of the state’s 250,000 participants. This move is anything but unprecedented, with 39 other states and the District of Columbia already coordinating Medicaid through Managed Care. Continuing on the current path of outmoded health insurance models, Arkansas will cost taxpayers as much as $2.5 billion that could be saved by shifting to Managed Care, according to the independent Stephen Report which was commissioned by the Arkansas General Assembly. This change would not only cost taxpayers less but would in no way decrease the number of recipients and would, in fact, improve their quality of care. The choice is simple.