Free «Managed Care In America» Essay Sample

Managed Care In America

Managed care in America is a concept introduced by the corporate industry as it tried to reduce costs regarding expenses undertaken when providing health care coverage to employees. One of the key characteristics of the managed care is that the employer finds a private insurance which, in turn, covers the medical costs when workers become ill. Moreover, it is of importance to understand that employees lose the control of the choice of a hospital or a doctor in time of illness (Brienbaum, 1997). It means that the choice of the physician and the hospital where workers can receive medical services has to be among those selected by the insurer. The concept of managed care dates back to the 1980s when private employers started complaining about medical costs that were rising approximately 15%-20% annually (Reinhardt, 1998). According to many executives in this era, this increment signified the failure on the part of the government in meeting its share of health care costs. Eventually, after Bill Clinton was elected president, these grievances were decreased by a well-cultivated move by the private sector which was in control and had the power to contract a health insurer on behalf of the employees.

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Statement of the Problem

Managed care has a positive impact on the health care industry in America. It can be reflected in the subsided medical coverage provided to employees where both employers and workers contribute to the employees’ medical welfare. However, significant efforts need to be made for employees to enjoy comprehensive benefits of this concept aimed at safeguarding workers from the exorbitant costs of medical services. The premiums that employers are expected to pay to cover their employees’ health care coverage have constantly been rising. Therefore, the concept may be deemed irrelevant since its main agenda was to safeguard employees from excessive charges. Therefore, the question at hand is whether Americans benefit from the managed care concept.

Significance of the Study

Information is power and, in the same line of thought, the study is aimed at providing more insight into relevant parameters of managed care concept. The study’s goal is to provide details pertaining to managed care that will enable people to understand this concept in a detailed manner. Besides, the recommendations are aimed at ensuring that this concept that was initiated to protect the employees from excessive health care cost goes back to the original primary goal. In addition, the study aims at ensuring that all interested groups are fully aware of their rights and responsibilities under the concept of managed care in America. Moreover, the study is keen on pointing out the major drawbacks experienced that have almost made the managed care initiative irrelevant in safeguarding the employees’ health care welfare.


Managed care is a significant achievement attained after the election of Clinton. Employers were desperate because of the ever increasing budget on the employees’ health care costs in terms of insurance coverage. There was the need to come up with a platform where both employees and employers experienced reduced cost of health care insurance premiums. On the part of the employees, despite the limitation of the choice of the hospital and the doctor, the managed care presented an opportunity for reduced risk of job loss. The cost incurred in health care by the corporate sector had increased to an extent that there was the call for them to cut on their cost, not to mention the 1980s-1992 recession (Reinhardt, 1998). Therefore, employees whose jobs were attracting health care cost faced the risk of job loss, which was the main reason the managed care enjoyed the full support of workers. Losing the power of choice was nowhere near to the loss of the job.

Challenges Facing Managed Care in America

Selective Contracting

One of the greatest challenges facing managed care is the selective contracting. It is a situation where a private health insurer contracts a particular physician or a hospital to deliver health care services to individuals covered by the concerned private insurer. Selective contracting has caused instability in the health care industry, whereby former independent physicians are now dependent on private insurance carriers and could be hired and dismissed at any moment through the cancelation of the carriers (Reinhardt, 1998).

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As a result of the selective contracting, physicians and hospitals lost control of the content and the demands of the health care industry to the private insurance carriers. In particular, for a doctor or a hospital to be considered for hiring by insurance carriers, they have to meet every demand stipulated by the insurers, some of which might not be for the benefit of the employees covered and other health care seeking individuals. Moreover, selective contracting has resulted in the instability and the eventuality whereby the health care industry is controlled by an arm that is not a specialist in the field of medicine.


Cost is another challenge facing the managed care in America. The primary purpose of establishing managed care was to offer health services at a reduced cost. However, contrary to this founding role, due to the instability caused by selective contracting, the premiums paid have been increasing and becoming infeasible.

Review of the Literature

The health care industry in the Unites States has consistently been too expensive for many Americans, which is the reason behind Obama Care. Managed care was implemented to help solve the cost issues in the field of health care. It works under the concept of “fee-for-service” model. Here, the beneficiaries of the health care service receive services from health care delivering parties that have agreed to be a part of the Medicaid program (Patel & Rushefsky, 2015). Managed care is one of the initiatives undertaken in an attempt to reduce the cost of availing health care services.


The main benefit of managed care is low-cost health care services. The primary role of managed care is to ensure that people have access to the best quality health care services for a minimum cost possible (Rickel & Wise, 2000). Another accrued benefit of managed care is the accredited care, where all the doctors and hospitals from which people seek medical help are well accredited and have the necessary knowledge and capability to offer the stipulated services under the coverage (Kongstvedt, 2012). Lastly, there is the benefit of cheaper prescriptions because the medicine given to the patients is also under the coverage of the insurance carrier.


The most prominent disadvantage of managed care is the restricted care where the beneficiaries are limited in the choice of places where they can seek their medical help. The patients under a particular policy will only be able to seek help from physicians or hospitals that have been contracted by their medical insurance carrier (Davis, 2000). There is also the problem of strict approval whereby insurance companies may decline to cover people if they have suffered serious illness before. Lastly, there is the problem that occurs in times where referral cases arise. Sometimes, the contracted hospitals or doctors may face a problem that is out of their specialization, which necessitates referral of the patients to other health care centers. The insurance companies usually do not cover expenses incurred in institutions that they have not contracted (Rickel & Wise, 2000).

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Challenges/Problems Analysis

Cost Analysis

The main challenges faced by managed care in America as mentioned earlier are the cost and selective contracting. In terms of the cost, the main reason the concept is facing this challenge is due to the liberalization of the health care industry. The backbone of managed care is the restriction of the services offered and the facilities at which the health care services are offered. However, with the policy being set in the 1980s-1990s as a result of recession, economy advances and changes have made the managed care model irrelevant. The managed competition ensured that the cost of health care services delivery remained relatively low, which has given way to a culture of non-competition among insurers, which, in turn, has led to people having to spend more to receive medical help (Reinhardt, 1998).

Moreover, the insurance offering these services works under the minimal regulation for the government. As mentioned above, this phenomenon has led to health care industry being managed and influenced by people who are not specialists in the field of medicine. Consequently, many Americans have heavy debts as a result of high-priced medical services.

Selective Contracting

As discussed earlier, selective contracting is the primary platform under which managed care operates (Reinhardt, 1998). This approach has led to an unstable health care industry where the insurance companies have a huge influence on what happens in the delivery of services regarding cost and quality. On top of this, the selective contracting has shifted the interest of the hospital and concerned physicians from being patient-oriented to being insurance carriers’ interest-oriented. It has resulted in the eventuality where the health care industry players are keener in profit making rather than taking care of the patient’s interest.


The primary role of any medical initiative should be making the health care more inclusive and affordable. Therefore, it is expected that all relevant players should channel their efforts towards making the industry less of a profit making avenue to the one that seeks to provide improved welfare to the people. In the context of the case at hand, costs and selective contracting are the major drawbacks towards the attainment of the role of managed care as it was envisaged by its founders. In terms of the cost aspect of managed care, there is a need to ensure that there is a price ceiling in terms of the maximum premium that can be charged to the organization providing coverage to people. A price ceiling will ensure that the fundamental purpose of reducing medical cost is attained, thereby bringing back the real intentions of managed care.

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On the other hand, the problem of selective contracting has changed the health care industry. Currently, it is championed by profits rather than safeguards the issues that are of concern to the patients. There is a need to ensure that there is a thorough follow-up undertaken to guarantee that those contracted are the best fit for the job in terms of the qualification and charges. Moreover, there is the necessity to have clear-cut guidelines on contracting procedures and the contract binding time to ensure that physicians and hospitals are not held in captivity by the insurance carriers. Having clear guidelines will ensure that hospitals and physicians concentrate on providing the best services to people.

Implementation of Solution

The key to having an affordable and inclusive managed care is having clear-cut regulations. Moreover, it is evident that the main players that are jeopardizing managed care are the insurance carriers who have made the health care industry adopt approaches that are self-seeking rather than patient-centered. In respect of these realities affecting the concept of managed care, there is a need to have clear guidelines stipulating the expected conduct on the part of the insurance carriers, physicians, and hospitals.


If utilized properly, managed care presents a well-thought concept that can result in the eventuality where people in the United States can afford good quality health care services (Jonas & Goldsteen, 2007). It is evident that the lack of regulations in the health care industry contributed to the domination of the insurance carriers, leading to increased costs and minimized patient orientation. Therefore, in appreciating the huge impact the managed care still possesses, there is a need to come up with a measure of ensuring that the primary objective of managed care of cutting cost is upheld. Consequently, this can be met by ensuring that there is comprehensive legislation on the means and ways through which managed care should be exercised. Proper legislation will guarantee that the interests of all parties in the health care are taken into consideration, leading to a managed care system where the main goal is availing cheap but high-quality health care services.

Summary and Conclusion


The case study demonstrates the elements of managed care by providing insights into different pavements that have affected this concept in the United States. The intention of the study was to analyze different parameters of interest and the way they affect the delivery of managed care in America. Throughout the study, there is an in-depth analysis of the way different parameters affect the managed care performance in terms of meeting the primary role of cutting medical costs. There is also a well-detailed recommendation portion which the best way of ensuring that managed care in America retraces its steps and returns to its founding role of availing low-cost health care coverage for everybody.


It is evident that managed care coverage presents a well-thought policy aimed at reducing cost in the health care industry. The policy coped with its task in the 1990s. However, it is clear that the insurance carriers pose the greatest challenge to the attainment of a low-cost health care for all due to the arm twisting effect it has brought to the industry. In addition, it is obvious that managed care still has a significant place in the health care industry in America. However, there is a need to have clear-cut guidelines on how all influential partners are supposed to behave if a fair, comprehensive, and inclusive health care industry is to be guaranteed.