How Is Managed Care Supposed to Save Money?

Most managed-care plans fall into two major categories: the preferred provider orgnization (PPO) and the Health Maintenance Organization (HMO). Although there are differences among managed-care plans, they all aim to contain costs. One way they do this is by negotiating with doctors for discounted fees. In turn, the physicians are guaranteed a steady flow of patients. Sometimes plans pay their doctors a monthly capitation, which is a fixed amount of money per patient regardless of how much or how little care that person actually receives.

Many managed-care plans have formal systems to improve and review the quality-of-care provided. These systems are designed to eliminate the unnecessary visits to specialists and duplicate tests that some experts say account for 30 percent of America's health care costs. Managed care is supposed to put a high emphasis on preventive care and early detection to prevent serious illness from getting a foothold.

Regardless of how different types of managed-care plans are organized, the money they save allows them to offer lower out-of-pocket costs to their enrollees. But critics--including both doctors and patients--believe the pressure on health care providers to contain costs may lead to delays in or denial of necessary and sometimes life-saving care.

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