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Journal Issue: Health Care Reform Volume 3 Number 2 Summer/Fall 1993

Managed Care for Children and Pregnant Women: Promises and Pitfalls
Authors: Deborah A. Freund Eugene M. Lewit

Endnotes

  1. Sullivan, C.B., Miller, M., Feldman, R., et. al. Employer-sponsored health insurance in 1991. Health Affairs (Winter 1992) 11,4:172–-85.
  2. Wilensky, G.R., and Rossiter, L.F. Coordinated care and public programs. Health Affairs (Winter 1991) 10,4:62–77.
  3. Ellwood, P.M. Health maintenance organizations: Concept and strategy. Journal of the American Hospital Association (1971) 45:53–60.
  4. While service-specific case management more often is applied to areas such as drug abuse or psychiatric care, there is interest in applying it to pregnancy care, especially in low-income populations, to see if birth outcomes can be improved. In such a program, pregnancy care case management is a separate intervention which need not take place in a comprehensive managed care organization. While this represents an important area of study, in this paper we discuss the pregnancy care that is delivered as part of a comprehensive managed care plan that is also responsible for providing an array of other health and medical services to its enrolled population.
  5. Goldstein, G.S. Defining managed care. HMO Magazine (March/April 1992) 33,2:53–54.
  6. Gold, M.R. Data watch: HMOs and managed care. Health Affairs (Winter 1991) 10,4:189–206.
  7. Szilagyi, P.G., Rodewald, L.E., and Roghmann, K.J. Managed health care for children. Journal of Ambulatory Care Management (January 1993) 16,1:57–70.
  8. Hurley, R.E., and Freund, D.A. A typology of Medicaid managed care. Medical Care (1988) 26,8:764–67.
  9. Freund, D.A., and Neuschler, E. Overview of Medicaid capitation and case-management initiatives. Health Care Financing Review (1986 Annual Supplement) 21–30.
  10. Hoy, E.W., Curtis, R.E., and Rice, T. Change and growth in managed care. Health Affairs (Winter 1991) 10,4:18–36.
  11. Because plans are so diverse and present such a variety of features, it may make more sense to categorize managed care plans by reference to important demand and supply side features, some of which are defined in Table 2. Elements that influence the demand for health care services include, but are not limited to: (1) the nature of entry into the delivery system, for example, whether access is controlled by a gatekeeper; (2) the presence of co-insurance, deductibles, or other financial barriers to the use of services; and (3) the health status and health care utilization preferences of the individuals who elect to join a managed care entity versus those who do not. Important supply side features are: (1) the manner in which physicians are compensated and other monetary and nonmonetary incentives, including risk-sharing arrangements; (2) the availability of providers and their specialty distribution and location; and (3) utilization management controls, such as prior authorization, concurrent review, and lists of mandated outpatient procedures. Many possible combinations of each of these exist within plans. Although some interest has focused on the effects of particular plan features on cost, utilization, and quality, little of this work has looked at the impact of these features on children, the focus of this review.
  12. Managed Care Digest: Update Edition. Kansas City, MO: Marion Merrell Dow, 1992.
  13. Managed Care Digest: PPO Edition. Kansas City, MO: Marion Merrell Dow, 1992.
  14. The estimates of children enrolled in managed care plans are quite rough because data come from a variety of sources and no attempt has been made to reconcile the estimates to assure consistency of reporting and eliminate possible double counting. Particular caution should be exercised in interpreting the PPO estimates. They are derived from a survey of all PPO plans and reflect whether employees are “eligible” for PPO participation as part of an employee benefit plan. Total PPO eligibility is then obtained by adding an estimate of employee dependents to the survey responses. This may lead to two potentially offsetting sources of error: (1) many employees who are “eligible” for PPO benefits may not, in fact, participate in the plans and (2) the many children with two working parents who are eligible for health insurance under benefit plans offered by employers of both their parents may be double counted.
  15. Health Care Financing Administration, Office of Medicaid Coordinated Care, Department of Health and Human Services. Personal communication with Michael Fiore, deputy director of Medicaid Coordinated Care Office, March 1993.
  16. Tabor, M.B.W. New York's poor trying alternative to Medicaid. The New York Times. February 1, 1993, at A1.
  17. Robitaille, S. Medi-Cal's planned changeover to HMO system is revamped. San Jose Mercury News. January 14, 1993, at B3.
  18. Hurley, R.E., Freund, D.A., and Paul, J.E. Managed care in Medicaid: Lessons for policy and program design. Ann Arbor, MI: Health Administration Press, 1993.
  19. Iglehart, J.K. Health policy report: The American health care system: Managed care. New England Journal of Medicine (September 3, 1992) 327,10:742–47.
  20. Freund, D.A., Medicaid reform: Four studies of case management. Washington, DC: American Enterprise Institute Studies in Health Policy, 1984.
  21. Welch, W.P., Hillman, A.L., and Pauly, M.V. Toward new typologies for HMOs. Milbank Memorial Fund Quarterly (1990) 68,2:221–43.
  22. Among the different plans, physicians may alternately be salaried employees of the managed care organization, salaried by a firm that is a general contractor to a managed care entity, in private practice and directly capitated, or receive compensation on a sessional basis or as discounted fee-for-service. In addition, under most of these arrangements, physicians may share in plan profits through yearly bonuses.
  23. Luft, H.S. How do health-maintenance organizations achieve their “savings?” New England Journal of Medicine (1978) 298,24:1336–43.
  24. Valdez, R.B., Ware, J., Manning, W., et al. Prepaid group practice effects in utilization of medical services and health outcomes for children: Results from a clinical trial. Pediatrics (1989) 83,2:168–80.
  25. U.S. Department of Health and Human Services. National Center for Health Statistics. National Hospital Discharge Survey: Annual Summary, 1992. Vital and health statistics. Series 13, No. 109. Washington, DC: USDHHS.
  26. Szilagyi, P.G., Roghmann, K.J., Foye, H.R., et al. The effect of independent practice association plans on the use of pediatric ambulatory medical care in one group practice. Journal of the American Medical Association (1990) 263,16:2198–2203.
  27. In their review of the literature, Hurley, Freund, and Paul looked at 25 evaluations of Medicaid managed care programs that ran the gamut from federally supported large-scale evaluations such as the Medicaid Competition Demonstrations (hereafter MCD), the evaluation of the Arizona Health Care Cost Containment System, and the Medicaid Program Evaluation to analyses prepared by state governments requesting permission from HCFA to implement Medicaid managed care programs. See Freund, D.A., Rossiter, L.F., Fox, P.D., et al. Evaluation of the Medicaid competition demonstrations. Health Care Financing Review (Winter 1989) 11,2:81–97; Hurley, R.E. The status of Medicaid competition demonstrations. Health Care Financing Review (1986) 8,2:65–75; Research Triangle Institute. Evaluation of the Medicaid competition demonstrations: Integrative final report. Contract No. HCFA-500-83-0050, Research Triangle Park, NC, 1989; SRI International. Evaluation of the Arizona health care cost containment system: Final report. Contract No. HCFA-500-83-0027. Menlo Park, CA, 1989; Holahan, J., Bell, J., and Adler, G.S. Medicaid program evaluation: Final report. Number MPE 9.2. Office of Research and Demonstrations. Health Care Financing Administration, Baltimore, MD, 1987.
  28. Research Triangle Institute. Evaluation of the cost effectiveness and utilization of health services by Medicaid recipients enrolled in health maintenance organizations. Final report to the Bureau of Medical Assistance, Managed Health Care Section. Ohio: Department of Human Services, 1992.
  29. Leibowitz, A., Buchanan, J.L., and Mann, J. A randomized trial to evaluate the effectiveness of a Medicaid HMO. Journal of Health Economics (1992) 11:235–57.
  30. In the 12 programs with stronger evaluations, 3 programs showed increases, 5 showed decreases, and 4 showed no change in physician visits.
  31. See note no. 27, Freund, Rossiter, Fox, et al.
  32. Cartland, D.C., and Yridkonsky, B.K. Barriers to pediatric referral in managed care. Pediatrics (1992) 89:183–92.
  33. Hurley, R.E., Paul, J.E., and Freund, D.A. Going into gatekeeping: An empirical assessment. Quality Review Bulletin (October 1989) 306–14.
  34. Freund, D.A., Hurley, R.E., Paul, J., et al. Interim findings from the Medicaid competition demonstrations. Advances in Health Economics and Health Services Research (1989) 10:153–81.
  35. Hurley, R.E., Freund, D.A., and Taylor, D.E. Emergency use and primary care case management: evidence from four Medicaid demonstration programs. American Journal of Public Health (July 1989) 79,7:843–47.
  36. Hurley, R.E., Freund, D.A., and Taylor, D.E. Gatekeeping the emergency department: Impact of a Medicaid primary care case management program. Health Care Management Review (1989) 14,2:63–71.
  37. Bonham, G.S., and Barber, G.M. Use of health care before and during Citicare. Medical Care (1987) 25:111–19.
  38. Davidson, S.M., Manheim, L.M., Werner, S.M., et al. Prepayment in publicly funded programs. Pediatrics (1992) 89,4:761–67.
  39. Sloss, E.M., Keeler, E.B., Brook, R.H., et al. Effect of a health maintenance organization on physiologic health. Annals of lnternal Medicine (1987) 106:130–38.
  40. Ware, J.E., Rogers, W.H., Davies, A.R., et al. Comparison of health outcome at a health maintenance organization with those of fee-for-service. Lancet (1986) 1:1017–22.
  41. Brook, R.H., Kamberg, C.J., Lohr, K.N., et al. Quality of ambulatory care: Epidemiology and comparison by insurance status and income. Medical Care (May 1990) 28,5:392–433.
  42. Szilagyi, P.G., Roghmann, K.J., Foye, H.R., et al. Increased ambulatory utilization in IPA plans among children receiving hyposensitization therapy. Inquiry (Winter 1992) 29:467–75.
  43. Carey, T., Weis, K., and Homer, C. Prepaid versus traditional Medicaid plans: Effects on preventive health care. Journal of Clinical Epidemiology (1990) 43,11:1213–20.
  44. Freeman, R.K., and Poland, R.L. Guidelines for perinatal care. Elk Grove Village, IL: American Academy of Pediatrics, 1992.
  45. Goldfarb, N.I., Hillman, A., Eisenberg, J., et al. Impact of a mandatory Medicaid case management program on prenatal care and birth outcomes. Medical Care (1991) 29,1:64–71.
  46. See note no. 27, SRI International.
  47. The reasons for the reduced travel times in Santa Barbara could not be determined within the MCD study design.
  48. Freund, D.A., and Hurley, R.E. Managed care in Medicaid: Selected issues in program origins, design, and research. Annual Review of Public Health (1987) 8:137–63.
  49. Langwell, K. The effects of managed care on use and cost of health services. CBO staff memorandum. Washington, DC: Congressional Budget Office, 1992.
  50. Utilization of health care services depends on both an individual's health status and her demand for care given her health status. We use the term “healthier” to describe individuals who will be low users of health care for either or both reasons. In the real world, it is likely that managed care plans try to avoid enrolling sicker individuals and that individuals who have a high demand for health care services will try to avoid managed care plans that attempt to control utilization.
  51. Buchanan, J.L., and Cretin, S. Risk selection of families selecting HMO memberships. Medical Care (1986) 24:39–51.
  52. Wilensky, G.R., and Rossiter, L.F. Patient self-selection in HMOs. Health Affairs (1986) 5:66–80.
  53. Hellinger, F.J. Selection bias in health maintenance organizations: Analysis of recent evidence. Health Care Financing Review (1987) 9:55–63.
  54. Freund, D.A., Hurley, R.E., Adamache, K.W., et al. The performance of urban and public hospitals and NHCs under Medicaid capitation programs. Hospital and Health Services Administration (1990) 35,4:525–46.
  55. Gabel, J.R. Witness to a thousand stories: A look at insurance data. Health Affairs (Winter 1992) 11,4:186.
  56. The Medicaid managed care market appears to be in disequilibrium. Though the Medicaid reimbursement rate is perceived as stingy by many, managed care plans built on networks of providers which have traditionally served Medicaid beneficiaries such as urban hospitals and community health centers usually agree to participate in Medicaid managed care plans in order to maintain a share of the patient care market. Other plans do not participate because they believe payments are too low. Still others leave the market or go out of business altogether because of financial losses. If capitation rates in Medicaid are too high and plans are being overpaid as is shown in several studies,29 ,31 then many plans, especially those with little Medicaid experience, should enter the market. But they do not. It may be that it is too costly to gain the experience to treat Medicaid subscribers or that plans which treat the nonpoor are not efficient at treating the poor. It may also be that traditional plans and providers are reluctant to get involved in some heavily regulated Medicaid markets and also find it difficult to compete with plans that may use selective enrollment and other techniques to game the system. Similarly, there is considerable evidence of disequilibrium in the private managed care market as new plans emerge, some old plans go out of business, and others merge, differentiate, and develop satellite operations. See also, Managed Care Digest: HMO Edition. Kansas City, MO: Marion Merrell Dow, 1992.
  57. Newhouse, J.P. Medical care costs: How much welfare loss? Journal of Economic Perspectives (1992) 6:3–21.
  58. Ellwood, P.M., Enthoven, A.C., and Etheridge, L. The Jackson Hole initiative for a twenty-first century American health care system. Health Economics (1992) 1:149–68.
  59. Starfield, B. Child and adolescent health status measures. The Future of Children (1992) 2,2:25–39.
  60. Strumwasser, J., Paranjpe, N.W., Ronis, D.L., et al. The triple option choice: Self-selection bias in traditional coverage, HMOs and PPOs. Inquiry (1989) 26:432–41.
  61. Hurley, R.E., Gage, B.J., and Freund, D.A. Rollover effects in gatekeeper programs: Cushioning the impact of restricted choice. Inquiry (Winter 1991) 28:375–84.
  62. Anderson, M., and Fox, P. Lessons learned from Medicaid managed care approaches. Health Affairs (1987) 6,1:71–86.
  63. This strategy, however, runs counter to the standard insurance practice of pooling risks in large groups and to community rating, which is espoused by many health care reform proposals. It is consistent, however, with experience rating and medical underwriting, which currently dominate the market for private health insurance and tie the premiums charged individuals and groups to their expected health care utilization. See Phelps, L.E. Health Economics. New York: Harper Collins Publishers, Inc., 1992.
  64. Attention has focused on ways to improve the Average Annual Per Capita Cost (AAPCC), the capitation rate that Medicare pays an HMO when a beneficiary joins. At the present time, the AAPCC is linked to fee-for-service Medicare payments and is adjusted up or down according to the demographic characteristics of the persons joining each HMO. See Rossiter, L.F., Chiu, H.C., and Chen, S.H. Strengths and weaknesses of the AAPCC. Paper prepared for presentation at the FHP conference on HMOs and the Elderly, Institute for Health Policy Studies, UCSF, November 17–18, 1992. Thus, each HMO contracting with Medicare is paid a different capitation rate for each enrollee according to his or her characteristics. According to Brown and Hill, many studies have shown that, as in Medicaid managed care, Medicare HMO enrollees are healthier than nonenrollees; critics of current AAPCC procedures contend that this occurs because the AAPCC does not reward HMOs for treating those who are sick. See Brown, R., and Hill, J. The effects of Medicare risk HMOs on Medicare costs and service utilization. Paper prepared for presentation at the FHP conference on HMOs and the Elderly, Institute for Health Policy Studies, UCSF, November 17–18, 1992. Because an individual's use of health care in the years immediately before he enrolls in managed care plans may be a good indicator of his use after enrollment, several researchers have suggested that the AAPCC be adjusted to reflect the prior use of enrollees. For a discussion of different adjusters designed to improve the performance of the AAPCC, see Rosko, M.D., and Broyles, R.W. The economics of health care: A reference handbook. New York: Greenwood Press, 1988, pp. 340–48. While prior use adjustments might work for some populations, they will not for other vulnerable groups. For example, prior use is not likely to be a good predictor for pregnant women because after a birth episode, expenses will likely be reduced. There is evidence from the literature on both the nonpoor and Medicaid which substantiates this conclusion. For example, in one study expectant mothers who were Medicaid eligible were found to be more likely to select Group Health of Puget Sound rather than to stay in the standard Medicaid program. Their costs in the HMO, however, dropped to average levels after about 18 months. See Wintringham, K., and Bice, T. The effects of turnover in use of services by Medicaid beneficiaries in an HMO. The Group Health Journal (1985) 6,1:12–18. Thus, in this instance, the prior use of individuals before HMO enrollment underpredicted expenses in an HMO. Similarly, an analysis of Bank of America employees who had a choice of a fee-for-service indemnity plan or an HMO found that women who were pregnant selected the HMO to have their children and disenrolled shortly afterward. See Robinson, J.C., Gardner, L.B., and Luft, H.S. Health plan switching in anticipation of increased medical care utilization. Medical Care (January 1993) 31,1:43–51. The evaluation of the Ohio Medicaid experience found an opposite effect: Medicaid pregnant women enrolled in an HMO only after a delivery (see note no. 28, RTI). Thus, among certain populations, an individual's prior use may be a poor predictor of future use and of potential selection bias because someone can store up use, such as pregnancy, for another period.
  65. Kronick, R., Goodman, D.C., Wennberg, J., and Wagner, E. The marketplace in health care reform. New England Journal of Medicine (1993) 328,2:148–52.
  66. Davidson, S.M., Manheim, L.M., Werner, S.M., et al. Prepayment in publicly funded programs. Pediatrics (1992) 89,4:761–67.
  67. See note no. 63, Phelps.
  68. Belkin, L. Sensing a loss of control, more doctors call it quits. The New York Times. March 9, 1993, at A1.
  69. See note no. 54, Freund, Hurley, Adamache, et al. Public hospitals frequently find it difficult to reorganize their outpatient care services to guarantee access to a particular physician. As a result, they have difficulty controlling use of the emergency department and other services.
  70. Gruber, J. The effect of price shopping in medical markets: Hospital responses to PPOs in California. National Bureau of Economic Research, Working Paper No. 4190, October 1992.
  71. Lewit, E.M., and Monheit, A.C. Expenditures on health care for children and pregnant women. The Future of Children (Winter 1992) 2,2:95–114.
  72. Plan size is another important factor in mitigating financial risk among managed care plans or any insurance scheme. In general, if losses are distributed randomly among many small plans, some plans will experience surpluses and some will experience large losses as a result of chance alone. Combining plans increases the likelihood that surpluses and losses will balance out. For a general discussion of many of these issues, see Wallack, S.S. Managed Care: Practice, pitfalls and potential. Health Care Financing Review (1991 Annual Supplement) 27–34.
  73. Robitaille, S. Tug of war over Medi-Cal patients. San Jose Mercury News. January 11, 1993, at A1, A10.
  74. Belkin, L. Under new health plans patients change habits. The New York Times. January 6, 1993, at A1, A14.
  75. State governments currently exercise some control over HMOs through their insurance and health departments. Whether this oversight is adequate to deal with the current rapidly changing health care market remains to be seen. It appears, however, that many states which are moving to expand their Medicaid managed care programs may not have well-developed and adequately staffed oversight operations. The August 1992 issue of Consumer Reports magazine which explained managed care concepts and rated many large plans attests to the interest of the nonpoor population in learning more about managed care and to the ability of nongovernmental entities to provide needed information. See Health care in crisis. Are HMOs the answer? Consumer Reports (1992) 57,8:519–31.
  76. McGlynn, E.A., Siu, A.L., Leatherman, S.T., et al. Producing publicly available information on the quality of health plans. Unpublished paper. Santa Monica, CA: RAND Corporation, 1992.
  77. Winslow, R. Report card on quality and efficiency of HMOs may provide a model for others. The Wall Street Journal. March 9, 1993, at B1, B10.