Managed Care Backlash Seen Easing Up

Washington

Consumers have become more open to the idea of a return to managed care practices, according to a recently released study, even if they remain skeptical that such practices wont have an effect on their care.

"The managed care backlash is easing up, probably because consumers are feeling the pinch of rising costs themselves," said Claudia Schur, principal research scientist with the National Opinion Research Center at the University of Chicago, which conducted the study. "However, support for managed care practices is quite segmented, depending on each consumers health care experience and needs. As a result, we may see more plan offerings where consumers who want choice can pay for it, while those willing to accept limits on their care can pay less."

According to the survey, only 30% of respondents believe that managed carethrough such means as gatekeeper referrals, drug substitution and prior approval for new or expensive procedurescan keep health care costs down without negatively affecting patients health. However, many respondents also indicated they would be willing to make trade-offs depending on their health and their ability to pay for care.

The survey was supported by the California HealthCare Foundation and released through the Health Affairs Web site.

"Who you are matters," Schur said, noting that lower income consumers would be among those more willing to accept limitations to their coverage if it meant costs would be reduced. One of the groups most opposed to change, she noted, are older consumers and those who have a greater reliance on their health care coverage who would be more affected by the limitations and whose out-of-pocket expenses would be increased.

Managed care practices declined several years ago amid public outcry over the effects on care, but some aspects of it have begun to resurface, Schur said. Although there is still what she called a "general underlying skepticism about managed care and its ability to hold down costs without affecting care," Schur said the public has shown it is willing to at least consider the idea in the face of rising costs.

"I think theres a clear willingness to consider managed care," she said. "There is no blanket refusal."

Containing costs may take on an increased importance for insurers, according to James Robinson, professor of health economics and chair of the Division of Health Policy Management at the University of California, Berkeley, as companies try to maintain their growth of the last few years.

Publicly traded life companies have experienced very good results in the market over the past few years, Robinson noted, and much of that has come via the acquisition of smaller companies by larger companies. However, the markets in most states have shrunk, to the point where the top 2 or 3 companies in any given state control an overwhelming market share. Typically, he said, a state market is dominated by the Blue Cross Blue Shield affiliate, with 1 or 2 major carriers and a smaller regional company.

"They need to sustain growth," Robinson said, "and the easy pickings are getting harder to find."

Among the issues limiting the markets is the unwillingness of a regional company to enter new markets. Instead, most prefer to acquire smaller companies in that market.

However, Todd Richter, managing director and head of health care strategic transaction development at Banc of America Securities, argued that there is still plenty of room for managed care companies to grow. There are other companies in the health care arena, he noted, some of which are considerably larger than the managed care companies.

On the issue of market share, Richter noted that while most states are indeed dominated by a few companies, that has been the case for a long time. "If theyre lucky, theyre the No. 2 plan," behind Blue Cross Blue Shield, he said.

In fact, Richter asserted that "managed care" has become a misnomer as companies have begun to set their prices to reflect their costs rather than control them.

"The whole concept of managed care is dead," he said. "Its not to control costs thats important. Its understanding what your costs are and pricing for it."

However, as costs continue to rise and competition decreases, Robinson said the industry is facing 2 distinct futures. Either a new product will be developed that will lure new companies into health care, or prices will continue to increase until the public outcry forces the hand of the federal government.

Reproduced from National Underwriter Edition, November 11, 2004. Copyright 2004 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.

Managed Care Backlash Seen Easing Up

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