What is Managed Care?

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  • Written By: N. Madison
  • Edited By: Niki Foster
  • Last Modified Date: 08 March 2020
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Managed care is an approach to healthcare intended to streamline services and provide healthcare that is quality and cost effective. Through supervision, monitoring, and advising, managed care programs seek to ensure a certain standard of care, measure performance, and control costs. Additionally, some managed care plans seek to assist members in staying healthy through prevention.

Managed care plans typically cover some or all of the costs of obtaining healthcare services. Members of such plans are usually encouraged, if not required, to seek services from within a network of approved providers. Some managed care plans allow members to obtain services from providers outside the network. However, such plans usually cover less of the bill when a participating provider is not used.

Managed care plans include utilization review components intended to oversee and keep track of the types and amounts of services obtained by members. Provider reimbursement methods are another primary component of managed care plans. These methods are used to discourage members from receiving healthcare services that are deemed unnecessary, according to the guidelines of the plan.

In the interest of preventing members from obtaining unnecessary services, many managed care plans require members to obtain approval before receiving certain services. Another method of preventing frivolous care involves providing financial incentives to providers for eliminating inessential services. Other methods of controlling superfluous costs are used as well.


Preferred provider organizations (PPOs), health maintenance organizations (HMOs), point-of-service (POS), and primary care case management (PCCM) programs are the four most common types of managed care arrangements. PPOs work to lower healthcare costs by contracting with a network of providers. Each of the providers in this network agrees to offer services at lower than normal reimbursement rates. Depending on the plan, network providers must meet specific requirements in order to participate in the program.

HMOs have provider networks that are entirely exclusive. Often, an HMO will use primary care physicians (PCPs) as gatekeepers for member care. Basically, each member is assigned or chooses a PCP who is responsible for providing general care, as well as arranging for any necessary referrals to specialists or hospitals.

Other HMOs operate differently. They allow members to seek services from any approved network provider or specialist, without a referral. Many HMOs have reimbursement systems in place, as well as other methods to prevent unnecessary services and costs.

POS managed care plans allow members the choice of using providers outside of or within the approved provider network. Members who seek care from providers inside the network pay less than those who use providers outside the network. Often, these plans require gatekeepers to authorize certain services within the network. However, such authorization is typically not required for care sought outside the network.

PCCM managed care plans operate exclusively within the bounds of the Medicaid program. In such plans, Medicaid pays each PCP a monetary amount to manage the care of plan members. Providers are reimbursed for providing healthcare services on a fee-for-service basis as well.


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Post 2

Managed care definitely has some negative effects. My father's company required us to be a part of one when I was growing up, but I look forward to hopefully not needing one in my own adult life, especially with health care reform actively trying to fix things.

Post 1

I used to have a HMO health plan and although it was cheaper than a PPO plan I did not like that I could not see the doctor that I wanted.

I had to instead see a doctor that was in the network. I ended up paying out of pocket to see my regular doctor and the following year I had my husband sign us up for a PPO plan.

The PPO plan was more expensive but I was able to see my doctor for preventive visits and any operations would be paid up to 75%.

I only paid about $2,000 for having my son because the insurance picked up the rest. I could not see

using a different doctor for my delivery. He delivered my first child and I could not see anyone else delivering my baby.

If your doctor happens to be in the HMO plan then it would actually make sense to stick with an HMO, but for me it did not make any sense.

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