Benefits & Disadvantages of Managed Health Care

by M. Paul Jackson ; Updated June 26, 2018
Benefits & Disadvantages of Managed Health Care

The creation of managed care – the most prevalent form of health insurance in the United States – has led to significant change in the ways that patients receive medical care, allowing more people to receive affordable care in a variety of different programs and health-care packages. Under managed care, health insurance plans contract with providers and hospitals to provide care for patients at lower cost. But patients who enroll in a managed care plan should be aware of both the benefits and the drawbacks of those plans.

Managed Care Coverage Options

Managed care became the most popular form of health insurance coverage in the 1980s, over the "fee for service" system. Under managed care, patients have a choice of three types of health plans, each with different co-payment rates. They include health maintenance organizations, which only pay for medical care within a specific health "network," preferred provider organizations, which also cover care within their network, but will cover partial payments for care by providers outside their network, and point of service plans, which offer patients a choice between HMOs and PPOs each time they need care.

Better Drug Costs

Under managed care, more Americans are spending less on their prescription drug bills. This is significant, as Americans spent about $338 billion on prescription drugs in 2017, a figure that is expected to rise to $360 billion in 2018. Under managed care insurance, more patients use less expensive, generic drugs for their treatments, and see lower costs on their drug co-payments. Lower-cost unbranded generic medications make up about 84 percent of all drug prescriptions.

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But managed care plans have some disadvantages. Patients in certain plans might not be able to easily see their preferred health provider, if that health provider works outside of the patient's approved coverage network. Because most managed care plans place restrictions on where patients can go to receive care, patients who want to see a specific doctor will often have to spend more in out-of-pocket costs to see those physicians. A patient in a PPO plan, for example, can have a large medical network, but will still spend more to visit a doctor outside of that network, for example.

Referral Issues

Before managed care, health providers referred patients for specialized medical services, without worrying whether the referred specialist is within their patient's health network. Under managed care, however, more patients have to decide whether to accept a physician's specific referral, if it falls outside of their network. Because managed care systems have more oversight than fee-for-service payments, health providers often have to consider their own patients' individual insurance plans before referring them to a specialist.

About the Author

M. Paul Jackson specializes in business, technology and health-care topics. He has written for newspapers in New York, Pennsylvania and North Carolina. Jackson holds a Bachelor of Science in business and a master's degree in media arts.

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