Less managed care? Featured

5:46am EDT August 31, 2004

In the late 1980s and into the 1990s, managed care was ballyhooed as the mechanism that would hold down spiraling health care costs. Now, Highmark and other plans are turning back the clock and moving away from managed care plans.

"We really thought we had the solution in the 1990s with managed care, this whole concept of a gatekeeper, a primary care physician who would make sure people have access to high-cost services ... only as needed and appropriate," says Ken Melani, president and CEO of Highmark Inc.

Highmark has opted to eliminate the requirement for a referral by a primary care physician for all of its plans by 2005. Last month, it decided to discontinue its HMO and point-of-service products in Central Pennsylvania and the Lehigh Valley.

Jim Godfrey, president of HealthGuard of Lancaster Inc., the Highmark subsidiary that offers the managed care products, cites consumer preferences for more freedom in choosing their health care providers and forecasts of declining managed care enrollments as reasons for phasing out the products.

Insurers began to use managed care strategies widely to curb the use of expensive technologies and specialist care. Such plans generally employ a gatekeeper, usually a primary care physician who is responsible for referring patients to specialists and, more often than not, incentives to limit those referrals. There were variations of the managed care plans, but the essential feature is the gatekeeper who decides when it is appropriate to make a referral.

In some cases, patients can opt out and visit a specialist without a referral, but usually find themselves paying a higher co-payment or with no coverage at all. By 1996, 71 percent of employees in companies with fewer than 200 employees were enrolled in managed care plans. In 2003, of the total enrollment in commercial insurance plans nationally, 59 percent of employees were enrolled in managed care plans.

Managed care did cut costs -- for awhile. For a few years during the 1990s, increases slowed and insurance purchasers got a respite from runaway cost inflation. But rates began to rise again in the late 1990s, and Melani says the savings came not so much because of managed care measures but from deep discounts that doctors and hospitals agreed to because they didn't want to get left out of provider networks.

Says Melani: "That looked good in theory, but what we found out was it really didn't work to the degree that we had anticipated."