The Value of Managed Care Subsection of the California Association of Health Plans’ 2009 Annual Report
April 2010
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CALIFORNIANS AND HEALTH CARE
MANAGED CARE BENEFITS CALIFORNIANS
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anaged care refers to health care coverage that organizes doctors, hospitals and other providers into groups in order to enhance the quality and cost effectiveness of medical treatment. Managed care plans provide health care coverage to employers, government programs, and individuals who buy their own coverage in the form of HMOs and PPOs. California has the largest managed care enrollment in the U.S., covering one in four Americans in a HMO. By comparison, New York has the second greatest number of enrollees which only account for 10 percent of Americans.
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anaged care health plans coordinate a patient’s care among several providers through a primary care physician, who directs care for that patient. In California, health plans contract with large groups of doctors — networks — who offer general and specialty care through an organized medical group. Health plans pay these medical groups and independent practice associations (IPAs) a fee for each health plan member who sees doctors in that medical group. This is referred to as capitation — medical groups are paid per patient instead of per patient visit and decisions about medical care are delegated to the medical group instead of the health plan. This approach, called the delegated model, benefits California’s managed care enrollees by allowing their physicians to direct the course of their treatment rather than the managed care organization. The delegated model has significantly contributed to containing health care costs over the past two decades.
There are currently 21 million Californians enrolled in managed care plans. Over half have group coverage, more than one-third are in public programs, and nearly 3 percent privately purchase their own health insurance. There are an estimated 6.6 million uninsured Californians. Other insured Californians purchase coverage that may not be as comprehensive as a managed care plan or their employer may directly insure them.
2009 CAHP ANNUAL REPORT—THE VALUE OF MANAGED CARE
HOW HEALTH PLANS ARE ORGANIZED
$ Role of health plans Health plans provide the public with better and more cost effective health care services by coordinating care among providers and focusing on tools that help prevent or manage debilitating conditions. Health plans employ various tools to provide better health care, including encouraging the use of evidence-based medicine, coordinating care through a primary care physician and offering consumer support. Health plans take on the financial risk of their members’ medical costs so people don’t have to worry about an accident or disease wiping them out financially. The premiums paid by many healthy people help cover the cost for sick people who have considerable medical need.
Role of physician group Under the delegated model, which is more predominant in California than any other state, health plans entrust their physician group partners with managing all aspects of patient care. Health care coverage decisions are in the hands of doctors, and the groups often manage administrative functions like claims payment.
Role of patient Consumers with health insurance are more likely to have a regular doctor and more likely to get preventive medical care. As a result, they are likely to be healthier, which means they can enjoy a better quality of life and avoid major medical costs that can occur by waiting until they become seriously ill to seek care. Health plan members should be active partners in their own health care, along with their physicians.
Role of government The Knox-Keene Health Care Service Plan Act of 1975, as amended, is the body of California law that regulates and licenses managed care plans (primarily HMOs and certain PPOs). It is the first and most extensive state law regulating health plans in the United States. Under the Act, health plans that provide coverage to Californians must provide basic benefits through a network TWENTY-FIVE HEALTHY YEARS
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HMO: Health Maintenance Organizations, or managed care plans, provide a wide range of comprehensive health care services for a specified group or individual for a fixed premium. Consumers must choose a primary care physician who directs the patient’s care within the HMO’s network. PPO: Preferred Provider Organizations negotiate discounted fees with preferred providers and encourage their members to use this network by offering lower co-payments and other incentives. FFS: Fee-for-Service or Indemnity coverage generally assumes that a provider will be paid a fee for each service provided to a patient. Capitation — a prepaid periodic fee to a physician by a managed care organization that is fixed. The fee is paid for each member regardless of the actual cost or number of services provided. Medi-Cal: California’s Medicaid program — a federal and state funded program run by states to provide health insurance coverage to individuals with low incomes or disabilities. Healthy Families Program: California’s Children’s Health Insurance Program (CHIP) — a federal and state funded program providing health insurance coverage to children whose families have too high of an income to qualify for Medi-Cal, but are still lower income. Medicare — a federally funded program that provides health insurance coverage for people age 65 and older or those with certain disabilities. Medicare is FFS and beneficiaries can receive medically necessary care members from nearly any hospital or doctor in the country. For people who choose to enroll in a Medicare Advantage health plan, Medicare pays a managed care plan a capitated rate.
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of providers who are readily available and accessible. The Legislature gave the California Department of Managed Health Care (DMHC) the responsibility of overseeing licensure of health plans and their compliance with the Knox-Keene Act. The state’s insurance commissioner regulates traditional health insurers (primarily indemnity plans and some PPOs) through separate insurance laws. MANAGED CARE IN GOV ERNMENT PROGRAMS
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he government also relies on managed care plans to provide care to many Californians who participate in public health care programs. This includes government employees, notably the state’s CalPERS and federal government’s TriCare, seniors through Medicare, and low income individuals through Medi-Cal, Access for Infants and Mothers (AIM) Program and Healthy Families Program. Half of the state’s 6.6 million Medi-Cal enrollees are enrolled in managed care health plans. More than 880,000 children are enrolled in the Healthy Families program which offers coverage through private health plans.
An additional 72,000 children are enrolled in managed care plans through local Children’s Health Initiatives — for children who do not meet the eligibility requirements for Medi-Cal or Healthy Families but still need assistance for health care coverage. Nearly one in three Californians, or 1.4 million seniors, are enrolled in Medicare Advantage programs offered by health plans.
Research has shown that in Medicaid health plans contain costs and provide beneficiaries with improved access to health services compared to those in FFS. Some states have saved up to 19 percent with the managed care model. In California, preventable hospitalizations were significantly lower for Medi-Cal beneficiaries in health plans than in fee-for-service programs. Data from a subset of Medi-Cal beneficiaries suggested that managed care was associated with an average of over 7,000 fewer hospitalizations per year, saving an estimated $66 million in hospital charges.
SOURCES: Managed Risk Medical Insurance Board, December 2009; California Children’s Health Initiatives, September 2009; California HealthCare Foundation, Health Care Almanac, January 2009.
2009 CAHP ANNUAL REPORT—THE VALUE OF MANAGED CARE
BENEFITS of MANAGED CARE in CALIFORNIA
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embers of managed care plans get much more than payment for medical services. Prior to the advent of managed care plans, there was no structured system focused on prevention and well being. Health Plans regulated by the Department of Managed Care (DMHC) provide coverage for medically necessary health care services, including: Physician services; Preventive health services; Hospital inpatient services and ambulatory care services;
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Maternity care; Mental health treatment services;
Like the population of California, health plans operating in the state are diverse in their operation. Regardless of how they are structured, they all achieve the same end goal: providing comprehensive health care coverage to 21 million Californians. Commercial plans can be for-profit or not-for-profit and cover any consumers that purchase health care coverage. This includes employers and individuals. Commercial plans also cover Medi-Cal and Healthy Families beneficiaries in certain counties. Public plans are available in 25 counties for people covered by government-provided health care coverage. Local Initiatives (LI) are programs initiated by counties and compete with commercial plans in one or two counties. County Organized Health Systems (COHS) are operated by the county board of supervisors and can operate in one to four counties in a region.
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Laboratory services; Home health services; Emergency health care services; and Hospice care.
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In addition to providing basic health care and other mandated services, managed care plans improve access to care, provide care coordination, ensure quality care, and provide cost savings in some of the following ways:
Broad Physicians’ Networks Health plans in California offer extensive provider networks that provide every beneficiary with has access to covered services.
Medical Home Health plan members select a primary care physician who keeps track of their health care needs and refers them to specialists or other providers when necessary. Through the direction of a primary care doctor, care is comprehensive. Physicians take into consideration all the patient’s health care needs and utilize appropriate resources to treat the patient’s physical, mental, and emotional needs.
2009 CAHP ANNUAL REPORT—THE VALUE OF MANAGED CARE
Timely Appointments Health plans, working in tandem with their physician groups, ensure their members can see a physician within a reasonable timeframe. If the member has trouble getting a timely appointment, the health plan can help the member find an alternate physician.
Language Assistance In a state as ethnically diverse as California, health plans make sure they have the ability to communicate with their members. Health plans translate many of their materials into several languages. Additionally, health plans provide interpreter services at no charge so that patients can engage in their health care treatment in their primary language.
Prevention and Risk Reduction Managed care plans reach out to at-risk members to promote wellness and encourage preventive care and early intervention. Examples of preventive programs offered by managed care plans include routine physical exams, health assessments, immunizations, mammograms, prenatal care, annual pap tests, smoking cessation programs, weight management and/ or exercise program discounts. One analysis showed that investing in just five preventive services could save more than 100,000 lives per year. SOURCES: Partnership for Prevention’s National Commission on Prevention Priorities, June 2009.
THE VALUE OF MANAGED CARE IN CALIFORNIA: INTEGRATED HEALTHCARE ASSOCIATION (IHA) $ The Integrated Healthcare Association (www.iha.org) is a statewide multistakeholder leadership group that promotes quality improvement, accountability and affordability of healthcare in California. The California Pay for Performance (P4P) program is the largest private physician incentive program in the United States. Founded in 2001, it is managed by IHA on behalf of eight health plans representing 10.5 million insured persons. IHA is responsible for collecting data, deploying a common measure set, and reporting results for 35,000 physicians in 229 physician groups. California consumers benefit from the availability of standardized performance results, which are available to the public through the Office of the Patient Advocate (www.opa.ca.gov). The overall goal of P4P has been to improve the quality of healthcare and results have shown steady improvement in clinical performance and significant improvement in the adoption of information technology. P4P also formed a collaborative environment between health plans and physician groups, and created a single set of performance measures and public report card. P4P is now evolving into performance-based contracting and will include new performance measures based on cost efficiency. Aetna, CIGNA, Anthem Blue Cross, Blue Shield, Health Net, UnitedHealthcare (formerly PacifiCare), and Western Health Advantage participate in the incentive payouts to physician organizations, totaling over $316 million. Kaiser Permanente participates in public reporting only.
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Innovations in Chronic Care Management Health plans engage with members who have chronic diseases to help with disease management and provide care coordination. Frequently, a patient’s care is more carefully monitored through a case manager to ensure that the patient is receiving appropriate care to best improve the condition or avoid complications, and to avoid overlapping care. One health plan’s diabetes management programs reduced hospitalizations by 22 to 30 percent and lowered costs by nearly one quarter compared with non-participants. SOURCE: Villagra VG, Ahmed T. “Effectiveness of a Disease Management Program for Patients with Diabetes.” Health Affairs, 2004; 23(4): 255-266.
Evidence-Based Medicine One of the cornerstones of managed care is the reliance on treatments that are proven through scientific research to improve health outcomes and keep the cost of health insurance affordable by avoiding unnecessary or inappropriate care.
Pay-for-Performance Physicians’ Networks
measures for their patients that ensure quality and efficiency. The measures sought to improve quality of medical care, patient experience, use of information technology, and publicly reporting providers’ performance. P4P principles have been adopted nationally by insurers and government payers, including Medicare. California boasts the largest program, spending $264 million on P4P between 2003 and 2007. As a result, the set of measurements used to assess quality of care improved by an average of 3 percent annually. Further, adoption of information technology, which helps build efficiencies and improves the quality of health care, increased annually by 7 percent. SOURCE: Robinson JC, Williams T, Yanagihara D. “Measurement of and Reward for Efficiency in California’s Pay-for-Performance Program.” Health Affairs, 2009; 28(5): 1438-1447.
Federal Standards for Quality Measurement Health plans want to make sure their members are receiving quality care from its physician networks. More than 90 percent of America’s health plans use a nationally accepted standardized measurement tool to analyze care and services provided by the health care industry.
Pay-for-performance (P4P) programs are a relatively new payment model used to reward physicians, hospitals, medical groups and other providers for meeting targeted performance
2009 CAHP ANNUAL REPORT—THE VALUE OF MANAGED CARE
Health Plans Manage Costs Poor quality in our health care system costs the nation up to 79,000 avoidable deaths, 66.5 million sick days, and $1.8 billion in excess medical costs each year. In 2009, health care spending accounted for over 17 percent of the gross domestic product. As the cost of health care continues to escalate, health plans provide protection against unexpected medical expenses, while their cost-containment strategies and relationships with health care providers stretch health care dollars. The investments health plans make in prevention, chronic care management, and assurance of quality care ease cost pressures throughout the system. As an example, in one analysis, researchers found that investments health plans make in smoking cessation programs result in cost savings in the short term. By investing $35–$410 per patient in a one-year program generated a positive return on investment within 2 years. Within 5 years, $750–$1,120 was saved per patient. In another study that examined chronic care management addressing the needs of individuals with multiple chronic conditions, the program reduced patient visits to specialists by 12.7 percent, emergency department visits by 25.9 percent, and hospitalizations by 18.3 percent.
Poor quality IN OUR HEALTH CARE SYSTEM COSTS THE NATION UP TO
79,000 AVOIDABLE DEATHS, 66.5 MILLION SICK DAYS, AND $1.8 BILLION IN EXCESS MEDICAL COSTS EACH YEAR.
OBESITY PREVENTION TOOLKITS California Association of Health Plans (CAHP) and the California Medical Association Foundation (CMAF) teamed up to encourage physicians to discuss healthier lifestyles with their patients by distributing the first-ever comprehensive toolkits to address overweight and obesity. The toolkits were developed to address obesity and overweight and to improve the care and outcomes for adults, children and adolescents and pre/post bariatric surgery patients. The toolkits have been distributed to physicians across the state so they can better assist their patients in weight management and obesity prevention. According to a former United States Surgeon General, obesity is “the fastest-growing, most threatening disease in America today,” and California is experiencing the fastest increase in adult obesity of any state in the nation. The direct and indirect cost of obesity is $100 billion per year nationally. In California alone, it is $28.5 billion. The result of this unique collaboration is the “ultimate” package of obesity toolkits which include: Guidelines and policy statements on obesity prevention, weight management, diet, physical activity counseling, body mass index (BMI) screening and other measurements Effective communication techniques to help patients make decisions Culturally appropriate, ready to copy, materials and handouts Identification of internet tools and information Strategies for managing overweight patients Patient education resources
SOURCES: National Committee for Quality Assurance, State of Health Care Quality 2004; Centers for Medicare & Medicaid Services, Health Spending Projections Through 2019: The Recession’s Impact Continues. February 2010; California HealthCare Foundation, “Challenging the Status Quo in Chronic Disease Care: Seven Case Studies.” September 2006.
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The toolkits and additional resources are available through CAHP, CMAF and participating health plans. Visit www.calhealthplans.org/policy/obesityPrevention.cfm for more information.
California Association of Health Plans 1415 L Street, Suite 850 Sacramento, CA 95814 916.552.2910 www.calhealthplans.org
The California Association of Health Plans (CAHP) is a statewide trade association representing 40 fullservice health care plans. Through legislative advocacy, education, and collaboration with other member organizations, CAHP works to sustain a strong environment in which our member plans can provide access to products that offer choice and flexibility to the more than 21 million Californians they serve.
Additional copies of this publication and other CAHP policy documents are available online at www.calhealthplans.org.
Please contact CAHP for questions or comments about this report by calling 916.552.2910.
