The term “managed care” refers to any system that seeks to organize health care delivery. Its goals are to optimize quality of care while mitigating costs, a dual aim that has led to what the United States health system has become today.
The United States first embraced managed care to a significant degree in the mid-1970s, when the government passed the Health Maintenance Organization Act of 1973. This led to developments such as the creation of provider networks, which require health care providers to meet specific quality benchmarks and abide by certain pricing arrangements.
Managed care has also led to the popularity of financial incentives, such as lower pricing for generic drugs, which encourage the use of lower-cost interventions throughout the system. Meanwhile, the practice of utilization management has helped reduce expenditures by allowing insurers to evaluate the necessity of an intervention before approving its coverage.
These managed care strategies are utilized by a number of managed care entities. These include health maintenance organizations (HMOs), which cover care in exchange for regular payments from subscribers. Another kind of managed care company is the preferred provider organization (PPO), which contracts with care providers to secure lower in-network prices. Point-of-service (POS) plans also offer lower prices for in-network care, although they work on a primary care model in the same way an HMO does.