Medicare, consumerism and IT to shape managed care in 2006

January 1, 2006

The managed healthcare market has been expanding, and the trend is likely to continue as employers and government agencies struggle to rein in spiraling healthcare costs. An aging population and more costly healthcare technology will aggravate current spending trends; these developments, in turn, will spur further consolidation among health plans and providers, stymie efforts to reduce the growing number of uninsured in the United States and drive innovative efforts to make consumers more aware of treatment costs and quality options.

MCOs will feel the impact of several key developments in coming months:

1. Expansion of Medicare Advantage. Health plans and insurers are signing up seniors for prescription drug plans not only to build that new business, but also to attract more elderly beneficiaries to MA-PD plans. Higher rates and more program flexibility have made the Medicare business more attractive for MCOs, but this could change quickly if Congress curbs outlays for Medicare Advantage and for prescription drug coverage to keep budget deficits under control.

3. Rise in consumer-directed healthcare. The most obvious cost-shift is to high-deductible insurance plans, often linked to health savings accounts (HSAs) or similar programs. Some 12 million employees are taking this route (see Newswire), in addition to many individuals seeking affordable coverage. More employers will offer HSAs to workers to reduce health benefit costs, and insurers are responding with expanded HSAs and high-deductible product lines. Policy makers are encouraging the shift by adopting measures that make "consumer-choice" options more attractive.

4. Push for electronic health information systems. Increased reliance on consumers to make informed choices about their care highlights the critical need for easier access to information on treatment costs and provider quality. Despite resistance from many providers and concerns about patient privacy, visible progress is being made in efforts to establish a national electronic medical records system. Insurers, payers and providers are supporting standards-setting activities and investing in e-health infrastructure, as expanded government health coverage drives these efforts. E-health systems also support increased health quality reporting initiatives by hospitals and physicians. Growing public acceptance of linking provider payments to quality measures will lead to more common reporting policies for providers as has been the case for MCOs.

5. Expansion of Medicaid managed care. Pressure to control local healthcare spending is prompting more states to increase MCO participation in Medicaid and other state healthcare programs. Last month, Florida approved a program to gradually enroll its 2 million Medicaid patients in MCOs, a move that is expected to provide a model for other states.

6. Push for preparedness. Recent healthcare dislocations by Hurricane Katrina and continued warnings of a possible influenza pandemic are prompting MCOs to establish plans for dealing with emergencies. Such programs involve delivery of preventive vaccines and expanded disease surveillance, and point to the need for a more comprehensive national health information system.

Jill Wechsler, a veteran reporter, has been covering Capitol Hill since 1994.