What exactly is managed care today?

Barry Volin was working for the Lutheran Medical Center, a hospital in the Sunset Park neighborhood in Brooklyn, New York, that is now part of the NYU Langone Health system, in the early 1980s when he first encountered the term “managed care.” Volin, a veteran of the healthcare industry and CEO and co-founder of the Managed Care Resource Alliance, was working on a program funded by the Robert Wood Johnson Foundation that had the goal of increasing access to quality care for women and children.

“How do you offer access to care to those individuals on Medicaid who do not have access to private doctors?” Volin says. “What they had available in Brooklyn was essentially Medicaid mills and other clinics.”

Managed care was that opportunity, Volin says, and it positioned the primary care provider as both the gatekeeper and manager of healthcare services, “so there’d be some coordination of services, some coordination of medical information for that member, and underpinning all of this would be some level of continuity of care for that person.”

Michael Lutz’s introduction to the idea — if not exactly the term — of managed care came when he started his career in the 1990s working for a property and casualty insurance company. People who needed medical care as a result of an auto accident or fall had free rein about where to get healthcare. “You got your services wherever, no problem,” says Lutz, a managing director at Avalere Health. Where managed care came into play was in his employer’s health plan, which had a defined network of providers whose services were covered. “That’s what sticks in my mind — being focused on ‘Is my provider covered by this health plan?’ and not much about the services.”

What managed care is and who does the managing has taken many twists and turns in the decades since it was introduced in U.S. healthcare. As a term and concept, it has largely been eclipsed by “value-based care” in recent years. A search of PubMed, the database of medical literature maintained by the U.S. National Library of Medicine, shows that managed care was mentioned in 2,135 abstracts of articles between Jan. 1, 2014, and Dec. 31, 2024. During that same period, value-based care was mentioned 5,255 times. Some experts say that value-based care, with its emphasis on shared risk between payers and providers and quality metrics, is just a rebranding or perhaps a later iteration of managed care, and that it demonstrates the staying power of the original goals of managed care: prudently managing healthcare services so outcomes and the patient experience improve while costs decline or are at least controlled.

But others see managed care as having lost its way, being ineffective, or perhaps both. In the big picture, U.S. healthcare spending continues to far outpace spending elsewhere. According to an analysis published in 2025 by KFF, despite the U.S. spending twice as much per capita on healthcare as other economically advanced countries, U.S. healthcare performs worse than comparable countries on long-term health outcomes, such as life expectancy, and in other, more specific areas, such as maternal mortality and congestive heart failure. There are bright spots. KFF says the U.S. is better than its peers when it comes to some treatment outcomes, such as mortality rates within 30 days of acute hospital treatment and postoperative complications.

Volin, noting that his four decades of experience in healthcare, sees a turn in managed care away from improving healthcare and toward a focus on financial concerns. After physician-hospital organizations (PHOs) faltered in the late 1980s, the number of for-profit companies increased, he said. “I don’t want to just broad-brushstroke all for-profits and say, by virtue of being a for-profit, you are a bad guy,” Volin says. “What I am saying is that I have seen a significant shift in our focus to managing our bottom lines rather than outcomes. And more and more, it’s bottom-line management that is now dictated.”

Lutz sees managed care as shedding some of its earlier features that emphasized the physician as gatekeeper and a vocabulary that Lutz says made it seem like it was all about limiting access rather than helping patients.

“In the early days, we used terms that really made it sound like restrictions, limiting access, limiting payment — those types of things,” says Lutz. “We don’t talk about managed care the way we used to because we have evolved to the point where we see the value of having care managers and health coaches and social workers in the mix, helping people navigate a very complex system. All of [those] are components of managing care, not just referrals and prior authorizations and the networks.”

What it is not, which is fee-for-service

Managed care is a definitionally fluid term that changes depending on a kaleidoscope of time, place, goals, context and perspective. Its boundaries are often set by what it is not, which is fee-for-service. Managed care does not appear in the index of Paul Starr’s landmark 1982 book about the history of U.S. healthcare, “The Social Transformation of American Medicine.” But Starr writes in some detail about the mid-20th-century origins of Kaiser Permanente in California and the Health Insurance Plan of New York, which he describes as prepayment plans that had many of the elements of managed care: limited networks, coordinated care and disincentives to provide low-value care because of the prepayment arrangements.

Later, in the early 1970s, health maintenance organizations (HMOs) became the entities delivering what would now be recognized as having managed care features. The HMO was the brainchild of Paul M. Ellwood Jr., a Minneapolis physician who saw the need to change the incentives in healthcare to reward keeping healthy rather than treating individuals when they become ill. In Starr’s telling, federal funding of HMOs was the Nixon administration’s response to proposals by U.S. Sen. Edward M. Kennedy, among others, to create a national health insurance plan.

Managed care, as a recognized term and an organizing principle of healthcare outside of HMOs, started to take hold in the 1980s and 1990s. John Iglehart, the founding editor of Health Affairs and a national correspondent for the New England Journal of Medicine (NEJM) for many years, wrote an often-cited article about managed care that was published in the Sept. 3, 1992, issue of NEJM. Iglehart cast HMOs as the main providers of managed care but also mentioned the emergence of a menagerie of other organizations involved in managed care: preferred provider organizations (PPOs), independent practice associations and point-of-service plans. Inglehart’s list of managed care’s features includes contracts with selected physicians and hospitals, utilization and quality controls and assumption of some financial risk by doctors — all of which would be recognized as standard aspects of a health plan today. Inglehart portrayed managed care as a check on healthcare costs that were increasing faster than inflation, and gave it a qualified endorsement. “Given the unsustainable rate at which medical spending continues to escalate, serious efforts to make further structural changes in the health care system are inevitable,” wrote Iglehart. “At this point, well-run managed care schemes have considerable potential for allowing physicians to use their clinical skills as full partners in the quest to allocate scarce health care resources effectively.”

But Iglehart, and many other commentators at the time, also said managed care was changing the physician-patient relationship — and not in a good way. Under managed care, wrote Iglehart, instead of “serving as an agent for the patient’s welfare,” doctors would be put in the position of “balancing the patient’s needs against the need for cost control.”

Rationing of care

At roughly the same time as Iglehart was sizing up managed care for NEJM readers, a backlash against managed care was brewing. Robert Pear, an influential healthcare journalist at The New York Times, wrote about managed care plans putting restrictions on what physicians could say about treatment options. By the middle of 1997, 25 states had passed legislation against “gag rules,” according to a review article about the managed care backlash by David Mechanic, Ph.D., founder of the Institute for Health, Health Care Policy and Aging Research at Rutgers University, that was published in The Milbank Quarterly in 2001. News reports about shorter patient visits in general and shorter hospital stays for women who had given birth in particular (“drive-through deliveries”) garnered attention, although Mechanic argued the reality was far more complicated. Mechanic steered down the middle on managed care (“Managed care organizations seem to do better on some measures and worse on others”). In his analysis, the backlash was fueled by strong feelings against the rationing of health care. “Managed care, and particularly utilization management, makes patients acutely aware of rationing and the fact that services they may want or their physicians believe desirable are sometimes denied,” Mechanic wrote in The Milbank Quarterly. Health care had been rationed before, argued Mechanic, but in more diffuse ways, through lack of insurance or benefit design. The explicitness of utilization review and other managed care tools makes rationing more salient, he wrote.

Hollywood dramatized the rationing of care in the 2002 movie “John Q.,” in which Denzel Washington takes emergency room staff hostage after an HMO refuses to cover the cost of his son’s heart transplant.

Volin recalls the growth of PHOs in the mid-to-late ‘90s. Hospitals, particularly the large academic hospitals, started to buy up primary care practices and started to take on full financial risk for patients. “They became essentially stealth insurance carriers without an insurance license,” he says.

“The big mistake that was made is that they didn't realize that practices and practice patterns had to change,” Volin continues. “They saw this as a play to gain top-line revenue, without understanding that unless they changed how care was being provided, the bottom line would not be what they anticipated. And most of the academics that got into PHOs lost a ton of money and got out of it.”

In Volin’s view, the failure of the PHOs contributed to managed care taking on a bad reputation and marked the beginning of a sharp split between the provider and the payer communities, “and we've never been able to ford that gap.”

Post backlash

The backlash against managed care had some concrete effects. Programs and policies that positioned the primary care physician as the gatekeeper for referrals to specialists faded. Among those with employer-sponsored health insurance, enrollment in HMOs peaked in 1996, whereas the percentage of those in more loosely managed PPOs climbed. Managed care, as a term and idea, was

somewhat tarnished, and other terms and ideas gained cachet. In 2006, Michael Porter, Ph.D., a Harvard Business School professor, and Elizabeth Teisberg, Ph.D., now at The University of Texas at Austin Dell Medical School, introduced value-based care in their book “Redefining Health Care: Creating Value-Based Competition on Results.” The same year, Elliott S. Fisher, M.D., M.P.H., a Dartmouth professor, and his colleagues published the first article about accountable care organizations (ACOs) in Health Affairs. The 2010 Affordable Care Act created the Center for Medicare and Medicaid Innovation, which launched numerous payment and program models designed to test ACOs and value-based programs.

The irony is that even as managed care seemingly fell out of favor, from some perspectives U.S. healthcare became more managed than ever during and after the backlash period. Inglehart reported that in 1991, 2.6 million (11%) of Medicaid’s 24 million beneficiaries were enrolled in managed care plans. According to KFF, that proportion increased dramatically in the 1990s, so by 1998, more than half of Medicaid beneficiaries were enrolled in managed care plans. In a report published in 2025, KFF said that 75% of Medicaid beneficiaries were enrolled in comprehensive managed care organizations (MCOs) as of 2022, the most recent year for which such enrollment data were available. It is a similar story with Medicare. According to Inglehart, less than 7% (2.1 million out of 33.6 million) of Medicare beneficiaries were in managed care arrangements in 1991. The Balanced Budget Act of 1997 launched capitated Medicare plans managed by private companies called Medicare+Choice that later got renamed Medicare Advantage. Low payment to the plans led to falling enrollment in the early 2000s. But starting in 2006, enrollment in privately managed Medicare plans has been steadily increasing, so by 2023, more than half of Medicare patients were enrolled in Medicare Advantage plans and, effectively, choosing managed care over traditional Medicare that, Medicare ACOs notwithstanding, is far less managed.

Considering that employer-based health insurance also has elements of managed care, the backlash against managed care seems more like a ripple on the surface of a fundamental shift in U.S. healthcare rather than a major roadblock.

Ownership of health

Managed care may not be in the headlines like it was in the 1990s, but many of its tools and tactics remain hot topics — prior authorization, utilization and sundry issues related to provider networks. Companies on the payment side of U.S. healthcare are sometimes called managed care organizations, and KFF and others still refer to “Medicaid managed care.” But “payers” or “health plans” are used more often these days. And there are questions about how successful managed care and its progeny, value-based care, have been in achieving the goal of moderating the uniquely spendthrift ways of U.S. healthcare.

Some successes have gone unnoted. Volin mentions a demonstration project for the medically frail population that predated the current Medicare Advantage Special Needs Plans. The project was successful in keeping people out of nursing homes. “It was a win-win for the plan, the member and the family. The only flaw in it was that the feds didn’t see any cost savings because the cost savings were accrued by the state through Medicaid dollars.”

Lutz says managed care has been miscast as being primarily focused on restricting access. “True managed care is having a coach on your side, helping you manage the process, helping you understand the next best step, or, as we call it in the industry, helping you understand what’s the next best step,” he says. Lutz also says care managers have sometimes been unfairly portrayed as meddling in care. That perception comes from the system they are working in, not their work, he says. Before Avalere, Lutz worked for several health plans. “I’ve seen care managers in the office until 11 o’clock at night doing what I used to call ‘dialing for health’ because they would be calling every facility in the area just trying to find an open bed for that individual,” he said.

Lutz and Volin landed on the same point about what’s needed for managed care to achieve its more altruistic goals. It can’t be top-down, breathing down your neck, controlling or the no-sayer of healthcare. “Managed care is only going to work when people don’t perceive that this is something that is being thrust on them, but they engage with it and they understand that here’s a coach at my side, trying to help me through this,” Lutz says. Participation rates in some care management programs are in the single digits, Lutz observes, and one ingredient to improve those numbers is — Lutz says he wants to choose his words carefully. He says members/patients “need to take some ownership of being an active participant in the process as well, because that’s when they’re going to get the better outcomes.

“Until that happens,” Lutz continues, “until we actually, as a society, teach people to be engaged and be on a team, an interdisciplinary care team, there’s always going to be this perception that managed care just means limiting my access to what I think I need.”

Volin says managed care and health plans have struggled with the question of “How do you engage your member to take on a level of responsibility for care?”

“I'm not asking anybody to become a cancer expert,” Volin says. “But I am suggesting that, as a patient, you owe it to yourself to have an up-front conversation with your doctor and understand how your doctor practices and what his expectations are of you as a patient and a member.” Patients and members don’t do that, he says.

“We, as the public and the consumers of healthcare, have to take on some level of responsibility for our health and our health outcomes,” Volin adds. “We can't just rely entirely on the insurance industry or the provider community to make sure that we stay well. There's got to be a partnership here. And I know plans struggle with patient engagement, and I think that still is the biggest gap.”