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DIABETES AND
OBESITY

HOW

MANAGED CARE

COMPANIES

ARE

MANAGING CARE

THE TYPE 2 DIABETES CASE

By Alan Preston, MHA, ScD

T he Health Maintenance Organization (HMO) Act of ceived sufficient care at the doctor level in order to keep them out

of the hospital. The most important advantage of capitation pay-
1973 was federal statute enacted on dec. 29, 1973, under
the Nixon administration and was introduced by a dem-
over-utilization while adding an incentive to provide cost-effective
ocratic senator, Ted Kennedy. In 1973, there was concern that ment is that it removes the economic incentive of unnecessary
healthcare costs were skyrocketing and something needed to be care including preventive services, which in turn help to control
done to curtail the costs of increasing healthcare premiums. Sound health care costs. This change in economic incentive is related not
familiar? The concept was that if more emphasis were placed on only to cost containment but also to the improvement of alloca-
preventing the diseases, as opposed to just paying for claims once tive efficiency.
a person acquired a disease, healthcare costs would decrease. As the HMO model evolved, Medicare created the Medicare
One of the key components of the HMO Act was that it Advantage program. Medicare Advantage provides the same med-
changed the relationship of the insured to the HMO (or later aka ical services as Medicare Parts A, and b. Medicare Part A provides
the Managed Care Organization). doctors and providers con- payments for inpatient hospital, hospice, and skilled nursing serv-
tracted with HMOs and looked solely to the HMO for payment ices. Part b provides payments for most physician and surgical
and were prohibited from seeking additional payments (other than services, including outpatient hospital services such as ER, surgical
co-payments and co-insurance of the patient) from the member. center, laboratory, X-rays, and durable medical equipment and
The providers were also "credentialed" to assure they met criteria supplies. Part C plans, including Medicare Advantage plans, also
of the contracting HMO. Often the payments were tied to im- typically have additional services, such as prescription drugs (Part
proved outcomes that we now characterize as "pay for perform- d), dental, hearing, vision, and wellness care and often have a
ance." And over time, disease management programs were created. zero-premium amount attached to many of the plans offered.
during the 1990s, many providers were capitated for the care The MA plans are capitated by Center of Medicare Services
they delivered. Some of the medical groups took on an increasing (CMS), and the capitation is based on many attributes including
level of risk to include PCP, Specialty, and Hospital. The capitated the relative risk of the Medicare beneficiary. Often, the MA plans
payments aligned incentives for PCPs to make sure patients re- share upside and downside risk with certain medical groups for

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24 San Antonio Medicine • December 2018