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Managed Care and Private Health Insurance in a Global Context

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McKinsey & Company. Abstract This article provides an overview of the current role of private health insurance and private care management organizations ...
Managed Care and Private Health Insurance in a Global Context Jonathan P. Weiner Joanna Case Famadas Hugh R. Waters Johns Hopkins University Bloomberg School of Public Health Djordje Gikic McKinsey & Company

Abstract  This article provides an overview of the current role of private health

insurance and private care management organizations around the globe. We describe past experiences and challenges associated with the export of U.S.-style managed care. We provide a framework for understanding the potential opportunities within a national health system for expanding managed care approaches and also private health insurance more generally. This article is relevant to both the United States and members of the international community.

This is the global century. Although more “local” than other sectors, health care must increasingly be viewed from a global perspective. International boundaries are becoming porous; health-related goods, information, staff, financial capital, services, patients, pathogens, and, of course, ideas and innovations are exchanged daily. The global dimension will increasingly have profound implications for all participants in the international health care community. For decades, there has been a heated international discourse over the appropriate roles of public and private insurance plans, and governmentcontrolled social insurance and competitive insurance markets. As all nations confront the dual challenges of increasing consumer demand and constrained public financing (Anderson 2007), policy makers continue to Aspects of this article are adapted from a chapter in Essentials of Managed Health Care, ed. P. R. Kongstvedt, 5th ed. (Boston: Jones and Bartlett, 2007). We gratefully acknowledge the assistance of Brian Gould and Walter Wieners in providing published and nonpublished background materials and for offering constructive criticism of earlier drafts. Journal of Health Politics, Policy and Law, Vol. 33, No. 6, December 2008 DOI 10.1215/03616878-2008-034  © 2008 by Duke University Press

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consider expanding the roles for private insurance or care management organizations. It is not our goal to review the advantages and disadvantages of private insurance and managed care relative to other models. Rather, the information, frameworks, and analysis we offer here are intended to facilitate a better understanding of the potential global opportunities and challenges of private health plans and managed care organizations. We do not use the terms managed care and private health insurance synonymously. To the contrary, managed care techniques — which originated in the private health insurance industry in the United States — have been increasingly applied within social health insurance and national health insurance systems financed primarily with public funds. The purpose of this article is to explore the role of private insurance in a range of countries, then focus on the opportunities for applying managed care techniques in both the private and public insurance sectors. We provide an overview of the current role of private insurance and private (nongovernmental) organizations across most high-income nations in the Organisation for Economic Co-operation and Development (OECD) as well as other selected middle-income nations. In this description, and throughout this article, we focus not only on financing but also on managing and organizing the care delivery process. We discuss past and present experiences and challenges associated with attempts to export U.S.-style managed care. We also offer and apply a framework that can be used to assess a given system’s current managed care orientation or potential readiness for implementing such approaches. This article should be relevant to American health care analysts, providers, and managers who want to learn more about comparative health care systems or business opportunities around the globe. It should also be useful to those outside the United States wishing to learn more about private insurance markets and the applicability of managed care tools within their context. This article will be of primary relevance to readers in high-income nations. However, given the rapid economic and health sector development of middle- and lower-income nations like China and India, aspects of this analysis should be applicable to a wide spectrum of countries. Background

Managed care organizations (MCOs) were developed in the United States several decades ago largely as a response to escalating health care costs. Like “traditional” private health insurers of the 1960s and 1970s, most

Weiner et al.  ■  Global Context of Managed Care, Private Insurance   1109  

MCOs — such as health maintenance organizations (HMOs) and preferred provider organizations (PPOs) — function as third-party payers. But unlike the early traditional insurers, MCOs have some degree of legal responsibility for both the financing and the management of care delivery (Weiner and deLissovoy 1993). In the United States, MCOs are thought of as private, often investorowned organizations that employers or government engage to arrange for providing health care to an enrolled population. The structure of MCOs is constantly evolving, but the core functions of managed care include the bearing and sharing of financial risk for the cost of care, the development and management of provider networks, management of service utilization, and quality and outcome measurement and management. Although “managed care” is generally considered a uniquely American creation, all public and private health systems around the globe must deal with the above administrative functions. Over the past decades, health economists in the United States and internationally have written about the potential benefits of “competition” when MCOs vie for consumers in a given market (Enthoven 1993; Dixon, Pfaff, and Hermesse 2004). In the past there has been substantial international interest — at least among market-oriented political factions — in importing American-style MCO-based competition (Dixon, Pfaff, and Hermesse 2004: 170; Katzman 1998). Today, witnessing the runaway costs and strong public sentiments associated with the “managed care backlash” in the United States, policy makers and managers in other developed nations are not so keen on adopting U.S. models for health care financing. Rather, they tend to be interested in the possibility of grafting selected managed care cost-saving or quality-enhancing tools onto their existing universal government or social insurance models. Although not without controversy, some market-oriented policy makers in Canada, Europe, and other high-income countries are also calling for expanding private health insurance to supplement or complement universally available public programs (Maarse 2006). Even within existing universal systems, this “topping up” is appealing to higher-income persons who may wish to purchase coverage for services beyond the basic levels of care. In emerging markets and middle-income countries with rapidly growing economies, the possibility of using private sector health plans to increase middle-class investment in the health sector, to allow government to focus on providing for those with lower incomes, is also gaining some degree of attention (Pauly et al. 2006; Drechsler and Jütting 2007). These and other related issues are explored in this article.

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Health Care Financing and Organization around the Globe

The World Health Organization (WHO), the OECD, and the World Bank track key metrics of health and health financing in countries around the globe. Based on these data sources, the first part of this article provides an accessible overview for a cross-section of countries. Table 1 summarizes how major nations finance their health care delivery systems. In addition, this table presents key demographic, economic, and basic health markers. Table 1 documents the diversity of health care financing levels and approaches around the globe. It also makes clear that while low-income countries with modest health care outlays tend to have poor health outcomes, among higher-income countries there is not always a strong correlation between spending on health and population health attainment. There is also a wide variety of financing and organization schemes that nations of comparable income levels have chosen. For example, Singapore and New Zealand have similarly sized populations and per capita GDPs, but New Zealand spends almost twice as much as Singapore on health, in absolute terms. In addition, New Zealand’s health expenditures are financed primarily by the government, while private expenditures compose the bulk of Singapore’s health spending. Despite these differences in health financing, the two countries are quite similar in terms of life expectancy and child mortality. This example shows there is no one “right” way to organize a health system. That said, the difference between the U.S. system and those of other high-income countries on this list is stark. The United States spends more than any other nation, both per capita and in terms of percentage of GDP, but its health outcome measures are middling, and it is the only high-income nation on the list without universal, or nearly universal, coverage. The Role of Private Insurance

Table 2 extends the information presented in table 1 by offering a categorization of the type of health care system financing and management found in selected nations as well as the role and estimated market share of private (nonsocial insurance) health insurance companies. Although there are many variations within each category, the first dimension that we consider in table 2 classifies each nation’s health system by whether it is primarily government sponsored, run by independent or quasi-

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(4)

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Argentina Australia Austria Canada Chile China Czech   Republic France Germany Hungary India Japan Mexico Netherlands

39.1 20.5 8.2 32.6 16.5 1,311.8

10.2 61.0 82.4 10.1 1,109.8 127.6 104.2 16.4

$15,795 $33,493 $35,560 $35,030 $12,655 $7,660

$22,791 $33,408 $31,744 $19,585 $3,827 $32,385 $11,532 $36,219

75.9 80.2 78.9 72.6 63.5 82.1 75.4 79.3

74.8 80.6 79.4 80.2 78.2 71.8 4 5 5 8 74 4 27 5

18 6 5 6 10 27 $771 $3,464 $3,521 $800 $31 $2,831 $424 $3,442

$383 $3,123 $3,683 $3,038 $359 $71 7.3 10.5 10.6 7.9 5.0 7.8 6.5 9.2

9.6% 9.6 10.3 9.8 6.1 4.7 10.8 21.6 23.1 28.4 82.7 19.0 53.6 37.6

54.7% 32.5 24.4 30.2 53.0 62.0 10.3 7.5 13.3 25.0 77.6 17.7 50.6 7.7

26.6% 20.0 16.6 14.9 24.3 53.6

Out-of- Health Total Private pocket GDP per Life Under-5 expenditure expenditure expenditure expenditure capita, PPP Total expectancy mortality per capita on health as % of total as % of total (current population at birth rate (per (current as % of expenditure expenditure Country int’l. $) (millions) (years) 1,000) U.S. $) GDP on health on health



Table 1  Economic and Health Indicators for Selected Countries (10)

0.3 12.7 8.8 0.6 0.7 0.3 3.1 17.2

19.6% 7.8 7.6 12.7 27.5 3.7

% of population covered by government or national social insurance

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90.0 100.0 76.3 99.9 78.2 89.8 72.4 100.0 24.8  —  81.0 100.0 46.4 51.0 62.4 76.3 (continued)

48.6%  —  67.5 100.0 67.6 98.0 69.9 100.0 48.8  —  36.2  — 

Private pre-paid insurance Government as % expenditure of total as % of total expenditure expenditure on health on health

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4.1 4.4 47.4 9.0 7.4

60.4 299.0 3.0

$26,736 $32,748 $11,960 $35,162 $37,919

$34,983 $44,155 $9,421

78.9 77.7 75.2

79.6 79.7 47.7 80.5 81.2 6 7 17

6 3 68 4 5 $2,900 $6,096 $323

$2,040 $943 $390 $3,532 $4,077 8.1 15.4 9.8

8.4 3.7 8.6 9.1 11.6 13.7 55.3 72.8

22.6 66.0 59.6 15.1 41.5

12.6 13.2 18.2

17.2 64.0 10.3 13.9 31.8

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3.3 36.5 54.6

5.8 0.0 47.7 0.3 9.0

% of population covered by government or national social insurance

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85.7 100.0 44.6 26.6 27.2  — 

78.3 100.0 36.1  —  38.6  —  85.2 100.0 58.5 100.0

Private pre-paid insurance Government as % expenditure of total as % of total expenditure expenditure on health on health

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Sources: Columns 1 – 6, 2007 World Development Indicators of the World Bank; columns 7 – 10, 2006 World Health Report of the WHO; column 11, OECD Health Data 2006; data from most recent period available, generally 2004 – 2006 Notes: Column 10 provides estimates of the % of all health care costs paid for through government programs; column 11 provides estimates for OECD countries of the % of the population with insurance coverage provided by the government or nationally regulated social insurance program. In some cases this government program or social insurance program is administered by nongovernmental organizations such as Medicaid managed care plans in the United States or private sickness funds in Germany. Since these data were collated, the Netherlands has experienced a reform related to the role of private health insurance (see Maarse and Bartholomee 2007).

New Zealand Singapore South Africa Sweden Switzerland United   Kingdom United States Uruguay

Out-of- Health Total Private pocket GDP per Life Under-5 expenditure expenditure expenditure expenditure capita, PPP Total expectancy mortality per capita on health as % of total as % of total (current population at birth rate (per (current as % of expenditure expenditure Country int’l. $) (millions) (years) 1,000) U.S. $) GDP on health on health



Table 1  Economic and Health Indicators for Selected Countries (continued)

Primary Type of Health System

Country

Main Administrator(s)

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Argentina Private sector/Government Private plans & social sponsored insurance funds Australia Government sponsored Regional & national government Austria Social insurance Regional government Canada Government sponsored Regional government Chile Social insurance Private plans & social insurance funds China Private sector/Government None/National government sponsored Czech Republic Social insurance National government France Social insurance Social insurance funds Germany Social insurance Social insurance funds Hungary Social insurance National government India Private sector None/National government Japan Social insurance Social insurance funds Mexico Social insurance/Private National government/ sector Private plans

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0%/45 %

0%/65% 34%/NA 0%/0% 0%/0% 0%/92%

Complementary & supplementary Complementary & supplementary Supplementary Primary/Supplementary None None Complementary & supplementary Primary/Complementary/ Supplementary None Primary None Supplementary

0%/0% NA 0%/0% NA*/3%

9%/9%

0.1%/32%

NA

(continued)

Est. % Pop. with Primary / Secondary Private Health Insurance

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Primary/Supplementary

Role of Private Insurance

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Table 2  Summary of System Structure and Role of Private Insurance in Selected Countries

Primary Type of Health System

Country

0%/35%

NA/80% 0%/10% 72%/7%** NA

Complementary/ supplementary Primary/supplementary Primary/supplementary Complementary/ supplementary Primary/supplementary Supplementary Primary/supplementary Primary/supplementary

Government/Private plans Regional & national government Private plans & Social insurance funds QUANGOs/National government Private plans/National & regional government Private plans & social insurance funds

0%/2 %

NA

NA

28%/64%

Est. % Pop. with Primary / Secondary Private Health Insurance

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Primary/complementary

Role of Private Insurance

(3)

Private plans & social insurance funds National government/ QUANGOs National government

Main Administrator(s)

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* In Mexico, many people choose to pay out-of-pocket for medical care rather than purchase insurance. ** In the United States, supplementary private insurance includes private plans contracting with government Medicare program for the elderly. Note: Since these data were collated, the Netherlands has experienced a reform related to the role of private health insurance (see Maarse and Bartholomee 2007). Definitions: Government sponsored — government provides care or is the sole payer for care; Social insurance — compulsory participation or contribution in health insurance plan for designated population; Private sector — reliance on individuals and private corporations for the purchase and provision of health insurance; QUANGOs — quasi-autonomous nongovernmental organizations; NA — data not available

Netherlands Social insurance New Zealand Government sponsored Singapore Government sponsored/ Mixed South Africa Government sponsored/ Mixed Sweden Government sponsored Switzerland Social insurance United Kingdom Government sponsored United States Private sector/Government sponsored Uruguay Private sector/Government sponsored

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Table 2  Summary of System Structure and Role of Private Insurance in Selected Countries (continued)

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independent social insurance funds, or by the private health insurance sector. The government-sponsored systems include systems where many or most providers are employees or contractors of a government — or quasigovernmental — entity (for example, the United Kingdom and Sweden), as well as “single payer” models (like Canada) where national or regional government reimburses both public and private providers. Most systems of this type have compulsory universal coverage, are financed from general government tax revenues, and generally organize health care delivery around distinct geographic administrative units. In a social insurance model, like that found in Japan or Germany, health care is predominantly financed through payroll taxes rather than general taxation. Purchasing social insurance may be mandatory for a designated population, but eligibility is based on payment of a contribution (i.e., insurance premium) usually linked to the place of employment, with government programs for those who cannot afford to pay. Social insurance funds, which are financially autonomous and must maintain solvency, are generally not-for-profit collectives (sometimes known as “sickness funds”) often linked to unions or political parties. Finally, there are only a few countries in the world with a national system based primarily or heavily on private insurance, mixed with government insurance providers. Among high-income countries, a national system based on multiple private insurers exists only in the United States; even in the United States, public sources account for 45 percent of health expenditures nationwide. Other nations with a substantial market for private insurance as primary health insurance include Chile, South Africa, and the Philippines. While the sources of health care financing are key, so too is the structure and locus of the management of care and resources. It is important to consider the type of administrative entity, if any, that dominates the key policy and management decisions in a national health policy context. The most common administrators of health care include national government, regional government, social insurance funds, private insurers/MCOs, and quasi-autonomous nongovernmental management units, such as locally controlled “Primary Care Trusts” in the United Kingdom (Weiner, Gillam, and Lewis 2002; Bindman, Weiner, and Majeed 2001). This has implications for whether and how the various managed care tools applied by U.S. plans might be applicable; for example, the ability of the administrative entity to directly influence care for its covered population will affect its ability to engage in care management. Categorizing health systems in this way can be challenging, however, particularly for countries with no single national system. In Mexico, for example, although almost all of the population has

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access to some basic health services, many Mexicans have chosen to pay out-of-pocket for health services because of dissatisfaction with the public programs (Frenk et al. 2006). The system is thus divided among the social security system, the ministry of health, and the private sector — with none having a dominant role. Even in countries with universal public insurance, private insurance may play a significant role in a variety of ways. In France, for example, the system is based on the social insurance model, but incorporates significant elements paid through general taxation and private insurance. In table 2 we classify the role of private insurance in one of three ways: (1) a “primary” plan or as a substitute for the public program (i.e., where enrollees opt out of an available public plan); (2) as a complement to public programs (i.e., where consumer out-of-pocket outlays for the government program’s co-insurance is reimbursed); or (3) as a supplement to public programs (i.e., where excluded services and private providers not affiliated with the public system are covered). The latter two types of “secondary” coverage are sometimes referred to as “topping up” beyond the publicly available plan. While the type of health system may affect which types of administrative entities are present (e.g., regional government vs. sickness funds), it does not absolutely determine their role or the role of private insurance within that system. As the next section shows, each of these dimensions has implications for the role of MCOs and managed care tools within each system. Exporting Managed Care

The international opportunities for applying managed care models and tools are numerous. This section discusses the international experiences of U.S. private health insurers and MCOs and local entities patterned after them. We address challenges, opportunities, and the recent history in both middle-income and high-income nations. Direct out-of-pocket consumer payments — to doctors, hospitals, and other providers — represent a common approach to health financing in lower-income countries. As health insurance or government-sponsored health programs are implemented, some degree of consumer cost sharing is a mechanism used to help prevent overutilization. Out-of-pocket cost sharing is generally a regressive type of financing that can negatively impact the poor. As a nation’s economy progresses (take, for example, China) public sector insurance mechanisms are introduced, and they generally struggle to find enough resources to provide basic coverage to all members of society. Many believe that the introduction of private insurance in this context

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allows the public sector to focus on delivering services to benefit the people most in need, leaving those who can do so (generally the upper and middle class) to purchase coverage on their own. Thus in countries with a growing middle class, MCOs can play a complementary role to the public system. Some analysts have countered that this trend could undermine the public programs by leading to two-tier health systems (Bassett 2005; Carrin and James 2004; Colombo and Tapay 2004; OECD 2002; Gwatkin 2004). An interesting case is the Philippines, where unsuccessful attempts were made in 1978 to establish the first HMO. However, a few years later five HMOs were created, a number that has since grown to about thirty-five companies (Reverente 2000). This growth occurred not through government regulation or promotion but through private sector initiatives. The primary driving force was the need for financial access to quality health services in the private sector. As in many lower-income countries, the Philippines has limited resources for health care, spending just 3.2 percent of GDP on health (World Bank 2006). With the introduction of managed care, HMO enrollees can now access private providers without risking personal bankruptcy. In addition, the government was able to reallocate its limited resources and strengthen its programs for the poor. While there is great opportunity for private plans to play a role in expanding access to affordable care in middle-income developing nations, among some camps there is concern that expanding the private sector and the need to regulate it will only exacerbate the problem of limited management capacities in these developing countries. For example, managers may leave the public sector to work for these private plans, and some of the remaining ones will need to devote time to monitoring the private plans. Alternatively, managed care companies may offer their expertise to governments to help administer or coordinate the services provided within either the public or the private sectors. Private companies often have good institutional capacity, well-developed information systems, and skills that can potentially be transferred to the public sector to help enable them to more effectively manage publicly funded initiatives. For decades, market-oriented policy makers within most developed nations have suggested that competing health insurance plans patterned after U.S. MCOs represent a viable alternative to socialized models of care. In addition, even if not supportive of competing MCO-like plans, policy makers of all economic persuasions have called for applying the tools and methods promulgated by private health insurance and managed care organizations in their quest for greater efficiency and value. As noted in the previous section, private health plans may also contribute

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in the market for secondary coverage, as a complement, supplement, or even partial substitute for existing government-sponsored systems. In the European Union, private health insurance currently accounts for less than 5 percent of total health expenditures, but it may play a more significant role in individual member states, as illustrated previously in table 2. In France, for example, over 90 percent of the population has complementary insurance, mostly from the private sector, which covers services that are excluded or not fully reimbursed by the public system. For many years in the Netherlands, higher-income families, which represented about one-quarter of the population, were not eligible to participate in the public system and had to purchase private health insurance as a substitute. (Starting in 2006 the Dutch system has been revamped, and social insurance and private insurance organizations can now compete with one another within all consumer income categories [Maarse and Bartholomee 2007]). Finally, those European consumers wanting faster access to elective services and freedom from restrictions can often purchase supplementary private insurance, as over 10 percent of the British population does (Thomson and Mossialos 2004). Despite the many potential roles for private plans and MCOs outside the United States, in most nations there is more than a bit of unease associated with the issue of how to balance privatization with a national commitment to equity and access. In part because of this and other political and market challenges, over the past decades, few U.S. MCOs have elected to offer independent supplementary or complementary plans as overlays to national health programs. Rather, U.S. insurers’ forays abroad have tended to focus on offering health plans that provide substitute or complementary services in middle-income nations not yet offering universal coverage. Another more recent role for U.S. managed care companies is the provision of administrative services. Recent Experience of U.S. Managed Care Companies Abroad

Over the past few decades most U.S. MCOs and health insurance companies have found that “exporting” their products overseas has proven an uphill battle. In the late 1990s, faced with a saturated domestic market, many companies looked for markets abroad as a source of growth. Although the number has fluctuated, as many as thirteen major U.S. MCOs had significant full-coverage business outside the United States during that period (Katzman 1998); today only a few still operate those

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insurance businesses, and they are often targeted at U.S. expatriates or those working for U.S. employers. U.S. MCOs have found that the challenges abroad are complex and require careful analyses and preparation. They have become wary of such an uncertain enterprise and the resource commitment that may be required for success. In the following section, we summarize some of the experiences and lessons learned from executives and individuals involved in managed care enterprises abroad. Executives with hands-on experience in this field have suggested that the basic prerequisites for success abroad by U.S. managed care and health insurance companies include the need for health insurance and managed care to be a dedicated line of business (and not a sideline to a broader insurance or financial services offering); strong incentives for local providers to participate; an adequate “middle income” population of target market consumers; and the ability to collect a large enough premium base to build a reasonable-sized infrastructure (Beichl, Gunnery, and Navarro 2003). Several other factors have been cited as key to the success or failure of private plans in international settings. These include the state of the existing provider and health information infrastructures, consumer expectations and preferences, regulatory barriers, and local culture and perceptions associated with private insurance (Kahn and Ware 2000). While U.S. health plans have considerable experience with claims processing, utilization management, care management, and the design and implementation of provider payment schemes, such programs need to be integrated into complex existing systems found in other nations. For example, in most other countries, there are few standardized codes that describe services provided. In Argentina, a joint U.S.-local managed care venture decided it would be easier to incorporate the Argentine coding system for services and procedures into the MCO’s claims processing system rather than try to change the coding system (Wieners 1999). Ultimately, the lack of a usable coding infrastructure created great difficulty in getting clinical information from providers and impeded the MCO as it tried to implement even the most basic care management functions. In Latin America, MCOs have often experienced resistance from providers, unions, and political organizations (Stocker, Waitzkin, and Iriart 1999; Gould 2000). One of the most likely sources of resistance for U.S.-style MCOs (whether imports or homegrown) is the local provider community. In addition to having a large enough available supply of providers, there has to be a reasonable degree of trust and relationship build-

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ing on the part of the MCOs. Even more important, the providers have to be offered meaningful financial incentives. One challenge in many (if not most) low- and middle-income developing countries is the “informal” economy. Since many providers get a substantial portion of their income “off the books” (i.e., beyond their government salaries or official fees) they are likely to view a more formalized private insurance payment as a serious threat to their livelihood. MCOs that fail to take such societal factors into account face strong resistance. Like other cross-national business or social-policy exchange, cultural sensitivity is essential to successfully exporting managed care concepts or products. Historically, failures have often been because of lack of understanding of all facets of the market, often because the local context was viewed through a North American frame of reference (Kahn and Li 1999). For example, one feature of managed care is that it frequently requires restrictions on services or consumer choices in exchange for lower costs. If consumers are not ready for this or do not see the benefit of this trade-off, MCO models are not likely to succeed. While social trade-offs are the norm for many international social-welfare programs, consumers in those settings are wary of such trade-offs in the corporate context (Stocker, Waitzkin, and Iriart 1999). An interesting case study is that of UnitedHealth Group’s experience in South Africa. In the early 1990s, the then United Healthcare Corporation was enjoying domestic success and believed that “its expertise in successfully managing diverse health care systems was an exportable asset” (Gould 2000: 52). United executives felt they understood the importance of adapting to local conditions as they had done during their process of acquiring numerous regional health plans. After much analysis, South Africa was selected for the company’s main foray into the business of exported managed care. United formed a joint venture with Southern Life, a South African insurance company, and Anglo American Corporation, a huge mining and financial services conglomerate in South Africa. The South African companies provided local market expertise, actuarial experience, and local relationships, and United would contribute managed care systems and programs, and expertise. At first, responsibilities would be shared, but eventually management would be transferred entirely to the South Africans. Despite the careful planning and successful implementation of the information system for the new company, “Southern HealthCare” Ltd. faced several insurmountable challenges including negative physician response and bad press. When Anglo American made an independent business deci-

Weiner et al.  ■  Global Context of Managed Care, Private Insurance   1121  

sion to divest its nonmining businesses, the joint venture was effectively abandoned. In the final analysis, several factors have been identified as contributing to the failure: (1) overcommitment of resources, (2) failure to recognize the importance of direct patient pay pharmaceuticals as a source of revenue for South African physicians, (3) failure to gain the support of employers, and (4) lack of full understanding of the complex racial situation in South Africa, which ultimately led to a lack of support for the plan from the majority of black physicians (ibid.: 52). In the future, the wholesale exportation of U.S.-style private health insurance may or may not be successful, but arguably U.S. MCOs still have a great deal to offer other national health systems. In particular, these include information technology applications, utilization and care management tools and techniques, and other managed care tools and methodologies that can be adapted within local provider and administrative organizations. This is exactly what is happening presently in the United Kingdom. U.S. managed care was of considerable interest during the Tony Blair years (Feachem, Sekhri, and White 2002), and several major U.S. MCOs (including Kaiser and United) have been advising the NHS. Adding to this strong linkage was the fact that Blair’s key health adviser left to head United’s European, and then international, divisions (Day 2006). As of 2008, several U.S. MCOs (including United, Humana, and Aetna) are offering a wide range of administrative and care management services on a contractual basis to various units of the English National Health Service, most notably local primary care trusts and regional strategic health authorities (SHAs) (Department of Health 2007). To date, these insurers have not been offering risk-based insurance products in the United Kingdom, other than some plans targeted at U.S. expatriates or individuals employed by U.S.-based companies. The role of these U.S. (and other UK-based) commercial concerns within the United Kingdom’s primary care trusts has been quite controversial and viewed by many as a backdoor mechanism for privatizing the public system (Pollack and Price 2006). However, some analysts have also cited the bene­ fits of some of the approaches these transplanted managed care approaches are able to provide, including financial responsibility at the primary care level (Donaldson and Ruta 2005). The United Kingdom is not alone in its need for the types of administrative and care management services that U.S. MCOs have to offer. In the next section we offer a framework that can be used to help gauge a health care system’s potential for uptake of managed care functions and tools.

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A Framework for Assessing Managed Care Readiness

A nation’s (or region’s) health financing and organization infrastructure will have considerable implications for how (or whether) U.S.-style managed care tools might be applied. Based on our knowledge of managed care in the United States and other health care systems, we offer a framework to assess the managed care “readiness” in a given jurisdiction. We apply this framework to help characterize the systems in the United States (both fee-for-service and current MCOs) and six other selected nations (table 3). In addition to offering readers our assessment of the current characteristics of these nations from within a managed care – centric framework, table 3 suggests a model for how our typology might be applied beyond these countries to characterize a health care system along the continuum of managed care readiness. The framework we present in table 3 assesses eight distinct relevant managed care dimensions grouped into four broad categories: overall system structure, consumers, providers, and clinical management. For each of these eight measures we rate each delivery system along a continuum of four levels of attainment, from uncommon/very weak to widespread/very strong. The remainder of this section describes each dimension and discusses our rationale for some of the ratings we offer in the table. 1. Degree of Central/Regional Government Control. The first structural dimension is the extent of control that the central or regional government exerts over the health care system’s day-to-day management and care processes. The characteristics we consider are the degree of government control of the overall budget, level of centralized or regional planning, and the management of care delivery processes. For example, in the United Kingdom, Canada, and Sweden — the nations we rate as having very strong central or regional government control — most resources are budgeted by governmental units, and there is a high degree of central goal setting and operational guidance. Both the U.S. fee-for-service and MCO systems are rated in the weak (though not very weak) category, given that the majority of health care is not controlled or guided by government. Moreover, the U.S. government payers are fairly laissez-faire by international standards, and neither the federal Medicare nor the state/federal Medicaid programs have fixed budgets or mandate that providers and health plans practice collective planning or standardized care delivery. The roles of the German

Overall System Structure

Consumers

Providers

Clinical Management

-/- ++ + ++ ++ + +

+/++ + + -- - - -

++/++ -- + -- -- + +

++/+ - + + - ++ +

+/++ + - - + - -

-/++ + - - - + -

-/++ ++ - - + - -

+/++ + -

Key: Relative to other nations: ++ Widespread/Very strong + Not uncommon/Strong - Not widespread/Weak --Uncommon/Very weak * UR = Utilization Review/Utilization Management. The term care management includes programs often labeled disease management and complex case management. ** In the case of the United States, both nonmanaged fee-for-service and MCO-based systems are summarized.

U.S.A.   (FFS/MCO)** UK Chile Canada Sweden Germany France

(6) Degree of (1) Degree of (2) Autonomy of (5) Degree of provider-directed (8) Use of central/regional health plan (3) Choice provider/ financial UR and care government management/ of health (4) Choice integration/ controls/ (7) Population management control organization plan of provider organization incentives orientation tools*



Table 3  Characteristics Associated with “Managed Care” Readiness and Orientation in Selected Nations

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and French governments fall midway. In these nations there is a fairly high degree of global budgeting and central planning, but nongovernmental sickness funds and health plans and providers do most of the day-to-day management (within broad boundaries). 2. Autonomy of Private Health Plans/Organizations. There are a variety of potential roles for nongovernmental insurance plans or care management organizations. The second structural dimension we assess is the extent to which private plans or organizations play a significant and largely independent role within each country in the delivery of services to the consumer (as the main source of coverage). The term private includes both nongovernmental (or quasi-nongovernmental) organizations, social insurance funds, and private (either investor-owned or not-for-profit) insurance or managed care companies. The degree to which these private entities are allowed to set their own operational objectives, select or hire providers, interface with consumers directly without a high level of regulation, and set their own standard operating procedures are the factors we considered when rating within this dimension. The U.S. MCOs are the model at the high end of the continuum, and we rate them as “++.” These private (usually investor-owned) companies function on a very independent basis relative to government. The United Kingdom — with its increasingly independent primary care trusts — and Chile, with a large number of private health plans (known as ISAPREs), are rated as having a strong role for private organizations that intermediate between the other parties (government, consumers, and providers). The single-payer system of the Canadian provinces is rated the lowest on this health plan autonomy dimension. Other than a few small pilots (and supplementary private insurers, which we are not focusing on here), currently there is no major role for MCOlike organizations as the main manager of care in Canada. Other nations in table 3 (e.g., Germany and France) do have independent sickness funds that play key roles, but they have not (until very recently) been involved in setting their own independent goals, care delivery mechanisms, or provider networks; thus we rate these organizations as not having widespread autonomy (though this may change moving forward). 3. Choice of Health Plan. The first consumer-oriented dimension we assess is the degree to which consumers have significant alternative options with respect to their primary health insurance plan and system of care. The type of health care plan or program can potentially play an important role in the quality and amenities of care that consumers receive.

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Consumer choice is often cited as the central tenet of a market economy in health care. In the United States consumers (or at least their employer) may select from many hundreds of health plan variations. This choice can have a very real impact on the health care process and experiences. In the United Kingdom and Sweden, there are no real choices in this regard, as the organization of care (even within the autonomous PCTs) is almost always delivered on a geographic basis, and virtually all persons in the same area are “enrolled” in the same program. In Chile, Germany, and France, most (or many) consumers do have a real choice of alternative health plans. However, given that these plans generally offer options that are similar to one another, we do not rate these systems as having as much true choice as employers and consumers served by the U.S. MCOs. 4. Choice of Provider. The second consumer-oriented characteristic we assess is the ability of patients to choose their provider (e.g., generalist or specialist physician and hospital) at the time they seek care. The number of alternative provider options available to the consumer will affect satisfaction and potentially the quality of care. The dynamics of choice can also have an impact on the degree to which providers feel the effects of market pressures. For this dimension we rate U.S. MCOs lower than traditional fee-for-service indemnity plans, as provider network limitations are a hallmark of U.S. managed care. In the United Kingdom and Sweden, consumers usually choose from among a limited number of capitated/ salaried primary-care doctors within their neighborhood. Their choice of specialists and hospital is usually even more limited, as they usually reach these secondary-care providers based on referral by their general practitioners (GPs) and then most usually based on geographic availability. The rating for Germany — where all consumers have direct access to mainly community-based specialists paid on a fee-for-service basis — is higher than other nations. For the most part, German consumers have direct access to almost any generalist, specialist, or hospital in the nation. In Canada and France, and in Chile (at least for those enrolled in the private plans), consumers may choose from a wide number of providers (assuming they are taking new patients). 5. Degree of Provider Integration and Organization. The first provideroriented dimension we consider is the degree of organizational interconnectedness or “integration.” We define this as cohesiveness of function, particularly between primary and specialty care, and ambulatory and hospital care. The level of integration can directly affect efficiency and

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effectiveness of health care. The degree to which clinicians and their support structures view themselves as an interconnected unit with singular goals has great implications for how influential providers can be relative to government and health plan administrators. We rate U.S. MCOs most highly on this dimension, as integration is often considered a hallmark of “good” managed care, so much so that many provider-controlled MCOs prefer to be called by the integrated delivery system — or IDS — moniker. The British NHS with its PCTs, as well as the care networks developed by the Swedish country councils, are “purpose built” as rational integrated systems. The other nations’ FFS systems are rated somewhat lower on this dimension, as generalists, community-based specialists, hospital-based specialists, and hospitals are often fairly autonomous, and it is not always common for clinical pathways and patient support systems to cross these providers’ organizational boundaries. In Germany and France interoperable electronic health records (EHRs) and other care integration initiatives are attempting to address this issue. The U.S. FFS system is rated more highly than some of the other international FFS systems, since unlike these other nations, the practice structure in the United States (even outside MCOs) often involves specialists and generalists who work side-byside within multispecialty groups, and a large majority of physicians provide care in both ambulatory and hospital environments. Neither of these organizational attributes is widespread in other nations. 6. Degree of Provider-Directed Financial Controls and Incentives. The second provider-oriented dimension focuses on the extent to which financial incentives and controls are targeted at clinicians in support of efficient and effective practice. Examples include special payments to foster preventive care, to minimize the use of inappropriate medical technology or to maximize adherence to evidence-based medical guidelines. This dimension attempts to gauge the presence of payer incentives beyond the simple ratcheting down of fees, intended to constrain overall costs. We rate the U.S. MCOs most highly, as many of them apply numerous mechanisms that link cost-effective practices and guideline adherence to payments. This is sometimes termed pay for performance (P4P). Also, many HMOs share the gains and losses of savings (or overexpenditure) with their doctors. Practice-based incentives do exist in the U.S. nonMCO FFS environment, but they are not widespread. All GPs in England now receive significant bonuses based on their attainment of the Quality and Outcomes Framework (QOF) indicators. This may be the largest (in terms of budget and scope) P4P program in the world. In Germany phy-

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sicians are paid extra for achieving certain “Disease Management Program” (DMP) criteria for their patients with selected chronic disease. For these reasons we rated these nations at the “+” level. The other nations in table 3 have pilot projects in this domain and make use of various salary, bonus, and fee-for-service incentives to induce productivity and to mitigate above-average FFS billings. However, we are not aware of any widespread payment incentives linked to the provider’s attainment of cost effectiveness or quality-linked targets. 7. Population Orientation. Economists often note the difficulty associated with distributing finite health resources among members of a population. “Population orientation” is the first dimension of clinical management that we assess. In rating this dimension we assess the degree to which each nation has adopted a “denominator” approach in structuring its delivery system. Specifically, are public health and epidemiologic principles applied in conjunction with economic incentives to maximize benefits across the society (or at least the enrolled group)? Population-based systems tend to emphasize primary, preventive, and community-based services and minimize high technology services without clear-cut benefit. Many leading U.S. MCOs (mainly HMOs) have developed sophisticated population-oriented programs with targeted outreach both for screening and for chronic-disease care management. They use tools such as health risk appraisals and “data mining” methods of case finding (often termed predictive modeling). We rate the U.S. MCOs highly along with the British NHS, which is applying many of these same techniques within their PCT catchment areas. The United Kingdom also has “public health doctors” assigned to each region. The British (like the Swedes) pay their providers capitation and salaries, which tends to foster the idea that the population (and not the single patient) is being served. In Sweden, care systems are all designed with a clear geographic dominator in mind, and effective outreach for screening is quite common. In the U.S. FFS system and the other nations, programs like this may be present for some subgroups and for some conditions. However, we give these other systems a “-” rating, as we believe that where FFS payment dominates, single patients with a presenting symptom or problem are the focus, rather than the broader population. 8. Use of Utilization Review, and Care Management. The last dimension in table 3 — and the second clinical management dimension — focuses on what is generally considered the essence of managed care. That is, the

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widespread application of mechanisms that offer significant guidance to clinicians as they deliver high-cost or high-impact care. In virtually all U.S. MCOs, utilization management (UM) or utilization review (UR) techniques are used to ensure that nonemergent patients meet explicit criteria before a doctor can admit them to a hospital or perform a major outpatient procedure. While most UR/UM target high-cost services, other tools, often known collectively as “care management” techniques, are applied by MCOs to improve quality (which may or may not save resources). These techniques include disease management (DM) initiatives targeted at persons with chronic disease and complex case management (CM) programs that focus on the “tip of the pyramid” individuals who are very sick and in need of special care coordination. These DM and CM programs are multifaceted and thus relate to some of the other dimensions discussed in other columns of table 3. The DM and CM programs are often nurse-led interventions, where the ultimate goal is to offer the right services to the right persons in accord with the best available scientific evidence. Many nations are increasingly sharing evidence-based guidelines with clinicians. And nurse-led care-coordination interventions for selected patients in need are not uncommon in most developed nations. However, the widescale application of these tools on a near real-time basis is not widespread outside U.S. MCOs. These techniques are not prevalent in U.S. FFS settings. As nations increasingly apply computerized clinical decision support systems linked to EHRs, it is likely that these types of UR/UM tools will be applied more widely around the globe. We recognize it is difficult to fully and accurately characterize all aspects of care in these seven large nations. We also acknowledge that a full review of the research evidence summarizing what is known about each of these managed care dimensions goes beyond the scope of this article. However, these caveats aside, we believe the frameworks and assessment we offer in table 3 provide at least one approach for identifying priority areas and challenges that might be addressed in these (and other) nations using key managed care principles and tools. Table 3 illustrates that among the nations we assess there has been only limited uptake of the methods and approaches found within leading U.S. managed care plans. For example, across the Canadian provinces, our assessments on the managed care readiness matrix suggest strong centralized control, limited population orientation, limited provider integration, and few provider incentives linked to care improvement. Thus we believe that there is considerable potential for the introduction of managed care tools within the Canadian system. We believe that in many nations there

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is considerable opportunity for U.S. managed care plans to collaborate for the benefit of both parties. Alternatively, as has been done in places like the United Kingdom and Germany, local organizations can learn from the experiences of the U.S. health plans. Looking Forward

It is most difficult to predict the future trajectory of a country’s health care system, let alone that of multiple nations. But as we look forward, a series of powerful global trends are quite relevant to this discussion. First, since most high-income nations already provide universal health insurance, growth in the role of private plans as the primary source of health insurance will likely be limited to low- and middle-income nations. Those nations with a growing middle-class will be particularly likely to follow this trend, representing a considerable opportunity for the private sector. But not without controversy: some will be troubled by the prospect of parallel delivery systems for those with and without means, and the overhead associated with multiple plans. On the other hand, private plans could prove to be more responsive to consumer needs than government, and they could help free up limited public resources to allow targeting of those with greatest need. It is safe to say that even wealthy countries will not be able to collect enough taxes or insurance premiums to provide all of the health care their citizens may want. So policy makers and consumers in countries with government-sponsored or mandated programs may come to the conclusion that supplementary or complementary private health insurance should be fostered or at least tolerated. Such private sector expansions or partnerships represent possible opportunities for U.S. managed care companies. Even if a nation’s health care leaders and consumers do not embrace a role for private health plans, they should be able to find many useful lessons and practical techniques from within the vast managed care tool kit. As described in this article, possible innovations include those focusing on care management, provider payment, or organizational structure. Each of these is a complex and challenging domain, but the experience and lessons (both positive and negative) to be found within the U.S. managed care community are manifold. The concomitant challenges of rising costs, increasing consumer demand, and ongoing concerns with social equity suggest that the global need for managed care tools and principles will be considerable. The question is not whether managed care approaches will be implemented internationally,

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but which are the most relevant, what processes are required for their local adaptation and implementation, and what role might there be for U.S. managed care organizations.

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