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Designing Healthcare Systems That Work for People With Chronic Illnesses & Disabilities

Healthcare Trends Affecting Special Needs


Robert Hurley, Ph.D., Associate Professor, Medical College of Virginia, Virginia Commonwealth University, Richmond, VA.

The fast-changing healthcare environment has a direct impact on the opportunities and potential of service delivery and financing systems. Managed care was spawned by private purchasers, who saw it as a way to get better value by decreasing costs while holding outcomes constant. Now those purchasers are losing confidence in managed care as multiple factors drive healthcare costs and managed care organization (MCO) premiums upward; these factors include the insurance cycle, increased regulations, provider consolidation creating countervailing leverage against the purchasing power of MCOs, and (perhaps most significantly) increased use of medical services, especially prescription drugs.

Dr. Hurley noted that future debates will center on "who lost cost containment?"

The public sector's use of managed care began much more recently, especially in Medicare and for special-needs populations within Medicaid. Congress has been very ambivalent about whether the Medicare population should participate at all, according to Dr. Hurley. State and Federal policymakers have been cautious about including special-needs populations in Medicaid managed care. Concerns center around several issues:

  • The "jury is still out" on disability/illness-specific programs, as most specialized plans are still fairly new. Progress is being made, but models tend to be limited in scope and scale.
  • Technical problems—such as risk adjustment, dual eligibility, benefit-design issues, and case management models/authority—are real.
  • Evidence of managed care's benefits is still limited.
  • MCOs tend to think in a conservative medical model, making innovation difficult.

Recent developments suggest that "reasonable" expectations may need rethinking, both by State policymakers and by MCOs considering bidding for contracts. MCOs withdrawing from Medicare have been particularly troubling. In 1999, 45 MCOs withdrew from the program, affecting 407,000 beneficiaries. The number of commercial MCOs serving Medicaid beneficiaries has also dropped, although not as precipitously as in Medicare.

Current perils of managed care in the public sector include:

  • Purchasers who want to both bash and buy managed care.
  • Hostile political environments.
  • A "Christmas tree mentality," in which purchasers increase expectations without aligning payment or resources/support to make these expectations realistic.
  • Unrealistic beliefs that MCOs can subsidize the cost of serving public sector clients with private sector dollars.
  • The sense of little control caused by the volatility of the market.


Health Care Financing Administration. Medicare+Choice: Policy concerns, implications, and prescription for change. Baltimore (MD): Health Care Financing Administration; 1999 May.

Gold M, Smith A, Cook A, et al. Medicare managed care: preliminary analysis of trends in benefits and premiums, 1999-1999. Washington (DC): Mathematica Policy Research, Inc. 1999 Jun.

Felt-Lisk S. The changing Medicaid managed care market: Trends in commercial plans' participation. Washington (DC): Mathematica Policy Research, Inc. for Kaiser Commission for the Future of Medicaid and the Uninsured. 1999 May.

Brown RS, Gold MR. What drives Medicare managed care growth? Health Aff 1999 Nov/Dec;18(6):140-9.

Laschober MA, Neuman P, Kitchman MS, et al. Medicare HMO withdrawals: what happened to the beneficiaries? Health Aff 1999 Nov/Dec;18(6):150-7.

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