Markets at Risk— Current and Future Challenges in a Managed Care Marketplace. D. Regulation—public and private.


The final broad pressure facing the managed care market place comes from the regulatory environment. This environment includes both the public sector where there has been a protracted period of political scapegoating and increasing imposition on a relatively slender segment of the managed care industry: the traditional HMO product. Also included here is private regulation or accreditation, which has had a pervasive effect on the industry in terms of standards and practices, as well as a rapidly growing cost of compliance. Ironically, despite the extensive investment plans have made to comply with these public and private requirements, they have not made much of an impact on the credibility and perceived legitimacy of the industry, as shown in public opinion polls of trust and respect.

The nature of the problem is even more troubling when looking at the accreditation experience since the NCQA’s origins’ lie largely with the purchaser community. It appears that accreditation status and accompanying reporting via HEDIS and CAPHS has had a disappointingly small impact on purchasers in terms of influencing their decision making. There are indeed exceptions, and there are also organizations like the Pacific Area Business Group on Health that have taken data collection and reporting much further than even NCQA63. But insofar as obtaining accreditation was designed to assure purchasers and consumers that plans with full accreditation have demonstrated laudable performance on a number of important dimensions, it has had little effect in muting or deflecting the generalized backlash against HMOs.

On the public sector front, regulation has probably had a distorting impact on product offerings and (self) funding decisions because it has loaded requirements on fully insured HMO products, and paid little or no attention to less fully formed managed care products. This is not simply a matter of inattention, but rather a recognition that looser models of managed care like PPOs are neither accepting as much responsibility nor are they capable of being held to the same standards of accountability as HMOs. It is because of this that the “PPO-ifying” of the industry noted earlier, will mean a much lower degree of care and quality management will be possible, with a corresponding inability of regulators to extract a higher degree of accountability. The implications of this trend for public purchasers, for whom loss of HMO contractors means a return to self-funded and fragmented fee-for-service medical care, will be significant.

  1. K. Hallam, “A Big Problem for Health Plans: Some Providers Won’t Play the Managed Care Game,” Modern Healthcare, June 5, 2000, pp: 48-52.