Markets at Risk— Current and Future Challenges in a Managed Care Marketplace. Turbulence in the Health Care Market

12/01/2000

Health benefit purchasers embraced managed care initiatives to increase value. They enlisted the assistance of managed care organizations to carry this out. Enrollment in network-based managed care products grew rapidly from the mid- 1980s to the late 1990s reaching nearly 200 million lives by the year 2000. Premium increases slowed dramatically into the mid-1990s, but have since sharply reversed this trend. Current double-digit rates of increase are painfully reminiscent of those of the 1992-94 period, suggesting to many purchasers that cost savings ostensibly gained from managed care may not be sustainable.

In addition, managed care organizations have provoked considerable backlash among consumers and providers. The backlash has, in turn, led to a nearly unrelenting series of substantial regulatory impositions on the industry. Despite major investments in the quality monitoring and improvement, plans have not been able to convince most constituencies that these efforts pay off in greater value. Financial pressures for plans and for providers have also contributed to significant uncertainty and to increasing contentiousness in negotiations between these parties. Taken as a whole then, there are reasonable doubts about the continued contribution that managed care as-we-have-known-it may make in the future.