The U.S. Experience with Managed Care and Managed Competition and Discussions

To understand “managed care,” one needs to understand the traditional model of health care organization and finance that managed care was intended to replace. That model was aptly characterized “Guild Free Choice” by Charles Weller to indicate that “free choice” was being used as a restraint of trade to block the emergence of any form of economic competition among doctors (Weller 1983). Its principles were: free choice of doctor at all times, free choice of treatment, that is, nobody interferes with the doctor’s decisions and recommendations, fee-for-service payment, direct doctor-patient negotiation of fees, and solo (or small single specialty group) practice (Weller 1983). The model was widely accepted because of the pre-Wennberg view of most people that “the medical care they receive is a necessity, provided by doctors who adhere to scientific norms, based on previously tested and proven treatments” (Wennberg 1984). In combination with well-insured patients, there was no way that employers or insurers could control health spending in this model. Organized medicine is still fighting to hold on to parts of it.1 Some people say that managed care is “anything other than Guild Free Choice.” For purposes of this paper, I divide managed care into two types, while recognizing that the boundary is not clean. The first is the “integrated delivery system” (IDS), or “delivery system HMO,” that is, systems that are built on the core of a large multi-specialty group practice, often with links to hospitals, labs, and pharmacies, and usually with a significant amount of revenue based on per capita prepayment. Prominent examples include Kaiser Permanente, HealthPartners of Minnesota, the former The U.S. Health Care System under Managed Care: A Case Study 98