Kaiser Permanente

History of Managed Care

Managed care is a concept in U.S. health care which rose to dominance during the presidency of Ronald Reagan, ostensibly as a means to control Medicare payouts.

Ronald Reagan had supported legislation in California during his term as Governor there as a way to stem rapidly rising costs to California's Medicaid (named Medi-Cal) Program adopted earlier in his administration. The program was allowed as a Medicaid "waiver." At the time it was called the "Pre-paid Health Plan Program. A series of contracting scandals with a number of prepaid health plans caused reforms in CA and prompted passage of the HMO Act by Congress. Reagan later promoted HMO's nationwide after he became President, and they spread relatively quickly through the health insurance industry. Managed care usually refers to a PPO, HMO, MCO, or POS plan.

The spread of managed care reflected its role as a primary mechanism through which corporations have tried to transform U.S. health care from a not-for-profit human service into a for-profit business.

The rise of managed care was touted by the U.S. health insurance industry as a way to lower the rate of medical inflation in the 1990s. But managed care has not been successful in lowering the rate of medical inflation. In fact, U.S. medical inflation is now two or three times the rate of overall inflation, as it was during much of the 1980s.

Managed care has been a successful for-profit business model. Corporations and many individual investors have reaped billions in profits. However, critics have argued managed care has been an unsuccessful health policy as it has increased health care costs, added to the number of uninsured citizens, driven away health care providers (e.g., nurses) and applied downward pressure on quality.

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