Essay about Health Care Systems

1368 Words Oct 3rd, 2011 6 Pages
Running head: HEALTH CARE SYSTEM EVOLUTION PAPER

Health Care System Evolution Paper
University of Phoenix
Sandra Walther/ HCS 310
October 20, 2009

Understanding the roller-coaster experience with the use of market forces in health care over the past ten years provides important context for discussions of likely future developments in the nature of competition (Lesser, 2007). The period began with acceptance of managed care transforming the organization of medical care delivery and proceeded to a period in which many of the changes were reversed. This paper begins with observations on competition in 1995, which is slightly past what one might call the peak of managed care’s influence. It goes on to describe the market and policy
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The industry was highly profitable at the time, mostly because cost trends came in below expectations at the same time that premiums were set, for several consecutive years (Lesser, 2007). Many insurers were entering new markets in 1995, often spurred by the belief that this would be the last opportunity to do so (Lesser, 2007). Entry typically involved purchasing a relatively small local plan and expanding it, often through setting premiums low in cost. The rapidly growing Medicare plan market was considered the most attractive segment at the time (Lesser, 2007). This likely occurred because payments from Medicare were pegged to costs in the traditional program, which were increasing at a higher rate than costs for managed care plans. Managed care transformed the health industry. Companies that were most successful in offering managed care products, especially HMOs, were those that had started up as local or regional HMOs. Traditional insurers tended not to be good at this, and one (Aetna) later acquired a large regional HMO (U.S. HealthCare) and put the HMO executives in charge of the entire operation (Lesser, 2007). United HealthCare, which started as an HMO company, later acquired a large traditional insurer to expand its reach. Blue Cross and Blue Shield (BCBS) plans lost market share to other insurers, although they continued to be dominant insurers in many markets (Lesser, 2007). Many hospitals entered the insurance business around this

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