MANAGED HEALTH CARE : AN INDUSTRIAL STUDY

Abstract

Health care cost inflation is a central issue in almost every country and the search for a solution has resulted in many different cost containment strategies. These strategies usually involve reducing the cost of health care resources and controlling the utilisation of health care resources. However, their success is limited, especially in controlling rate of utilising the resources. One of the main impediments to the development of a successful cost containment strategy is the failure to efficiently allocate the risk of unnecessary utilisation of health care resources among the players in the health care sector. In Singapore, cost containment strategies are generally successful. However, most of these strategies were targeted at the public health care sector, especially on secondary and tertiary health care. The preponderance of traditional indemnity fee-for-service medical insurance schemes in the employee benefits market means that the private health care sector is still open to abuse. Thus there is a need to efficiently manage the private health care sector. One possible solution is to use the concept of managed health care in the private sector, which offers a more holistic approach to cost containment strategies. The managed health care market in Singapore is still in the infant stage when compared to the United States. However, comparative studies show that these plans are structurally sound to help contain cost. Specifically, the average utilisation rate for primary care is about 2.08 for a particular managed health care plan compared to 7.56 for traditional indemnity fee-for-service plan. Furthermore, converting from traditional indemnity fee-for-service plans to managed health care plans can result in cost savings of about 24.8%. The cost containment potential of managed health care plans however did not guarantee their success. In fact, their growth rates have fallen short of the expectations of the analysts in the health care sector. The main impediment is the perception that there is no urgent need for such a revolutionary change in the health case sector. Coupled with lack of government support, resistance from employees and lack of market awareness, the managed health care plans have remained insignificant in the medical insurance market after 3 years.