17.4 History of Managed Care and Contemporary Ethical Dilemmas
Managed care has a long and controversial history in the U.S. The first organizations resembling a form of managed care emerged in the mid to late 19th century through community cost-sharing agreements and employer-sanctioned health programs (Friedman, 1996). However, regulatory backlash from government and physician groups prevented further growth until legal restrictions were repealed in the 1950s (Giled, 2000). Coupled with a more hospitable regulatory landscape, the creation of Medicare and Medicaid programs in 1965 led to renewed interest in managed care as federal and state governments sought to reduce their share of healthcare costs (Giled, 2000). By the 1970s, the regulatory landscape had shifted completely, with the federal government encouraging the development of managed care organizations through the Health Maintenance Organization (HMO) Act and state governments later encouraging the development of Preferred Provider Organizations (PPO) in subsequent legislation (Giled, 2000). These events have led to a massive growth in the use of managed care health insurance plans, with the concept of managed care becoming synonymous with contemporary American health insurance practices.
The managed care process in mental health and substance use counseling is designed to balance quality care with cost containment. It involves collaboration between healthcare providers, insurance companies, and clients to ensure effective and efficient delivery of services. Counselors must obtain “prior authorization” from managed care organizations (MCOs) before initiating treatment, ensuring that services align with the client’s insurance plan and clinical necessity. Treatment planning is a central component, requiring structured plans with clear goals, measurable outcomes, and defined timelines, which are reviewed and approved by the MCO. Managed care emphasizes using evidence-based practices to enhance treatment effectiveness and cost efficiency. However, plans often limit the number of sessions or types of services covered, requiring providers to deliver care within these constraints.
Additionally, MCOs may employ case managers to coordinate care, monitor client progress, and connect individuals to appropriate resources, particularly for complex cases. Providers must document progress and treatment outcomes, which are reviewed to determine the need for continued care or modifications to the treatment plan. While managed care can enhance accountability and affordability, it can also introduce challenges, such as limited provider choice, restricted treatment options, and administrative burdens for counselors. Each health insurance company and MCO uses different approaches, standards, and criteria to ensure that care is delivered safely and effectively. Counselors must consult with specific health insurance companies and MCOs to determine best practices and approaches for delivering appropriate and efficient care for their clients who use health insurance to pay for services.
Contemporary Controversies
Despite its prevalence as the dominant form of health insurance in America, managed care has not been without considerable controversy and ethical concern, particularly in behavioral healthcare (Boyle & Callahan, 1995; Giled, 2000). Though the Mental Health Parity and Addiction Equity Act (2008) and subsequent revisions have required health insurance providers to provide ease of coverage for mental health conditions comparable to that provided for physical health conditions, the significant cost associated with treating severe and persistent mental illness has led some insurers to require treatment guidelines that are at odds with traditionally accepted best practices (Boyle & Callahan, 1995). This is partly due to ambiguity in psychological science that does not necessarily point to a single identifiable best practice. However, requiring certain constraints on treatment may create tension and disagreement between the managed care agency and counselor when perspectives differ regarding the best course of treatment (Boyle & Callahan, 1995). This notion points to the importance of remaining an informed and current consumer of research regarding best practices in the field of counseling, as it allows counselors to continually advocate for clients while working collaboratively with insurance providers in the client’s best interest.
Managed Care Selected Providers
The practice of insurer-selected providers also raises ethical concerns regarding conflict of interest. Some medical practices and individual providers are salaried by a health insurance company rather than paid on a fee-for-service basis. As part of this, providers are often encouraged to see clients less or limit costly services through a reduction in salary if total client fees exceed a certain amount (Giled, 2000; Hillman, 1987). Furthermore, providers delivering services that exceed those recommended by MCOs are often at risk of losing their preferred provider status (Hillman, 1987). Thus, there is concern that MCO-provider relationships may incentivize clinicians to act in a manner that fulfills MCO requirements rather than in the client’s best interests (Boyle & Callahan, 1995).
Limitation of Client Choice
Health insurance can sometimes limit patient choice by restricting access to specific providers, treatments, and medications. Many insurance plans operate within a network of preferred healthcare providers, requiring patients to choose from a limited list of doctors and facilities to receive full coverage. If patients opt for out-of-network care, they often face higher costs or complete denial of coverage. Additionally, insurance companies may impose formulary restrictions on medications, approving only certain drugs while excluding others that may be more effective for an individual. Prior authorization requirements for specialized treatments or tests can further delay or block access to necessary care. These limitations, driven by cost-control measures, often undermine patients’ ability to make decisions aligned with their preferences, needs, or healthcare provider’s recommendations.
The United Healthcare Case
In December of 2024, a suspected lone gunman assassinated the CEO of United Healthcare, the health insurance subsidiary of one of the largest health insurers in the U.S., UnitedHealth Group (American Medical Association, 2024; Brumfield & Dale, 2024). At the crime scene, ammunition was found inscribed with the words “deny,” “defend,” and “depose.” A phrase mirroring the title of the popular book “Delay, Deny, Defend” by Jay Feinman (2010), which was highly critical of the insurance industry (Brumfield & Dale, 2024).
At the time of writing, the primary suspect in the assassination, which is presently being prosecuted as an act of terrorism, was found to be carrying a manifesto describing health insurance companies as “parasitic” while speaking out against corporate greed in America. While managed care has been highly controversial since its inception (Friedman, 1996; Giles, 2000), this event has brought issues of managed care and health insurance into public consciousness in a way not previously seen, with many sharing their frustrations against managed care in the wake of the assassination (Brumfield & Dale, 2024). As conversations unfold, managed care will likely become increasingly controversial in public health policy.
Key Takeaways
- Managed care has grown from 19th-century cost-sharing agreements to dominate American health insurance today, heavily influencing provider-client relationships and treatment accessibility.
- Managed care often imposes treatment constraints and provider incentives that can conflict with best practices, raising ethical concerns about prioritizing cost efficiency over client well-being.
- Insurance restrictions on providers, medications, and treatments can undermine patient autonomy and delay or block access to preferred or necessary care.
- Managed care’s practices, such as incentivizing limited care and restricting provider freedom, often clash with counselors’ responsibility to advocate for clients’ best interests.
- Events like the United Healthcare CEO assassination and broader frustrations with managed care have heightened public awareness and criticism of health insurance practices, signaling potential shifts in policy and public discourse.