managed care

What is managed care?

Managed care refers to a medical delivery system that attempts to manage the quality and cost of medical services that individuals receive. Most managed care health insurance systems utilize an HMO, EPO, PPO, or POS network design, limiting to varying degrees the number of providers from which a patient can choose, whether the patient has to obtain a referral from a primary care physician before seeing a specialist, and whether out-of-network care is covered under the plan.

Some managed care plans attempt to improve health quality by emphasizing the prevention of disease, and by sharing the resulting cost-savings with the health care providers who treat the patients (this approach refers to a value-based payment system, such as an accountable care organization).

Indemnity plans were popular before the advent of modern managed care plans, but they have been largely replaced by managed care plans over the last few decades, and the vast majority of privately insured Americans are in some form of managed care plan. According to KFF's annual analysis of employer-sponsored coverage, only about 1% of plans are still traditional indemnity policies, while the other 99% are managed care plans.¹

Do Medicare and Medicaid use managed care?

Yes, managed care is playing an increasingly large role in Medicare and Medicaid, with the majority of enrollees in both programs now covered under managed care plans.

Nearly three-quarters of the people enrolled in Medicaid were covered under private Medicaid managed care plans as of 2021² (this means the state contracts with a private health insurance company to manage and adminster Medicaid benefits).

And more than half of Medicare beneficiaries were enrolled in private Medicare Advantage plans as of 2024³ — a percentage that has been steadily growing over the past decade.