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nies and other approaches to managed care lower costs compared with the costs of indemnity insurance plans (e.g., Essock and Goldman, 1995; Frank et al., 1995).

This chapter discusses some of the major trends in managed care and their implications for behavioral health care: (1) the increasing rate of growth of managed care, (2) the rapid expansion in the use of managed care systems by public-sector populations, (3) the role of purchasers in managing costs, and (4) the recognition of quality assurance and quality improvement mechanisms as tools for purchasers in making informed decisions. The chapter provides an overview of different quality monitoring mechanisms, including accreditation, quality improvement, performance measurement, licensing, and other credentialing activities, and discusses consumer protections, including confidentiality. Although the responsibility for quality is diffuse, the committee believes that quality assurance and accreditation can be used as tools to help purchasers of care receive the most effective care at the lowest appropriate price.


Managed Care

Conventional insurance, also called indemnity or fee-for-service insurance, places few restrictions on the choice of practitioners whose services are covered. Practitioners are reimbursed on the basis of the numbers and types of services that they provide, which produces unintended consequences: an incentive for practitioners to provide more services and an incentive for patients to seek more services because they are paid for by a third party. Costs under indemnity coverage are typically controlled by higher copayments, strict limits on services, and lifetime limits on aggregate coverage.

In contrast, managed care imposes limitations on utilization by specifying which practitioners and which services are covered, and often also the number of allowable visits. Managed care comes in many forms and new structures continue to develop, making generalizations difficult. However, managed care plans have the following characteristics in common (HIAA, 1996):

  • they make arrangements with selected practitioners to furnish a specific set of health care services to enrollees;

  • they have explicit criteria and standards for the selection of practitioners;

  • they have formal programs for ongoing quality assurance, quality improvement, and utilization review; and

  • they have financial incentives for members to use the practitioners and procedures that are covered by the plan.

As discussed throughout this report, enrollment in managed care plans con-

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