This chapter covers managed care organizations (MCOs). The chapter begins by laying out the general game plan of a MCO: reduce ineffective medical spending so that you can offer the same health outcomes at a lower price. Then the broad organizational structure of common MCO types is discussed: HMOs, PPOs and POS type plans. Next, the chapter goes through various tools that MCOs use to try to achieve their goals: denial of payment, prior authorization, behavioral interventions, gatekeeper and second opinion programs, strategic manipulation of cost sharing, provider payment schemes, and choice of who to contract with for services. Finally, the patient tradeoff between cost of coverage and amount of red tape present is explored.

This chapter discusses the concept, design, implementation challenges and emerging models of successful strategic purchasing (SP) in low- and middle-income countries (L&MICs). The purchasing function is concerned with allocation and use of funds to ensure more value for the existing money by setting the right financial incentives to providers and ensuring that all individuals have access to needed health services. There is a marked difference across countries in terms of how they purchase health care. Passive purchasing implies following a predetermined budget or simply paying bills when presented. In contrast, SP involves a continuous search for the best ways to maximize health system performance by proactively answering questions such as – for whom to buy, what to buy, from whom to buy, how to pay and what impact. There are enablers and choke points for implementation of provider payment systems that need consideration. For L&MICs to do SP effectively, calls for building technical capacity in provider payment, greater policy coherence, institutional relationship between government and purchasers, and a step-by-step approach allowing countries to move towards SP.