Managed Care Reflections: A Q&A With Charles N. (Chip) Kahn III, MPH

Am J Manag Care. 2025;31(8):In Press

AJMC: How have the concept of managed care and the conversations around it changed over the past 30 years?

KAHN: There have been so many changes. If we look at that period of time, on the one hand, it’s sort of hard to conceptualize where we are today if you were to ask the question, “Where will we be in 30 years?” 30 years ago. On the other hand, whenever I talk about managed care, I immediately think about Alain Enthoven’s book Health Plan that was published in 1980,¹ and in that book, he described a lot of the problems with the health care system. I’m not sure that, despite all the changes I’m going to talk about in a moment, we don’t still have a lot of those same problems in terms of the lack of connectedness and the myriad issues that actual patients face on a daily basis when they need health care.

There are so many things that have happened over the [past] 30 years, and some of them would have been hard to predict. One, 30 years ago, managed care, as we know it, was primarily private sector. Today, it’s still obviously private sector in terms of employer coverage or coverage in the individual market, but the individual market itself is now government regulated in the ACA [Affordable Care Act] exchange marketplaces, so that’s a tremendously different feature. Second, we now have 54% of Medicare beneficiaries in managed care, and that number is likely to continue to increase, although there are some issues that I think will come up that could be obstacles to that. And on the Medicaid side, which is now 72 million Americans overall, we’re talking about—and considering that a good portion of those are in nursing homes, not in Medicaid for health care coverage, per se—that 70% of Medicaid is managed care. So that’s a complete change over the [past] 30 years, partly driven by the ACA, partly driven by the Medicare Modernization Act in 2003, but we have a completely different scene.

The large insurance entities are engaged in the public sector now as much as they are in the private sector: completely different scene. Another major change that’s taken place is that in certain pockets of the country, the original health maintenance organization, the prototype being Kaiser Permanente, has proliferated in pockets on the West Coast, up and down the West Coast. Not that Kaiser Permanente wasn’t there 30 years ago, but it’s really become dominant in certain areas. The rest of the country, though, is a mixed bag in terms of the structure of managed care.

There’s a lot of talk about managed care moving to value-based purchasing. I’m still a little unclear as to what value-based purchasing actually is, and I think that most of the coverage across the country—some of which may be heavy network, some of which may look more like fee for service, and there’s great variability—that the purchasing is still the purchasing. If we go back 30 years ago and remember that was the period of Patients’ Bill of Rights and all these concerns over prior authorization and other kinds of utilization review, well, one of the big issues today is prior authorization and utilization review, and those issues haven’t been settled, but the scene underneath that is completely different. We have 1 major insurer, UnitedHealthcare, which has probably now 100,000 primary care deliverers, including physicians and nurse practitioners and others, but basically, they have gone in the direction of controlling the access to care through controlling the primary care and all that implies. Other large insurers and health plans have tried to emulate that, to mixed success. But, to me, that is a very important trend of controlling the gatekeeping as something that has really evolved over the last 30 years.

Now, during that same period, the practice of medicine from the physician side has changed dramatically. Thirty years ago, private practice in small group practice still dominated health care in terms of that sector. Today, physicians generally are in very large groups and are either in groups owned by some entity—in the case of many of them, UnitedHealthcare—or owned by health care systems, hospitals, or other kinds of networks. You still have pockets across the country of major, private, old-fashioned practices, but they are not the future, and the fact that physicians are organized differently than they were 30 years ago has a tremendous effect on managed care and the structure of managed care. In some cases, you’ve got the managed care entities themselves; the health plans are trying to control the gatekeeping as well as controlling the care delivery through means of prior authorization or other kinds of utilization review. And I think that’s different.

Where that’s all going, I can’t say. I think part of this relates to so much becoming involved in the public programs, Medicare, Medicaid, CHIP [Children’s Health Insurance Program], the exchanges, and I don’t know what the destiny of that is. We just saw [in early July] the passage of the OBBBA [One Big Beautiful Bill Act], which has significant Medicaid reductions in it, which, over years, could have significant influence on public coverage for Medicaid recipients, which may have an effect on managed care, which is now the predominant player in that coverage, and on the Medicare side, we have dramatic growth.

AJMC: What changes do you see taking place in managed care over the coming years?

KAHN: Managed care has made a major commitment, with some of the major health plans being only in the public market, most still being split between the two, but those markets are under tremendous pressure regarding overall spending, and at least at this stage, I would argue, the health plans have been a bit immune from reductions. Although what’s happened with the risk adjustment subsidies, they would argue, they have been cut by CMS, but they haven’t had major cuts, and the structure is still generous for them and enables them to attract more and more Medicare beneficiaries every year. That could become stressed. I think that with the OBBBA, there’s going to be tremendous pressure on Medicaid, and that could have some effect on, frankly, the business model for managed care in terms of its provision of care for Medicaid recipients. There are very heavy stresses on the marketplaces, which is the individual market in the US that has gotten up to 24 million [enrollees] this year, but on the program integrity side there’s tremendous pressure, and the health plans will feel that in terms of approving eligible members. A lot of process has been added there. A lot of concern has been raised about brokers, and action has been taken to curtail a lot of broker freedom. And overall, the subsidies may or may not continue at the level they are now. There are tremendous subsidies for the members who join plans under the marketplace, and if those subsidies don’t continue at the current level, that could affect those plans materially in terms of the risk pool, because many of the people who will be affected by the subsidy pullbacks or the heavy obstacles created in the program integrity efforts could affect, frankly, healthy lives. And to make a risk pool work, you’ve got to have both. So, the cost of the premiums, and I’ve seen some numbers, is going to jump tremendously in 2026 and that could have a negative effect on managed care in terms of its reach.

The lowering of coverage overall will affect the providers more, because the providers, particularly hospitals and other providers that are at the front line, are going to have more patients who are uninsured or underinsured in this new environment that we may be heading into, and that’ll increase pressures on those who can pay the bills for their care, and that’ll put pressure on premiums. So, I think we’re heading toward a period of some instability or something worse, because we are right now sitting at the high point of health care coverage, probably in American history, across the nation, because of the full aspiration of the ACA playing out, and with what Congress just did and with what CMS and the administration have done on program integrity, we’re going to turn a corner there, and the corner is going to lead to degradation of coverage, and that affects health plans and managed care.

AJMC: After nearly 25 years of leading the Federation of American Hospitals, you recently announced you’ll be stepping away at the end of the year. What are you most proud of accomplishing during your tenure?

KAHN: Now that I look at it, I’m a little pessimistic about its endurance with what I just said in the previous answer, considering where we are today, but I think the crowning accomplishment of my tenure here was what I just described as the level of coverage that we have today. In my prior job, before coming to the Federation of American Hospitals, at the Health Insurance Association of America, I joined with Ron Pollack from Families USA in the “strange bedfellows” movement² to try to expand health care coverage…. I carried that over when I moved to the federation, and particularly in 2006 the federation membership became very committed to making a real difference and having universal coverage based on the structure of our current system in terms of private insurance and the existing public programs being fully available to people at various income levels and such. We worked very hard and in 2009-2010 were great supporters of and integrally involved in the development of policy of the ACA with the other hospital groups, and the fact that we at the end of the day led to changes in Medicaid, the creation of the exchange marketplaces, other aspects of the ACA, and in this year 2025 we can have this many Americans covered, I think was a tremendous accomplishment. Obviously, many, many people involved, but in terms of my leadership here, that was a primary accomplishment.

Second, in the wake of the Institute of Medicine, which is now the National Academy of Medicine, reports in the late 1990s and early 2000s on quality and safety in hospitals,^3,4 I joined with Dick Davidson at the American Hospital Association and Jordan Cohen at the Association of American Medical Colleges to form the Hospital Quality Alliance. That was the beginning point of hospitals taking the bull by the horns and both recognizing the quality and safety issues that we had and beginning a process of making our contribution to the overall performance measurement enterprise. If you don’t measure it, you don’t know it’s there. We began with voluntary measures and had most hospitals engaged in that. Then the Congress and CMS got involved and developed legislation and regulations with an entire infrastructure of reporting, with one of the provisions in the ACA, which I could take some credit for. I helped set up within the National Quality Forum the whole process for advising CMS on the quality measures, the safety measures that they would require of hospitals and other providers and clinicians, and today, measurement is integrated into the payment system in Medicare. It’s obviously a piece of all the value-based initiatives, whether they’re at CMMI [Center for Medicare and Medicaid Innovation], at CMS, or integrated into managed care. In terms of making sure that hospitals recognize the problems and were completely engaged in these processes, that’s developed over the 25 years, and I think it’s very important. I cochaired the coordinating committee of the Measure Application Partnership that oversaw this process, advising Medicare for many years at the National Quality Forum. And through that involvement and other involvements, I think that both recognition and actual application of performance and quality and safety measurement is something that I’ve played a role in and am very proud of. Hospitals have met their responsibilities here to a great extent, and I think I made some contribution to that through the early leadership, beginning at the start of my tenure.

Beyond that, there are many specific things that I was engaged in, physician ownership and referral restrictions, that I think are very important aspects of reforms that have helped rural hospitals over the many years; I could go through a lot of others. I’d say, generally, in terms of preserving and reforming payment, we’ve been very engaged, and that’s been part of my responsibilities here during my tenure. But for me, quality, safety, and performance improvement and assurance in this country that everyone has access to good health care coverage were the 2 major themes that were important to me and I think we made tremendous progress there.

AJMC: What are the unresolved issues that hospitals and health systems will need to contend with in a landscape of shifting policy and reimbursement?

KAHN: In recent years, the pressures in the relationship between managed care and providers and clinicians have reached a level of stress that is unprecedented. There have been previous periods when many of the insurance practices have caused stress, but I think at this point, because of all the pressures to control health care costs on every part of the health care system, that this tension is unresolved and creates tremendous issues for the patients, because the patients get caught in the middle between those who are providing their coverage, whatever kind of health plan they have, and the providers, the hospitals, and the clinicians. This tension is untenable, in my mind, and it’s leading to denials of care and delay of care. We see both from the health plan sector the beginnings of a clear recognition of this and how it’s playing out for patients, and from the provider sector we’re seeing, as relations with managed care get worse, a lot of tension, and at the end of the day, all this just can’t be settled in court, [although] a lot of it’s actually going to court.

I think we’ve got to find some kind of middle ground where plans can be confident that patients are getting the care that they need in the right setting and the most appropriate care, but at the same time, frankly, you can’t provide care without payment, and we’ve got to work something out here so that the hospitals and the clinicians and the other caregivers can do their jobs and meet the needs of their mission to serve patients.

This is an unresolved issue, as far as I’m concerned right now, and the No Surprises Act, which is one of the defining pieces of legislation here regarding the relationship between payers, health plans, and providers and clinicians, to me, has left much unresolved. For out-of-network service and then for in-network service, there’s tremendous tension, so that has to be worked through.

Second, I’ve mentioned the stresses of cost, and clearly the OBBBA, within a few years, will present significant problems, I think, because of the unprecedented reductions to Medicaid. One, it’s going to lead to uninsurance for many people who are covered today by Medicaid. And the facts are the facts: Many of those people will get sick, will have health care needs, and if they can’t get coverage other places, then in many cases, the hospital will become the residual, the emergency [department] will become more of a residual entry point, rather than appropriate primary care in many cases, and that’s going to add uncompensated costs, which will cause a domino effect in terms of how we finance that through managed care. Second, the OBBBA includes tremendous reductions a few years off in funding arrangements that have really brought Medicaid up above Medicare in many states across the country. Obviously, Medicaid varies from state to state, so payment is not identical, but actually, over the last 5 years, Medicaid has become, not necessarily covering all the costs, but become a contributor to making the world go round in terms of hospitals particularly, but all the other facilities and organizations that provide services to Medicaid recipients. That’s going to be stressed significantly, and that gets back to this other domino effect, because those people are going to still need care. They’re going to have expectations that the system is going to meet their needs. And we’ll have to see what the effect of that is. Third, this legislation and recent action by the administration’s Medicare-Medicaid arm, CMS, have placed significant stresses through their application of program integrity—not to say that there wasn’t need for reforms in the ACA marketplaces, exchange marketplaces—but there’s tremendous pressure now there, which is going to lead to more uninsurance. There are going to be more obstacles. There are people who either shouldn’t be getting a level of subsidy or shouldn’t be in that marketplace coverage, but I’m extremely worried that in order to determine eligibility there, they have created obstacles that will mean many deserving, eligible people will not get signed up. That will have an adverse effect, as I’ve described, on the risk pool, and make that that coverage more expensive, and managed care plans at the premium levels that are going to be required may decide that it’s not a market they want to be in. So, I think you’re going to have, on the member side, more difficulty to stay covered, and on the plan side, pressure to determine whether they even want to stay in the market. That I think is going to cause more stress.

And then, as I look forward generally, I think the issue of cost and appropriateness of care is going to be a major part of the landscape. We already lack sufficient primary care caregivers, and the stresses that I’m talking about will create more problems for primary care. The question of the care setting that Americans seek that initial care in is going to be a big issue, because the better primary care we have, the more we’re going to keep people well and out of the hospital or out of the emergency department. As we face this loss of insurance coverage and the continuing increasing costs, more [plans] having broader cost sharing, even if people are covered, I do worry about that and the paradox that as they make all these pullbacks and save all this money from programs, they actually could have many patients seeking more expensive care than they should, considering whatever their conditions are.

On the positive side, whether it’s [through] AI [artificial intelligence] or recent advances in all kinds of treatments that are there or right over the rainbow, I think the capacity to keep people well and to save the lives of millions is going to increase. My question is, how can we assure that they’re going to have access to that? And my other concern is, can all that be done in a way that doesn’t add even more health care costs?

AJMC: Finally, how can hospitals help advance the movement toward value-based care?

KAHN: I think that generally, [though] I can’t speak for all hospitals or hospital systems, there is a broad recognition that we have to be every day all about the outcomes, and that we have, through the public programs and through the contracts with health plans, the proliferation of all kinds of measurement and accountability now that’s developed over the past few decades that wasn’t there before. Beyond that, we’re not far off from analytic capacity with these complex electronic health records that I think probably have not been all that useful. We’re on the cusp of being able to manipulate and use data in ways that we never dreamed before. I look at appropriate value-based purchasing simply as a feedback loop, and the question is, [are] there sufficient data there? Are we going to have a future from a hospital standpoint where we have a seamless and less expensive feedback loop in terms of the accountability of the data, or are managed care and value-based purchasing simply cover for figuring out how to pay less for the same service? I think that goes back to the tension that I described between managed care and health plans and providers and clinicians, and I don’t know how all that’s going to get resolved yet. I’m optimistic about the capacity to understand what we’re doing on an aggregate level in hospitals regarding outcomes that should be the basis of value-based purchasing. But at the same time, I’m very concerned that all the mechanisms that are there to implement value-based purchasing from the health plan standpoint simply end up being mechanisms to limit payment or avoid payment, rather than to tie payment to better outcomes. I think we’re right in the midst of that, and I don’t know how all that’s going to be resolved.

I worry that a few years from now, if the OBBBA goes into effect and there are other stresses on the system that happen over the next few years to try to push down health care costs by pushing down the resources available or pushing down the coverage, that it’s going to make it much more difficult to implement real value-based purchasing, because from the hospital side, from the clinician side, it’s just going to be a daily [struggle for] survival of how you patch together enough money to just keep the emergency departments open so you can serve the patients who are coming there who really should have been in primary care and should have been covered.

REFERENCES

1. Enthoven AC. Health Plan: The Only Practical Solution to the Soaring Cost of Medical Care. Addison Wesley Publishing Company; 1980.

2. Joint public/private approach may help uninsured. New York Times. January 10, 2001. Accessed July 9, 2025. https://www.nytimes.com/2001/01/10/health/joint-publicprivate-approach-may-help-uninsured.html

3. Institute of Medicine. Crossing the Quality Chasm: A New Health System for the 21st Century. The National Academies Press; 2001. doi:10.17226/10027

4. Institute of Medicine. To Err Is Human: Building a Safer Health System. The National Academies Press; 2000. doi:10.17226/9728