Year: 2023
Type: article
Abstract: Exploiting the random assignment of Medicaid beneficiaries to managed care plans, we find substantial plan-specific spending effects despite plans having identical cost sharing. Enrollment in the lowest-spending plan reduces spending by at least 25 percent—primarily through quantity reductions—relative to enrollment in the highest-spending plan. Rather than reducing “wasteful” spending, lower-spending plans broadly reduce medical service provision—including the provision of low-cost, high-value care—and worsen beneficiary satisfaction and health. Consumer demand follows spending: a 10 percent increase in plan-specific spending is associated with a 40 percent increase in market share. These facts have implications for the government’s contracting problem and program cost growth. (JEL G22, H51, I13, I18, I38)
DOI: 10.1257/app.20210843
Language: English
Subfield: Economics and Econometrics
Domain: Social Sciences
Open Access status: green
Funders: National Science Foundation, New York State Department of Health, Rice University, University of Texas at Austin, Laura and John Arnold Foundation, Agency for Healthcare Research and Quality, Booth School of Business, University of Chicago, National Institute on Aging, National Institute of Mental Health, Eunice Kennedy Shriver National Institute of Child Health and Human Development
OpenAlex ID: W4382585088