American Economic Journal: Applied Economics
no. 3, July 2023
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.
Geruso, Michael, Timothy J. Layton, and Jacob Wallace.
"What Difference Does a Health Plan Make? Evidence from Random Plan Assignment in Medicaid."
American Economic Journal: Applied Economics,
Insurance; Insurance Companies; Actuarial Studies
National Government Expenditures and Health
Health Insurance, Public and Private
Health: Government Policy; Regulation; Public Health
Welfare, Well-Being, and Poverty: Government Programs; Provision and Effects of Welfare Programs