What Difference Does a Health Plan Make? Evidence from Random Plan Assignment in Medicaid
American Economic Journal: Applied Economics
vol. 15,
no. 3, July 2023
(pp. 341-79)
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.Citation
Geruso, Michael, Timothy J. Layton, and Jacob Wallace. 2023. "What Difference Does a Health Plan Make? Evidence from Random Plan Assignment in Medicaid." American Economic Journal: Applied Economics, 15 (3): 341-79. DOI: 10.1257/app.20210843Additional Materials
JEL Classification
- G22 Insurance; Insurance Companies; Actuarial Studies
- H51 National Government Expenditures and Health
- I13 Health Insurance, Public and Private
- I18 Health: Government Policy; Regulation; Public Health
- I38 Welfare, Well-Being, and Poverty: Government Programs; Provision and Effects of Welfare Programs
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