Health Care Rationing in Public Insurance Programs: Evidence from Medicaid
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Abstract
We study two mechanisms used by public health insurance programs for rationing health care: outsourcing to private managed care plans and quantity limits for prescription drugs. Leveraging a natural experiment in Texas's Medicaid program, we find that the shift to managed care and the relaxation of a strict drug cap increased access to high-value drugs and outpatient services and reduced avoidable hospitalizations. Program costs increased significantly, indicating a trade-off between cost and quality. We provide suggestive evidence attributing the reduction in hospitalizations to the relaxation of the drug cap and much of the spending increase to the shift to managed care.Citation
Layton, Timothy J., Nicole Maestas, Daniel Prinz, and Boris Vabson. 2022. "Health Care Rationing in Public Insurance Programs: Evidence from Medicaid." American Economic Journal: Economic Policy, 14 (4): 397-431. DOI: 10.1257/pol.20190628Additional Materials
JEL Classification
- G22 Insurance; Insurance Companies; Actuarial Studies
- H75 State and Local Government: Health; Education; Welfare; Public Pensions
- 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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