What Does a Provider Network Do? Evidence from Random Assignment in Medicaid Managed Care
- American Economic Journal: Economic Policy (Forthcoming)
Leveraging the random assignment of over 50,000 Medicaid enrollees
in New York, I present causal evidence that narrower networks
are a blunt instrument for reducing health care spending.
While narrower networks constrain spending, they do so by generating
hassle costs that reduce quantity, with modest effects on
prices paid to providers. Enrollees assigned to narrower networks
use fewer of both needed and unneeded services, and are less satisfied
in their plans. Using my causal estimates to construct counterfactuals,
I identify an alternative assignment policy that reduces
spending without harming satisfaction by matching consumers with
narrower networks that include their providers.
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