Are All Managed Care Plans Created Equal? Evidence from Random Plan Assignment in Medicaid / Michael Geruso, Timothy J. Layton, Jacob Wallace.

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Geruso, Michael

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Material type: Text

TextSeries: Working Paper Series (National Bureau of Economic Research) ; no. w27762.Publication details: Cambridge, Mass. National Bureau of Economic Research 2020.Description: 1 online resource: illustrations (black and white)Subject(s):

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Abstract: Exploiting random assignment of Medicaid beneficiaries to managed care plans, we identify plan-specific effects on healthcare utilization. Auto-assignment to the lowest-spending plan generates 30% lower spending than if the same enrollee were assigned to the highest-spending plan, despite identical cost-sharing. Effects via quantities, rather than differences in negotiated prices, explain these patterns. Rather than reducing "wasteful" spending, low-spending plans cause broad reductions in the use of medical services--including low-cost, high-value care--and worsen beneficiary satisfaction and health. Supply side tools circumvent the classic trade-off between financial risk protection and moral hazard, but give rise instead to a cost/quality trade-off.

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August 2020.

Exploiting random assignment of Medicaid beneficiaries to managed care plans, we identify plan-specific effects on healthcare utilization. Auto-assignment to the lowest-spending plan generates 30% lower spending than if the same enrollee were assigned to the highest-spending plan, despite identical cost-sharing. Effects via quantities, rather than differences in negotiated prices, explain these patterns. Rather than reducing "wasteful" spending, low-spending plans cause broad reductions in the use of medical services--including low-cost, high-value care--and worsen beneficiary satisfaction and health. Supply side tools circumvent the classic trade-off between financial risk protection and moral hazard, but give rise instead to a cost/quality trade-off.