Adverse Selection and Network Design Under Regulated Plan Prices: Evidence from Medicaid / Amanda R. Kreider, Timothy J. Layton, Mark Shepard, Jacob Wallace.

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Kreider, Amanda R

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TextSeries: Working Paper Series (National Bureau of Economic Research) ; no. w30719.Publication details: Cambridge, Mass. National Bureau of Economic Research 2022.Description: 1 online resource: illustrations (black and white)Subject(s):

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Abstract: Health plans for the poor increasingly limit access to specialty hospitals. We investigate the role of adverse selection in generating this equilibrium among private plans in Medicaid. Studying a network change, we find that covering a top cancer hospital causes severe adverse selection, increasing demand for a plan by 50% among enrollees with cancer versus no impact for others. Medicaid's fixed insurer payments make offsetting this selection, and the contract distortions it induces, challenging, requiring either infeasibly high payment rates or near-perfect risk adjustment. By contrast, a small explicit bonus for covering the hospital is sufficient to make coverage profitable.

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Item type	Home library	Collection	Call number	Status	Date due	Barcode	Item holds
Working Paper	Biblioteca Digital	Colección NBER	nber w30719 (Browse shelf(Opens below))	Not For Loan

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December 2022.

Health plans for the poor increasingly limit access to specialty hospitals. We investigate the role of adverse selection in generating this equilibrium among private plans in Medicaid. Studying a network change, we find that covering a top cancer hospital causes severe adverse selection, increasing demand for a plan by 50% among enrollees with cancer versus no impact for others. Medicaid's fixed insurer payments make offsetting this selection, and the contract distortions it induces, challenging, requiring either infeasibly high payment rates or near-perfect risk adjustment. By contrast, a small explicit bonus for covering the hospital is sufficient to make coverage profitable.