Are All Managed Care Plans Created Equal? Evidence from Random Plan Assignment in Medicaid

Mon, Apr 5, 2021, 12:00 pm to 1:15 pm
Students, Faculty & Fellows only
Center for Health and Wellbeing

Abstract: How much does a plan matter for constraining healthcare costs and other outcomes—beyond its widely-studied role in setting cost-sharing parameters like deductibles and coinsurance? Exploiting random assignment of some Medicaid beneficiaries to competing managed care plans, we identify plan-specific effects on healthcare spending in an environment where plans have identical cost-sharing. We find that auto-assignment to the lowest-spending plan generates 30% lower utilization than if the same enrollee were assigned to the highest-spending plan. 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. Our findings suggest that supply-side healthcare interventions offer an escape from the classic insurance trade-off between financial risk protection and moral hazard, but cannot escape a trade-off between program cost and quality—at least in this setting, where we show that negotiated provider prices play almost no role in explaining across-plan spending differences.

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