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.
Zoom link: https://princeton.zoom.us/j/93403419099