Adverse Selection and Network Design Under Regulated Plan Prices: Evidence from Medicaid

Amanda Kreider, Timothy Layton, Mark Shepard and Jacob Wallace

No 30719, NBER Working Papers from National Bureau of Economic Research, Inc

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.

JEL-codes: H51 I11 I13 (search for similar items in EconPapers)
Date: 2022-12
New Economics Papers: this item is included in nep-cta and nep-reg
Note: EH IO PE
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Published as Amanda Kreider & Timothy J. Layton & Mark Shepard & Jacob Wallace, 2024. "Adverse selection and network design under regulated plan prices: Evidence from Medicaid," Journal of Health Economics, .

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Journal Article: Adverse selection and network design under regulated plan prices: Evidence from Medicaid (2024)
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