What Difference Does a Health Plan Make? Evidence from Random Plan Assignment in Medicaid

Michael Geruso, Timothy Layton and Jacob Wallace

American Economic Journal: Applied Economics, 2023, vol. 15, issue 3, 341-79

Abstract: Exploiting the random assignment of Medicaid beneficiaries to managed care plans, we find substantial plan-specific spending effects despite plans having identical cost sharing. Enrollment in the lowest-spending plan reduces spending by at least 25 percent—primarily through quantity reductions—relative to enrollment in the highest-spending plan. Rather than reducing "wasteful" spending, lower-spending plans broadly reduce medical service provision—including the provision of low-cost, high-value care—and worsen beneficiary satisfaction and health. Consumer demand follows spending: a 10 percent increase in plan-specific spending is associated with a 40 percent increase in market share. These facts have implications for the government's contracting problem and program cost growth.

JEL-codes: G22 H51 I13 I18 I38 (search for similar items in EconPapers)
Date: 2023
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Citations: View citations in EconPapers (1)

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Working Paper: What Difference Does a Health Plan Make? Evidence from Random Plan Assignment in Medicaid (2020)
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DOI: 10.1257/app.20210843

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