 Medicaid program choice, inertia and adverse selectionJames Marton, Aaron Yelowitz and Jeffery C. Talbert Journal of Health Economics, 2017, vol. 56, issue C, 292-316 Abstract: In 2012, Kentucky implemented Medicaid managed care statewide, auto-assigned enrollees to three plans, and allowed switching. Using administrative data, we find that the state’s auto-assignment algorithm most heavily weighted cost-minimization and plan balancing, and placed little weight on the quality of the enrollee-plan match. Immobility − apparently driven by health plan inertia − contributed to the success of the cost-minimization strategy, as more than half of enrollees auto-assigned to even the lowest quality plans did not opt-out. High-cost enrollees were more likely to opt-out of their auto-assigned plan, creating adverse selection. The plan with arguably the highest quality incurred the largest initial profit margin reduction due to adverse selection prior to risk adjustment, as it attracted a disproportionate share of high-cost enrollees. The presence of such selection, caused by differential degrees of mobility, raises concerns about the long run viability of the Medicaid managed care market without such risk adjustment. Keywords: Medicaid; Managed care; Inertia; Adverse selection (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:jhecon:v:56:y:2017:i:c:p:292-316 DOI: 10.1016/j.jhealeco.2017.04.006 Access Statistics for this article Journal of Health Economics is currently edited by J. P. Newhouse, A. J. Culyer, R. Frank, K. Claxton and T. McGuire More articles in Journal of Health Economics from Elsevier |
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