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

Michael Geruso, Timothy Layton and Jacob Wallace

No 27762, NBER Working Papers from National Bureau of Economic Research, Inc

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 generates 30% lower spending—driven by differences in quantity—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: H75 I11 I13 (search for similar items in EconPapers)
Date: 2020-08
New Economics Papers: this item is included in nep-hea, nep-ias and nep-pbe
Note: EH IO PE
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Published as Michael Geruso & Timothy J. Layton & Jacob Wallace, 2023. "What Difference Does a Health Plan Make? Evidence from Random Plan Assignment in Medicaid," American Economic Journal: Applied Economics, vol 15(3), pages 341-379.

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