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

83 Pages Posted: 31 Aug 2020 Last revised: 11 May 2022

See all articles by Michael Geruso

Michael Geruso

University of Texas at Austin; National Bureau of Economic Research (NBER)

Timothy J. Layton

Harvard Medical School - Department of Health Care Policy; National Bureau of Economic Research

Jacob Wallace

Yale University - School of Public Health

Date Written: August 2020

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.

Suggested Citation

Geruso, Michael and Layton, Timothy J. and Wallace, Jacob, What Difference Does a Health Plan Make? Evidence from Random Plan Assignment in Medicaid (August 2020). NBER Working Paper No. w27762, Available at SSRN: https://ssrn.com/abstract=3683646

Michael Geruso (Contact Author)

University of Texas at Austin ( email )

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
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Timothy J. Layton

Harvard Medical School - Department of Health Care Policy ( email )

180 Longwood Ave
Boston, MA 02115
United States

National Bureau of Economic Research ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Jacob Wallace

Yale University - School of Public Health ( email )

PO Box 208034
60 College Street
New Haven, CT 06520-8034
United States

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