Rent-Seeking in Medicaid Managed Care

Abstract

The transition of Medicaid administration from government toward private companies, termed managed care organizations, has been driven in part by a desire to reduce Medicaid spending. Despite the stated goal of reducing spending, little peer reviewed evidence exists which finds real savings from privatization in Medicaid, or Medicaid managed care. Literature on the question of savings in Medicaid managed care tends to focus on quantitative analyses of savings – do they exist? – or programmatic issues like the relative health status of Medicaid recipients in different populations, generosity of benefits, or to what extent utilization reductions might be accomplished in managed care. The aim of this paper is to offer an alternative perspective: that privatization in Medicaid, instead of or perhaps in addition to introducing market forces and competition to yield efficiency and savings, incentivizes rent-seeking behavior on the part of managed care organizations.

Keywords: Medicaid, managed care, rent seeking