Journal of Economic Perspectives
ISSN 0895-3309 (Print) | ISSN 1944-7965 (Online)
Understanding Medicaid Managed Care: The Procured Competition Model
Journal of Economic Perspectives
(pp. 171–94)
(Complimentary)
Abstract
Medicaid is one of the largest public programs in the United States—providing health insurance to over 75 million low-income Americans—and over three quarters of its enrollees receive care via private "managed care" insurers. In this article, we make three central points about the economics of contracting out Medicaid to private insurers. First, the empirical evidence on Medicaid privatization is mixed: contracting out has not meaningfully reduced public costs or improved quality of care. Second, we propose a framework, which we call "procured competition," to describe the unique structure of Medicaid managed care as a hybrid of public procurement and regulated competition. Third, we discuss the key policy levers across procurement, competition, and consumer choice in this model. Throughout, we highlight open research questions, arguing that the enormous variation in how states design these programs—combined with limited evidence on what works—represents a promising area for high-impact scholarship.Citation
Shepard, Mark, and Jacob Wallace. 2026. "Understanding Medicaid Managed Care: The Procured Competition Model." Journal of Economic Perspectives 40 (2): 171–94. DOI: 10.1257/jep.20251475Additional Materials
JEL Classification
- H75 State and Local Government: Health; Education; Welfare; Public Pensions
- I11 Analysis of Health Care Markets
- I13 Health Insurance, Public and Private
- I18 Health: Government Policy; Regulation; Public Health
- I38 Welfare, Well-Being, and Poverty: Government Programs; Provision and Effects of Welfare Programs