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The Effects of Managed Care and Patient Demand on Public Health Insurance

Paper Session

Sunday, Jan. 8, 2017 1:00 PM – 3:00 PM

Hyatt Regency Chicago, Plaza A
Hosted By: Health Economics Research Organization & American Economic Association
  • Chair: Donald Yett, University of Southern California

Are All Managed Care Plans Created Equal: Evidence From Random Plan Assignment in Medicaid Managed Care

Michael Geruso
,
University of Texas-Austin
Timothy Layton
,
Harvard University
Jacob Wallace
,
Harvard University

Abstract

Almost all health insurance contracts in the US today, public or private, contain some feature of managed care, though what “managed care” means can vary considerably, ranging from supply-side tools like selective contracting and upstream provider price negotiation to demand-side tools like cost-sharing and patient gatekeeping. In this paper, we open the black box of managed care and study how health plans competing in the same market may vary in their approaches---and ultimately in their ability---to constrain healthcare spending. We examine this issue in the context of Medicaid Managed Care in New York City, in which some beneficiaries make active plan choices across a large number of privately-operated managed care plans, and other beneficiaries are randomly auto-assigned to the same set of plans. We exploit the random assignment to identify plan effects that are purged of selection, which we show would be an important confounder in this setting. Our findings reveal significant variation in both “production” and “selection” across ostensibly similar managed care plans competing in the same local market. Specifically, we find that plans differ in spending on identical beneficiaries by as much as 33%. These differences are even larger for enrollees with high baseline spending. We show that differences in negotiated upstream prices explain only a fraction of this difference, and that plan characteristics significantly affect the healthcare consumption of enrollees. Our findings are important for the continued reform of healthcare, in which managed care is is often touted as the single most important tool for constraining healthcare spending growth.

Health Care Spending and Utilization in Public and Private Medicare

Vilsa Curto
,
Stanford University
Liran Einav
,
Stanford University
Jon Levin
,
Stanford University
Jay Bhattacharya
,
Stanford University

Abstract

We compare healthcare spending in public and private Medicare using newly available private claims data from Medicare Advantage (MA) insurers. We fi…nd that healthcare spending is 27 percent lower in MA than for individuals in the same county and same risk score enrolled in public, traditional Medicare (TM). Spending differences between MA and TM are similar across sub-populations of enrollees and sub-categories of care. They primarily reflect differences in healthcare utilization. Average prices for an admission to a given hospital for a given diagnosis are virtually identical in MA and TM. We present evidence consistent with MA employing various types of utilization management and encouraging substitution to relatively less expensive modes of care, such as use of primary care instead of specialists, and outpatient rather than inpatient surgery. Geographic variation in healthcare spending is larger in MA than in TM, although geographic variation in hospital prices is lower in MA than in TM.

The Value of Health Insurance for Low-Income Adults: Evidence from Massachusetts

Amy Finkelstein
,
Massachusetts Institute of Technology
Nathaniel Hendren
,
Harvard University
Mark Shepard
,
Harvard University

Abstract

Using administrative data from Massachusetts' 2011 health insurance exchange, we analyze demand and costs of health insurance for low-income adults. We estimate that at least 70 percent of the population values the insurance at substantially less than the cost to the insurer of providing it. For example, the median individual is willing to pay roughly $100 per month, but faces an average cost imposed by those with higher willingness to pay of $420 per month. Our findings suggest that even generous public subsidies are unlikely to generate substantial take-up of insurance by low-income individuals. We explore the implications of our findings for the normative question of the desirability of subsidies for health insurance for low income individuals.
Discussant(s)
Jonathan Kolstad
,
University of California-Berkeley
James B. Rebitzer
,
Boston University
Jeffery Clemens
,
University of California-San Diego
JEL Classifications
  • I1 - Health