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Health Care Rationing in Public Insurance Programs: Evidence from Medicaid

Author

Listed:
  • Timothy J. Layton
  • Nicole Maestas
  • Daniel Prinz
  • Boris Vabson

Abstract

We study two mechanisms used by public health insurance programs for rationing health care: outsourcing to private managed care plans and quantity limits for prescription drugs. Leveraging a natural experiment in Texas's Medicaid program, we find that the shift to managed care and the relaxation of a strict drug cap increased access to high-value drugs and outpatient services and reduced avoidable hospitalizations. Program costs increased significantly, indicating a trade-off between cost and quality. We provide suggestive evidence attributing the reduction in hospitalizations to the relaxation of the drug cap and much of the spending increase to the shift to managed care.

Suggested Citation

  • Timothy J. Layton & Nicole Maestas & Daniel Prinz & Boris Vabson, 2022. "Health Care Rationing in Public Insurance Programs: Evidence from Medicaid," American Economic Journal: Economic Policy, American Economic Association, vol. 14(4), pages 397-431, November.
    • Handle: RePEc:aea:aejpol:v:14:y:2022:i:4:p:397-431
    DOI: 10.1257/pol.20190628
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    More about this item

    JEL classification:

    • G22 - Financial Economics - - Financial Institutions and Services - - - Insurance; Insurance Companies; Actuarial Studies
    • H75 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Government: Health, Education, and Welfare
    • I13 - Health, Education, and Welfare - - Health - - - Health Insurance, Public and Private
    • I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health
    • I38 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Government Programs; Provision and Effects of Welfare Programs

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