State governments contract with health maintenance organizations (HMOs) to coordinate medical care for nearly 20 million Medicaid recipients. Identifying the causal effect of HMO enrollment on government spending and health care quality is difficult if, as is often the case, recipients have the option to enroll in a plan. To estimate the average effect of HMO enrollment, this paper exploits county-level mandates introduced during the last several years in the state of California that required most Medicaid recipients to enroll in a managed care plan. The empirical results demonstrate that the resulting switch from fee-for-service to managed care was associated with a substantial increase in government spending but no observable improvement in health outcomes, thus apparently reducing the efficiency of this large government program. The findings cast doubt on the hypothesis that HMO contracting has reduced the strain on government budgets.
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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number
9091.
Length: Date of creation: Aug 2002 Date of revision: Handle: RePEc:nbr:nberwo:9091
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Find related papers by JEL classification: H51 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Health H57 - Public Economics - - National Government Expenditures and Related Policies - - - Procurement
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References listed on IDEAS Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
Glied, Sherry, 2000.
"Managed care,"
Handbook of Health Economics,
in: A. J. Culyer & J. P. Newhouse (ed.), Handbook of Health Economics, edition 1, volume 1, chapter 13, pages 707-753
Elsevier.
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