Does contracting out increase the efficiency of government programs? Evidence from Medicaid HMOs
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.
(This abstract was borrowed from another version of this item.)
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
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.:
- Joseph P. Newhouse, 1996. "Reimbursing Health Plans and Health Providers: Efficiency in Production versus Selection," Journal of Economic Literature, American Economic Association, vol. 34(3), pages 1236-1263, September.
- David M. Cutler & Mark McClellan & Joseph P. Newhouse, 2000. "How Does Managed Care Do It?," RAND Journal of Economics, The RAND Corporation, vol. 31(3), pages 526-548, Autumn.
- Andrei Shleifer, 1998.
"State Versus Private Ownership,"
NBER Working Papers
6665, National Bureau of Economic Research, Inc.
- Andrei Shleifer, 1998. "State Versus Private Ownership," Harvard Institute of Economic Research Working Papers 1841, Harvard - Institute of Economic Research.
- Baker, Laurence C., 1997. "The effect of HMOs on fee-for-service health care expenditures: Evidence from Medicare," Journal of Health Economics, Elsevier, vol. 16(4), pages 453-481, August.
- 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.
- Leibowitz, Arleen & Buchanan, Joan L. & Mann, Joyce, 1992. "A randomized trial to evaluate the effectiveness of a Medicaid HMO," Journal of Health Economics, Elsevier, vol. 11(3), pages 235-257, October.
- Leemore Dafny & Jonathan Gruber, 2000. "Does Public Insurance Improve the Efficiency of Medical Care? Medicaid Expansions and Child Hospitalizations," NBER Working Papers 7555, National Bureau of Economic Research, Inc.
- Randall P. Ellis & Thomas G. McGuire, 1993. "Supply-Side and Demand-Side Cost Sharing in Health Care," Journal of Economic Perspectives, American Economic Association, vol. 7(4), pages 135-151, Fall.
- Snyder, Christopher M., 1998. "Why do larger buyers pay lower prices? Intense supplier competition," Economics Letters, Elsevier, vol. 58(2), pages 205-209, February.
- Janet Currie & John Fahr, 2000.
"Medicaid Managed Care: Effects on Children's Medicaid Coverage and Utilization,"
JCPR Working Papers
156, Northwestern University/University of Chicago Joint Center for Poverty Research.
- Currie, Janet & Fahr, John, 2005. "Medicaid managed care: effects on children's Medicaid coverage and utilization," Journal of Public Economics, Elsevier, vol. 89(1), pages 85-108, January.
- Janet Currie & John Fahr, 2002. "Medicaid Managed Care: Effects on Children's Medicaid Coverage and Utilization," NBER Working Papers 8812, National Bureau of Economic Research, Inc.
- Lars A. Stole & Jeffrey Zwiebel, 1996. "Intra-firm Bargaining under Non-binding Contracts," Review of Economic Studies, Oxford University Press, vol. 63(3), pages 375-410.
- Mark G. Duggan, 2000.
"Hospital Ownership and Public Medical Spending,"
The Quarterly Journal of Economics,
Oxford University Press, vol. 115(4), pages 1343-1373.
- Levinson, Arik & Ullman, Frank, 1998. "Medicaid managed care and infant health," Journal of Health Economics, Elsevier, vol. 17(3), pages 351-368, June.
- Duggan, Mark, 2004.
"Does contracting out increase the efficiency of government programs? Evidence from Medicaid HMOs,"
Journal of Public Economics,
Elsevier, vol. 88(12), pages 2549-2572, December.
- Mark Duggan, 2002. "Does Contracting Out Increase the Efficiency of Government Programs? Evidence from Medicaid HMOs," NBER Working Papers 9091, National Bureau of Economic Research, Inc.
- McClellan, Mark & Cutler, David & Newhous, Joseph P., 2000. "How Does Managed Care Do It?," Scholarly Articles 2643884, Harvard University Department of Economics.
- Robert Kaestner & Lisa Dubay & Genevieve Kenney, 2002. "Medicaid Managed Care and Infant Health: A National Evaluation," NBER Working Papers 8936, National Bureau of Economic Research, Inc.
When requesting a correction, please mention this item's handle: RePEc:eee:pubeco:v:88:y:2004:i:12:p:2549-2572. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Shamier, Wendy)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.