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Does the quality of care in Medicaid MCOs vary with the form of physician compensation?


  • Troy Quast

    (Department of Economics & International Business, Sam Houston State University, Huntsville, TX, USA)

  • David E. M. Sappington

    (Department of Economics, University of Florida, USA)

  • Elizabeth Shenkman

    (Department of Epidemiology, Health Policy Research and Pediatrics, University of Florida, USA)


A growing fraction of Medicaid participants are enrolled in managed care organizations (MCOs). MCOs contract with primary care physicians (PCPs) to provide health-care services to Medicaid enrollees. The PCPs are generally compensated either via fee-for-service (FFS) or via capitated arrangements. This paper investigates whether the quality of care that Medicaid enrollees receive varies with the means by which PCPs are compensated. Using data for all Medicaid MCO enrollees in a large state, we find that enrollees in MCOs that pay their PCPs exclusively via FFS arrangements are more likely to receive services for which the PCPs receive additional compensation. These enrollees also are less likely to receive services for which the PCPs do not receive additional compensation. These findings suggest that financial incentives may influence the behavior of PCPs in Medicaid MCOs, and thus the quality of the health care received by Medicaid participants enrolled in MCOs. Copyright © 2007 John Wiley & Sons, Ltd.

Suggested Citation

  • Troy Quast & David E. M. Sappington & Elizabeth Shenkman, 2008. "Does the quality of care in Medicaid MCOs vary with the form of physician compensation?," Health Economics, John Wiley & Sons, Ltd., vol. 17(4), pages 545-550.
  • Handle: RePEc:wly:hlthec:v:17:y:2008:i:4:p:545-550
    DOI: 10.1002/hec.1264

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    References listed on IDEAS

    1. Moulton, Brent R, 1990. "An Illustration of a Pitfall in Estimating the Effects of Aggregate Variables on Micro Unit," The Review of Economics and Statistics, MIT Press, vol. 72(2), pages 334-338, May.
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    Cited by:

    1. Pierre Thomas Léger & Erin Strumpf, 2010. "Système de paiement des médecins : bref de politique," CIRANO Project Reports 2010rp-12, CIRANO.
    2. David Bardey & Helmuth Cremer & Jean-Marie Lozachmeur, 2014. "Competition in Two-Sided Markets with Common Network Externalities," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 44(4), pages 327-345, June.
    3. Marianne P. Bitler & Madeline Zavodny, 2014. "Medicaid: A Review of the Literature," NBER Working Papers 20169, National Bureau of Economic Research, Inc.

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