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Does service-level spending show evidence of selection across health plan types?

  • Shenyi Jiang

    (Department of Economics, Boston University)

  • Randall P. Ellis


    (Department of Economics, Boston University)

  • Tzu-chun Kuo

    (DxCG, Inc.)

The paper examines whether patterns of service level spending in capitated managed care plans differ from those in traditional non-managed care health plans. We apply the service selection model of Ellis and McGuire (2007) to recent, highly disaggregated commercial insurance data from Medstat MarketScan. Rankings of services by selection incentives give largely the same rankings as the EM results for Medicare. We next calculate selection indices separately for four types of health plans: non-managed care comprehensive, preferred provider organization (PPO) plans, managed care point of service (POS) and health maintenance organization (HMO) plans. Our results imply high correlations and similar rankings of selection indices across plan types. We then test whether services predicted to be underprovided indeed have less than average rates of spending by managed care plans, while non-managed care plans have above average rates of spending. Stronger evidence of selection distortions among the four plan types is found when decomposing spending by type of service and provider specialty than by place of service.

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Paper provided by Boston University - Department of Economics in its series Boston University - Department of Economics - Working Papers Series with number wp2007-43.

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Length: 26
Date of creation: Dec 2007
Date of revision:
Handle: RePEc:bos:wpaper:wp2007-43
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  1. Randall P. Ellis & Thomas G. McGuire, 2006. "Predictability and Predictiveness in Health Care Spending," Boston University - Department of Economics - Working Papers Series WP2006-001, Boston University - Department of Economics.
  2. Karen Eggleston & Anupa Bir, 2009. "Measuring Selection Incentives in Managed Care: Evidence From the Massachusetts State Employee Insurance Program," Journal of Risk & Insurance, The American Risk and Insurance Association, vol. 76(1), pages 159-175.
  3. Partha Deb & Chenghui Li & Pravin K. Trivedi & David M. Zimmer, 2006. "The effect of managed care on use of health care services: results from two contemporaneous household surveys," Health Economics, John Wiley & Sons, Ltd., vol. 15(7), pages 743-760.
  4. Frank, Richard G. & Glazer, Jacob & McGuire, Thomas G., 2000. "Measuring adverse selection in managed health care," Journal of Health Economics, Elsevier, vol. 19(6), pages 829-854, November.
  5. Arlene Ash & Randall P. Ellis & Gregory Pope & John Ayanian & David Bates & Helen Burstin & Lisa Iezzoni & Elizabeth McKay & Wei Yu, 2000. "Using Diagnoses to Describe Populations and Predict Costs," Papers 0099, Boston University - Industry Studies Programme.
  6. Cao, Zhun & McGuire, Thomas G., 2003. "Service-level selection by HMOs in Medicare," Journal of Health Economics, Elsevier, vol. 22(6), pages 915-931, November.
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