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Has the Shift to Managed Care Reduced Medicaid Expenditures? Evidence from State and Local-Level Mandates

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  • Mark Duggan
  • Tamara Hayford

Abstract

From 1991 to 2003, the fraction of Medicaid recipients enrolled in HMOs and other forms of Medicaid managed care (MMC) increased from 11 percent to 58 percent. This increase was largely driven by state and local mandates that required most Medicaid recipients to enroll in an MMC plan. Theoretically, it is ambiguous whether the shift from fee-for-service into managed care would lead to an increase or a reduction in Medicaid spending. This paper investigates this effect using a data set on state and local level MMC mandates and detailed data from CMS on state Medicaid expenditures. The findings suggest that shifting Medicaid recipients from fee-for-service into MMC did not reduce Medicaid spending in the typical state. However, the effects of the shift varied significantly across states as a function of the generosity of the state's baseline Medicaid provider reimbursement rates. These results are consistent with recent research on managed care among the privately insured, which finds that HMOs and other forms of managed care achieve their savings largely through reduced prices rather than lower quantities.

Suggested Citation

  • Mark Duggan & Tamara Hayford, 2011. "Has the Shift to Managed Care Reduced Medicaid Expenditures? Evidence from State and Local-Level Mandates," NBER Working Papers 17236, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:17236
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    Cited by:

    1. Chorniy, Anna & Currie, Janet & Sonchak, Lyudmyla, 2018. "Exploding asthma and ADHD caseloads: The role of medicaid managed care," Journal of Health Economics, Elsevier, vol. 60(C), pages 1-15.
    2. Lesley J. Turner, 2015. "The Effect of Medicaid Policies on the Diagnosis and Treatment of Children's Mental Health Problems in Primary Care," Health Economics, John Wiley & Sons, Ltd., vol. 24(2), pages 142-157, February.
    3. Victoria Perez, 2018. "Effect of privatized managed care on public insurance spending and generosity: Evidence from Medicaid," Health Economics, John Wiley & Sons, Ltd., vol. 27(3), pages 557-575, March.
    4. Lindsey Woodworth, 2016. "A Leak in the Lifeboat: The effect of Medicaid managed care on the vitality of safety-net hospitals," Journal of Regulatory Economics, Springer, vol. 50(3), pages 251-270, December.
    5. Koch, Thomas G., 2013. "Using RD design to understand heterogeneity in health insurance crowd-out," Journal of Health Economics, Elsevier, vol. 32(3), pages 599-611.
    6. Lukas Kauer, 2017. "Long‐term Effects of Managed Care," Health Economics, John Wiley & Sons, Ltd., vol. 26(10), pages 1210-1223, October.
    7. James Marton & Aaron Yelowitz, 2015. "Health insurance generosity and conditional coverage: Evidence from medicaid managed care in Kentucky," Southern Economic Journal, Southern Economic Association, vol. 82(2), pages 535-555, October.
    8. Jonathan Gruber, 2017. "Delivering Public Health Insurance through Private Plan Choice in the United States," Journal of Economic Perspectives, American Economic Association, vol. 31(4), pages 3-22, Fall.
    9. Mohammad Usama Toseef & Gail A Jensen & Wassim Tarraf, 2020. "Medicaid managed care and preventable emergency department visits in the United States," PLOS ONE, Public Library of Science, vol. 15(10), pages 1-15, October.
    10. David Dranove & Christopher Ody & Amanda Starc, 2021. "A Dose of Managed Care: Controlling Drug Spending in Medicaid," American Economic Journal: Applied Economics, American Economic Association, vol. 13(1), pages 170-197, January.
    11. Victoria Perez, 2018. "Does capitated managed care affect budget predictability? Evidence from Medicaid programs," International Journal of Health Economics and Management, Springer, vol. 18(2), pages 123-152, June.
    12. Lee, Ajin, 2020. "How do hospitals respond to managed care? Evidence from at-risk newborns," Journal of Public Economics, Elsevier, vol. 184(C).
    13. Elizabeth L. Munnich & Michael R. Richards, 2020. "Treatment flows after outsourcing public insurance provision: Evidence from Florida Medicaid," Health Economics, John Wiley & Sons, Ltd., vol. 29(11), pages 1343-1363, November.
    14. Marton, James & Yelowitz, Aaron & Talbert, Jeffery C., 2014. "A tale of two cities? The heterogeneous impact of medicaid managed care," Journal of Health Economics, Elsevier, vol. 36(C), pages 47-68.
    15. Thomas Buchmueller & John C. Ham & Lara D. Shore-Sheppard, 2015. "The Medicaid Program," NBER Chapters, in: Economics of Means-Tested Transfer Programs in the United States, Volume 1, pages 21-136, National Bureau of Economic Research, Inc.
    16. Diane Alexander, 2015. "Does Physician Pay Affect Procedure Choice and Patient Health? Evidence from Medicaid C-section Use," Working Paper Series WP-2017-7, Federal Reserve Bank of Chicago.
    17. Sacks, Daniel W., 2018. "Why do HMOs spend less? Patient selection, physician price sensitivity, and prices," Journal of Public Economics, Elsevier, vol. 168(C), pages 146-161.
    18. Keith Kranker & Mary Kay Fox & Pia Caronongan, "undated". "WIC-Medicaid II Feasibility Study: Final Report," Mathematica Policy Research Reports fb21857415324280ae3483385, Mathematica Policy Research.
    19. Thomas Buchmueller & Sarah Miller & Marko Vujicic, 2016. "How Do Providers Respond to Changes in Public Health Insurance Coverage? Evidence from Adult Medicaid Dental Benefits," American Economic Journal: Economic Policy, American Economic Association, vol. 8(4), pages 70-102, November.

    More about this item

    JEL classification:

    • H51 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Health
    • H72 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Budget and Expenditures
    • I11 - Health, Education, and Welfare - - Health - - - Analysis of Health Care Markets
    • I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health
    • L33 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Comparison of Public and Private Enterprise and Nonprofit Institutions; Privatization; Contracting Out

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