NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH
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Jacob U. Wallace

Yale School of Public Health
Department of Health Policy and Management
60 College Street
New Haven, CT 06520

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Institutional Affiliation: Yale School of Public Health

NBER Working Papers and Publications

August 2020Are All Managed Care Plans Created Equal? Evidence from Random Plan Assignment in Medicaid
with Michael Geruso, Timothy J. Layton: w27762
Exploiting random assignment of Medicaid beneficiaries to managed care plans, we identify plan-specific effects on healthcare utilization. Auto-assignment to the lowest-spending plan generates 30% lower spending than if the same enrollee were assigned to the highest-spending plan, despite identical cost-sharing. Effects via quantities, rather than differences in negotiated prices, explain these patterns. Rather than reducing “wasteful” spending, low-spending plans cause broad reductions in the use of medical services—including low-cost, high-value care—and worsen beneficiary satisfaction and health. Supply side tools circumvent the classic trade-off between financial risk protection and moral hazard, but give rise instead to a cost/quality trade-off.
 
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