A Tale of Two Cities? The Heterogeneous Impact of Medicaid Managed Care

Marton, James and Yelowitz, Aaron and Talbert, Jeffrey (2014): A Tale of Two Cities? The Heterogeneous Impact of Medicaid Managed Care.

Abstract

Evaluating Accountable Care Organizations is difficult because there is a great deal of heterogeneity in terms of their reimbursement incentives and other programmatic features. We examine how variation in reimbursement incentives and administration among two Medicaid managed care plans impacts utilization and spending. We use a quasi-experimental approach exploiting the timing and county-specific implementation of Medicaid managed care mandates in two contiguous regions of Kentucky. We find large differences in the relative success of each plan in reducing utilization and spending that are likely driven by important differences in plan design. The plan that capitated primary care physicians and contracted out many administrative responsibilities to an experienced managed care organization achieved significant reductions in outpatient and professional utilization. The plan that opted for a fee-for-service reimbursement scheme with a group withhold and handled administration internally saw a much more modest reduction in outpatient utilization and an increase in professional utilization.

• Item Type: MPRA Paper
• Language: English
• Keywords: Medicaid; Managed Care; Child Health
• Subjects: I - Health, Education, and Welfare > I1 - Health > I18 - Government Policy ; Regulation ; Public Health; I - Health, Education, and Welfare > I3 - Welfare, Well-Being, and Poverty > I38 - Government Policy ; Provision and Effects of Welfare Programs; J - Labor and Demographic Economics > J1 - Demographic Economics > J13 - Fertility ; Family Planning ; Child Care ; Children ; Youth

References

Angrist, J.D. and A.B. Krueger. 2001. Instrumental Variables and the Search for Identification: From Supply and Demand to Natural Experiments. Journal of Economic Perspectives 15(4): 69-85.

Aizer, A., J. Currie, and E. Moretti. 2007. Does Managed Care Hurt Health? Evidence from Medicaid Mothers? Review of Economics and Statistics 89(3): 385-399.

Aizer, A. 2007. Public Health Insurance, Program Take-Up, and Child Health. Review of Economics and Statistics 89(3): 400-415.

Aizer, A. and J. Currie. 2002. The Impact of Outreach on Medi-Cal Enrollment and Child Health: Lessons from California. California Policy Research Center Report.

Baicker, K., M. Chernew, and J. Robbins. 2013. The Spillover Effects of Medicare Managed Care: Medicare Advantage and Hospital Utilization. NBER Working Paper No. 19070.

Barham, T., P. Gertler, and K. Raube. 2013. Managed Care Mandates and Birth Outcomes: Who Benefits and Does the Model Matter. Access from http://www.colorado.edu/ibs/HB/barham/PAPERS/Barham_Gertler_Raube_MediCal_April2013.pdf .

Bartosch, W.J. and S.G. Haber. 2004. Evaluation of the Kentucky Health Care Partnership Program: A Comparison of the Managed Care Experiences in Regions 3 and 5 - Final Report. RTI International.

Berwick, D.M., T.W. Nolan, and J. Whittington. 2008. The Triple Aim: Care, Health, and Cost. Health Affairs 27 (3): 759-769.

Black, S.E. 1999. Do Better Schools Matter? Parental Valuation of Elementary Education. The Quarterly Journal of Economics 114(2): 577-599.

Burns, L. and M. Pauley. 2012. Accountable Care Organizations May Have Difficulty Avoiding the Failures of Integrated Delivery Networks of the 1990s. Health Affairs 31(11): 2407-2416.

Cebul, R., J. Rebitzer, L. Taylor, and M. Votruba. 2008. Organizational Fragmentation and Care Quality in the U.S. Healthcare System. Journal of Economic Perspectives, 22(4): 93-113.

Chalkley, M. and C. Tilley. 2006. Treatment Intensity and Provider Remuneration: Dentists in the British National Health Service. Health Economics 15(9): 933–946.

Cooper, D. and J. Rebitzer. 2002. Physician Incentives in Managed Care Organizations. Public Policy Brief, Levy Institute.

Currie, J. and J. Fahr. 2005. Medicaid Managed Care: Effects on Children's Medicaid Coverage and Utilization. Journal of Public Economics 89: 85-108.

Cutler, D.M. and J. Gruber. 1996. Does Public Insurance Crowd Out Private Insurance? The Quarterly Journal of Economics 111(2): 391-430.

Cutler, D., M. McClellan, and J. Newhouse. 2000. How Does Managed Care Do It? The RAND Journal of Economics, 31(3): 526-548.

Cutler, D.M. and S. Reber. 1998. Paying for Health Insurance: The Tradeoff Between Competition and Adverse Selection. Quarterly Journal of Economics 113(2): 433-466.

Cutler, D.M. and R.J. Zeckhauser. 2000. The Anatomy of Health Insurance. Anthony Culyer and Joseph Newhouse, eds. Handbook of Health Economics, Volume IA. Amsterdam: Elsevier: 563-643.

Duggan, M. 2004. Does Contracting Out Increase the Efficiency of Government Programs? Evidence from Medicaid HMOs. Journal of Public Economics 88: 2549-2572.

Duggan, M. and T. Hayford. 2013. Has the Shift to Managed Care Reduced Medicaid Expenditures? Evidence from State and Local-Level Mandates. Journal of Policy Analysis and Management 32(3): 505-535.

Dusheiko, M., H. Gravelle, R. Jacobs, and P. Smith. 2006. The Effect of Financial Incentives on Gatekeeping Doctors: Evidence from a Natural Experiment. Journal of Health Economics 25 (3): 449–478.

Fisher, E.S., S.M. Shortell, S.A. Kreindler, A.D. Van Citters, and B.K. Larson. 2012. A Framework for Evaluating the Formation, Implementation, and Performance of Accountable Care Organizations. Health Affairs 31 (11): 2368-2378.

Gaynor, M., J. Rebitzer, and L. Taylor. 2004. Physician Incentives in HMOs. Journal of Political Economy 112(4): 915-931.

Gelbach, J.B. 2004. Migration, the Life Cycle, and State Benefits: How Low Is the Bottom? Journal of Political Economy 112(5): 1091-1130.

Glied, S. 2000. Managed Care. Anthony Culyer and Joseph Newhouse, eds. Handbook of Health Economics, Volume IA. Amsterdam: Elsevier: 707-754.

Herring, B and E.K. Adams. 2011. Using HMOs to serve the Medicaid Population: What are the Effects on Utilization and does the Type of HMO Matter? Health Economics 20: 446-460.

Kaestner, R., L. Dubay, and G. Kenney. 2005. Managed Care and Infant Health: An Evaluation of Medicaid in the U.S. Social Science and Medicine 60(8): 1815-1833.

Kaiser Family Foundation. 2007. Medicare Advantage Fact Sheet. Accessed from: http://www.kff.org/medicare/upload/2052-10.pdf .

Kaiser Family Foundation. 2012. Medicaid Managed Care: Key Data, Trends, and Issues. Accessed from: http://www.kff.org/medicaid/upload/8046-02.pdf .

Kelejian, H. H. 1971. Two-Stage Least Squares and Econometric Systems Linear in Parameters but Nonlinear in the Endogenous Variables. Journal of the American Statistical Association 66: 373-374.

Luft, H. 1981. Health Maintenance Organizations: Dimensions of Performance. John Wiley & Sons: New York, 1981.

Miller, R.H. and H.S. Luft. 1994. Managed Care Plan Performance Since 1980: A Literature Analysis. Journal of the American Medical Association 271(16): 1512-1519.

Miller, R.H. and H.S. Luft. 1997. Does Managed Care Lead to Better or Worse Quality of Care? Health Affairs 16(5): 7-25.

Schwartz, A.L., and B.D. Sommers. 2014. Moving For Medicaid? Recent Eligibility Expansions Did Not Induce Migration From Other States. Health Affairs 33(1):88-94.

Song, Z., D.G. Safran, B.E. Landon, M.B. Landrum, Y. He, R.E. Mechanic, M.P. Day, and M.E. Chernew. 2012. The 'Alternative Quality Contract,' Based On a Global Budget, Lowered Medical Spending and Improved Quality. Forthcoming in Health Affairs.

Sparer, M. 2012. Medicaid Managed Care: Costs, Access, and Quality of Care. Robert Wood Johnson Foundation Synthesis Project, Research Synthesis Report No. 23. Princeton, NJ: Robert Wood Johnson Foundation.