Abstract:

The provision of public health insurance through regulated markets requires
a dynamic procurement of insurers over time. I study switching costs between
insurers, exploiting non-renewed contracts with incumbent insurers after a state
bid in Medicaid managed care. Using a difference-in-differences framework, I
find that beneficiaries that are forced to switch health plans after these bids have
fewer visits to primary care physicians and lower utilization of prescription drugs,
including for chronic conditions. Children, non-whites, and sicker switchers have
more preventable hospital admissions. In the year following the exit, insurers’
spending on switchers is 4% lower than the pre-exit baseline. Changes in the
network of providers and in drug formularies may serve as mechanisms.
in drug formularies — all may serve as mechanisms.