Abstract:We study two mechanisms used by public health insurance programs for rationing healthcare: outsourcing to private managed care plans and quantity limits for prescription drugs. Leveraging a natural experiment in Texas's Medicaid program, we find that the shift to managed care and the relaxation of a strict drug cap increased access to high-value drugs and outpatient services and reduced avoidable hospitalizations. Program costs increased significantly, indicating a trade-off between cost and quality. We provide suggestive evidence attributing the reduction in hospitalizations to the relaxation of the drug cap and much of the spending increase to the shift to managed care.
NBER Working Paper 26042
NBER Disability Research Center Paper NB 18-13
Summary in the NBER Bulletin on Retirement and Disability
Summary in the Brookings Hutchins Roundup
Summary on CEPR Vox
Cato Institute Research Briefs in Economic Policy No. 203