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Title: Do Insurers Risk-Select Against Each Other? Evidence from Medicaid and Implications for Health Reform

Citation Type: Miscellaneous

Publication Year: 2013

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Abstract: In many U.S. public insurance programs, the state finances competing, capitated private health plans but does not itself insure individuals through a public fee-for-service (FFS) plan. We present a simple model in which capitation incentivizes insurers to retain low-cost clients and thus improve their care relative to high-cost clients, who they prefer would switch to a competitor. We test this prediction using county transitions from fee-for-service (FFS) Medicaid to capitated Medicaid managed care (MMC) for pregnant women and infants. We rst document the large health disparities and corresponding cost diff erences between blacks and Hispanics (who make up the large majority of Medicaid enrollees in our data), with black births costing nearly double that of Hispanics. Consistent with the model, black-Hispanic health disparities widen under MMC (e.g., the black-Hispanic mortality gap grows by 42 percent) and black mothers' pre-natal care worsens relative to Hispanics. Remarkably, black birth rates fall (and abortions rise) signifi cantly after MMC|consistent with mothers reacting to poor care by reducing fertility or plans discouraging births from high-cost groups. Implications for the ACA exchanges are discussed.

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Authors: Rossin-Slater, Maya; Meckel, Katherine; Kuziemko, Ilyana

Publisher: Columbia University

Data Collections: IPUMS USA

Topics: Health, Other, Race and Ethnicity

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