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How do hospitals respond to managed care? Evidence from at-risk newborns

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  • Lee, Ajin

Abstract

Medicaid has increasingly transitioned from a government-run fee-for-service system (FFS) to a managed care system (MMC) administered by private insurers. To examine the effect of MMC, I exploit an arbitrary determinant of MMC enrollment in New York State: infants weighing less than 1200 g were excluded from MMC and were instead served through FFS. I find evidence that MMC reduces hospital costs at birth, which is driven by infants born in New York City. The hospital cost reductions arise from shortening the lengths of stay and encouraging inter-hospital transfers. These results are consistent with health plans influencing hospitals to reduce the intensity of treatment and steering patients away from high-cost hospitals.

Suggested Citation

  • Lee, Ajin, 2020. "How do hospitals respond to managed care? Evidence from at-risk newborns," Journal of Public Economics, Elsevier, vol. 184(C).
    • Handle: RePEc:eee:pubeco:v:184:y:2020:i:c:s0047272719301926
    DOI: 10.1016/j.jpubeco.2019.104130
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    More about this item

    Keywords

    Medicaid; Managed care; Hospital incentives; Infant health;
    All these keywords.

    JEL classification:

    • H51 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Health
    • I13 - Health, Education, and Welfare - - Health - - - Health Insurance, Public and Private
    • I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health

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