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The Private Provision of Public Services: Evidence from Random Assignment in Medicaid

Author

Listed:
  • Danil Agafiev Macambira
  • Michael Geruso
  • Anthony Lollo
  • Chima D. Ndumele
  • Jacob Wallace

Abstract

This paper examines the effects of privatizing social health insurance. We exploit a natural experiment in Medicaid, wherein nearly 100,000 enrollees were randomly assigned between a publicly-operated fee-for-service system and private managed care. Managed care reduced costs by 5.6% via cost-effective substitutions within prescription drugs and via lower prices for outpatient services. We present evidence that pharmacy utilization management was the key mechanism reducing overuse and encouraging substitution to lower-cost drugs without decreasing quality. In contrast, privatizing medical benefits led to only modest savings and was associated with decreased healthcare quality and consumer satisfaction.

Suggested Citation

  • Danil Agafiev Macambira & Michael Geruso & Anthony Lollo & Chima D. Ndumele & Jacob Wallace, 2022. "The Private Provision of Public Services: Evidence from Random Assignment in Medicaid," NBER Working Papers 30390, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:30390
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    Cited by:

    1. Jeffrey Clemens & Pierre-Thomas Léger & Yashna Nandan & Robert Town, 2024. "Physician Practice Preferences and Healthcare Expenditures: Evidence from Commercial Payers," NBER Working Papers 33090, National Bureau of Economic Research, Inc.

    More about this item

    JEL classification:

    • H4 - Public Economics - - Publicly Provided Goods
    • I11 - Health, Education, and Welfare - - Health - - - Analysis of Health Care Markets

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